Trump Treasury pick defends offshore investments, lending practices

Steven Mnuchin testifies before the Senate Finance Committee on Capitol Hill in Washington, DC, Jan 19, 2017, as part of his confirmation hearing to become Secretary of the Treasury for the Trump administration. (Photo: AFP/Jim Watson)

In his confirmation hearing, Wall Street banker and Hollywood financier Steven Mnuchin also defended his leadership of a bank accused of predatory lending and aggressive foreclosure practices.

Mnuchin conceded he had failed to disclose that he was the director of investment funds incorporated in Caribbean tax havens, or to reveal real estate holdings of about US$100 million, when making financial disclosures to lawmakers in December.

"My lawyer, who is quite sophisticated in this stuff and has done this for many nominees before, believed that we filled out the form correctly," he told the Senate Finance Committee.

Mnuchin also said his investment firms in the Caribbean enclaves of Anguilla and the Cayman Islands were created to serve clients that were non-profits and pensions.

"These entities were either taxed as US corporations or US partnerships and in no way did I use them whatsoever to avoid any US taxes."

Mnuchin also sought to explain Trump's comment this week that the US dollar was "too strong," which briefly caused the currency to plummet on foreign exchange markets.

"It was not meant to be a long-term comment," Mnuchin said, adding that Trump meant the strength of the dollar in the short-term hurt US exports.

Mnuchin likewise said Trump's threats on Twitter to impose a "border tax" on manufacturers selling foreign-made cars on the US market did were targeted to specific companies. "He has not suggested an across-the-board border tax," he said.

PROFITING IN THE HOUSING CRISIS?

If confirmed, Mnuchin will take over a US agency with power over taxation, bank regulation, sovereign debt, and policies to combat corruption and terrorism finance.

Democrats sought to paint Mnuchin, 54, and his Wall Street career as the embodiment of many of the things Trump railed against in his campaign, including Mnuchin's lengthy stint at investment bank Goldman Sachs and OneWest, the bank he co-founded which has been accused of profiting from the 2008 housing crisis.

OneWest, which Mnuchin helped created out of the ashes of the mortgage crisis, secured an agreement for the Federal Deposit Insurance Commission to absorb a large share of the losses from a loan portfolio it inherited from failed predecessor, IndyMac.

Critics have accused the bank of generating profits through improper and aggressive foreclosures. The Treasury Department in 2011 found that OneWest used "unsafe or unsound" practices in mortgage servicing and foreclosure proceedings.

In one case, the bank reportedly foreclosed on an elderly Florida woman after a 27-cent payment error. In a confidential 2013 memo leaked to online publication The Intercept, prosecutors at the California Attorney General's office claimed they found evidence of "widespread misconduct" at the bank.

After an independent review, the OneWest paid a total of US$8.5 million in compensation to more than 10,000 customers.

'I'M TRULY SORRY'

But Mnuchin said the bank, which he sold in 2014, took pains to avoid foreclosures, extending loan modifications to more than 100,000 delinquent borrowers.

"I have been maligned as taking advantage of others' hardship in order to earn a buck. Nothing could be further than the truth," Mnuchin said.

Senator Sherrod Brown, a Democrat from Ohio, said an independent audit found OneWest illegally foreclosed on 54 active-duty military families.

"We unfortunately did foreclose on certain people in the military and it was unfortunate and inappropriate and we responded and made them whole," Mnuchin said. "To the extent that there were any errors, that is something that I'm truly sorry for."