Trump has just named his pick for Treasury secretary: ex-Goldman Sachs banker and notorious foreclosure king Steven Mnuchin.
That’s right. The guy who ran for office promising to “drain the swamp” is putting the living embodiment of Wall Street corruption in charge of his economic policy.
This pick basically translates to Trump giving the middle finger to his working-class voters.
We’re launching a major campaign to make sure the American people know what a massive betrayal this is—and demand that Senate Democrats fight back
Mnuchin was Trump’s top fundraiser, and his record is so corrupt, it’s unbelievable, even for Trump.
Check it out:
- During the depths of the mortgage meltdown, his company OneWest foreclosed on 36,000 homes, including those of elderly retirees, using robo-signing to turn the company into a “foreclosure machine” while pocketing billions in bailout money.
2. He swindled $50 million out of a media company he ran by resigning two months before the company filed for bankruptcy and using his connections to get preferential payouts.
3. He made $3.2 million in the Bernie Madoff Ponzi scheme, and avoided having to pay back the victims because his army of lawyers convinced a judge that too much time had passed before he got caught.
4. He’s donated more than $120,000 dollars to politicians in both political parties to gain access and influence.
This nomination is the clearest evidence yet that Trump conned the working-class voters who supported him. And if Senate Democrats don’t fight this nomination, it will only confirm the voter’s belief that both sides are equally corrupt.
We’re launching a website calling out the blatant corruption in Trump’s cabinet and mobilizing hundreds of thousands of people to demand that the Senate call out Trump’s “drain the swamp” lies.
Bloomberg reports on Mnuchin: Former Goldman partner ran bank dubbed a ‘foreclosure machine’
Dubious lending practices. Bailouts. Foreclosures. Robo-signing. Huge executive paydays. Now that Steven Mnuchin is nominated for Treasury secretary, his confirmation process promises to dredge up every controversy of the U.S. mortgage meltdown almost a decade ago.
Mnuchin is a former Goldman Sachs Group Inc. partner and movie financier with no government experience who spent the past six months working as Donald Trump’s chief fundraiser. Trump’s transition team recommended Mnuchin for the Treasury job, people with knowledge of the matter said last week, and a decision could come any day. The part of his background that’s likely to get the most scrutiny is the six years he spent running OneWest Bank, a Southern California lender.
In 2009, during the depths of the financial crisis, Mnuchin joined with a group of former Goldman Sachs colleagues and billionaires to buy the remnants of IndyMac, which had collapsed after bingeing on reckless home loans during the frenzy of California’s subprime-mortgage boom. They changed the name to OneWest, turned it around and sold the bank for a big gain last year. Mnuchin may have personally gotten more than $200 million in proceeds from the sale, according to Bloomberg calculations. That doesn’t count any dividends or payments he might have received as chairman and chief executive officer of OneWest’s parent company.
The bank carried out more than 36,000 foreclosures during Mnuchin’s reign, according to the California Reinvestment Coalition, a San Francisco-based nonprofit whose deputy director, Kevin Stein, dubbed the bank a “foreclosure machine.” The group has accused OneWest of shoddy foreclosure practices and avoiding business in minority neighborhoods, claims the bank has denied.
It’s unclear whether OneWest’s practices were worse than those of other banks during the financial crisis or how much blame Mnuchin deserves for problems at a financial institution that was troubled before he bought it.
Mnuchin declined to comment through a spokesman. But former OneWest Vice Chairman David Fawer said in a statement that the bank inherited loans from IndyMac with “extraordinarily high delinquency rates” and “worked tirelessly to modify thousands of loans to help homeowners through the financial crisis.” The bank has pointed to positive reviews of its foreclosure and loan-modification practices by the Obama Treasury Department, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.
Although Mnuchin is seen as the front-runner for the Treasury job, he wasn’t the only potential pick Trump spent the weekend with as he interviewed cabinet candidates at his golf club in Bedminster, New Jersey. Real estate investor Jonathan Gray of Blackstone Group, David McCormick of hedge fund manager Bridgewater Associates and private equity billionaire Wilbur Ross also met with the president-elect.
If Mnuchin gets the nod, the world will hear more about people like Leslie Parks, who found the locks on her Minneapolis home changed during a blizzard in December 2009 after OneWest foreclosed. Or Rose Gudiel, who was evicted from her Pasadena home under circumstances she claimed were improper and inspired about 100 people to march on Mnuchin’s Bel Air, California, mansion in 2011.
Fannie Mae, which owned Gudiel’s mortgage and paid OneWest to service it, eventually agreed to modify the loan and allow her to stay in her home. OneWest acknowledged it had acted too early in Parks’s case and took steps to help her buy it back.
“People who believe the system is rigged don’t want to see Wall Street write the rules,” Sherrod Brown, an Ohio Democrat on the Senate Finance Committee, said in a statement, declining to discuss any specific nominees. “President-elect Trump has a choice to make in filling these top jobs: Keep his promise to drain the swamp or throw in with the Wall Street banks and their high-priced lobbyists who’ve made billions at the expense of hard-working Americans.”
Trump seemed to forecast the kinds of opportunities Mnuchin seized on during the financial crisis during a 2006 interview he gave for an audio book. “I sort of hope,” he said at the time, that the real estate market crashes so he could buy more at lower prices. “If there’s a bubble burst, as they call it, you know you can make a lot of money.”
A public hearing in Los Angeles last year, held as part of the Federal Reserve’s review of the OneWest sale to CIT Group Inc., offered a preview of some of the criticism Mnuchin may face in his Senate confirmation. One former OneWest borrower demanded that the Fed not only reject the merger but also “jail Steve Mnuchin.” Another claimed that OneWest had sent her name to a debt collector who called her 81 times in a single day.
One of the bank’s businesses that came in for a drubbing at the hearing was a unit called Financial Freedom. Before IndyMac’s collapse, the division was the country’s second-largest provider of reverse mortgages. These are loans to elderly homeowners that allow them to borrow against their home equity. They’re often marketed aggressively.
After Mnuchin took over in 2009, he slowed the unit’s origination of new loans and stopped completely in 2011, according to Reverse Mortgage Daily. The bank continued to service existing reverse mortgages, sometimes foreclosing on elderly retirees.
Julie Cheney, whose father got a loan from Financial Freedom before his death in 2005, testified at the Los Angeles hearing that he hadn’t needed the loan and was heavily medicated when he signed documents. After he died, OneWest moved to foreclose despite the family’s willingness to repay in full, she said.
Joseph Otting, CEO of OneWest bank at the time, said at the hearing that almost all of the bank’s reverse-mortgage servicing portfolio was insured by the Federal Housing Administration, which dictates how OneWest handles foreclosures. “The vast majority of criticism of our servicing practices are really criticisms of the regulations governing how we are required to service FHA-insured reverse mortgages,” he said.
While Mnuchin took steps to shrink the business, it’s become a headache for OneWest’s new owner, CIT. As the sale was completed, the Department of Housing and Urban Development opened an investigation of the unit’s servicing practices, and CIT discovered a material weakness in financial controls there and recorded a $230 million pretax charge.
Surveys of housing counselors during Mnuchin’s tenure sometimes showed OneWest to be among the banks with the worst reputations, according to Stein of California Reinvestment. He cited one 2010 survey that found 84 percent of counselors rated OneWest’s ability to keep borrowers in their homes “terrible” or “bad,” the worst among 13 banks. But other polls published on California Reinvestment’s website, such as one from 2013, show counselors ranking other banks worse.
Otting said at the Los Angeles hearing that OneWest was the only servicer to consistently get the highest three-star rating from the Treasury during the time it was in the third-party servicing business.
Like most other big banks, OneWest also had a robo-signing scandal. An employee in Texas said in a July 2009 deposition that she signed about 750 affidavits and other documents related to foreclosures and bankruptcies every week, spending about 30 seconds on each without always verifying their accuracy.
Two years later, the U.S. Office of Thrift Supervision, citing questionable foreclosure practices across the industry, ordered OneWest and the other 13 biggest mortgage servicers to review their procedures and fix any errors they found. Only OneWest finished the exercise. In 2014, the OCC said OneWest’s review had found only a handful of errors. The other banks paid billions of dollars to settle the case without completing a review.
Another review came from the FDIC, which in early 2011 got a letter from a group of OneWest employees claiming that they were under orders to reject as many loan modifications as possible, and that the terms of the bank’s arrangements with the FDIC gave it an incentive to complete as many foreclosures as it could. The FDIC’s inspector general audited the bank and found the claims mostly unsubstantiated.
One aspect of the OneWest deal sure to attract attention is the terms of the purchase of IndyMac assets, including $12.8 billion in single-family mortgage loans. The FDIC seized the lender in mid-2008 and spent months trying to find a buyer to recapitalize it. No banks would touch it. Mnuchin’s investor group agreed to put up $1.55 billion only after accepting an offer from the FDIC to bear some of the future losses on the loan book.
Loss-sharing payments to OneWest related to IndyMac and another bank Mnuchin’s group bought reached more than $1 billion as of September 2014, according to Stein’s nonprofit, which said it obtained the figures from the FDIC through a public-records request. FDIC losses ultimately are covered by depositors across the country, effectively cutting the interest they earn on their savings.
OneWest didn’t get government funds under the Troubled Asset Relief Program during the financial crisis, but CIT did. CIT’s $2.3 billion bailout was wiped out after the company declared bankruptcy in 2009.
Mnuchin’s partners in the IndyMac deal included his former boss, the billionaire investor George Soros, and John Paulson, who made a fortune shorting the housing market and is now a prominent Trump supporter and adviser. For his $400 million initial investment in 2009, Paulson earned $551 million in dividends and was expected to make another $788 million from the sale to CIT, he told investors in a 2014 letter.
Given the eye-popping returns, the FDIC loss-sharing agreement has been criticized as too generous. Fawer, the former OneWest vice chairman, noted that the bidding group prevailed in a competitive auction process.