Steven Mnuchin, the former Goldman Sachs banker, Wall Street investor and Hollywood financier who has been nominated for Treasury Secretary by president-elect Donald Trump, says he will divest sizeable holdings if confirmed.
On its face, that seems like a selfless and patriotic act. Politico reported yesterday that Mnuchin intends to divest his positions in a portfolio of big-name investments that include Wall Street behemoths Citi, Goldman, and Blackstone, plus AT&T, Berkshire Hathaway, CIT Group, Comcast, General Electric, IBM, Lehman Brothers Holdings, Microsoft and Verizon.
A New York Times story on Wednesday said that an examination of Mnuchin’s 45-page filing with the Office of Government Ethics suggested that the minimum combined value of items on his disclosure form is $166 million.
Mnuchin also said he would resign from hedge fund Dune Capital Management and, if confirmed, liquidate his stake in the entertainment finance company RatPac-Dune Entertainment Holdings.
Perhaps most significantly, Mnuchin said he would divest his shares in Paulson Advantage LP, a fund run by investor John Paulson that has an enormous position in the two titans of the housing market, government-sponsored entities (GSEs) Fannie Mae and Freddie Mac.
Mnuchin has a history with Paulson. In 2009, he teamed up with Paulson and other investors, including George Soros, to buy the troubled West Coast bank IndyMac, and then reconstituted it as a financial institution called OneWest. Once turned around – some say ruthlessly -- they made a killing, selling it to CIT Group for $3.4 billion.
One question the Senate needs to ask Mnuchin is how much of a gain he has realized since he suggested in a Fox News interview on Nov. 30, the day after he was nominated for Treasury Secretary, that the government should get out of the mortgage business by privatizing Fannie and Freddie.
That sent shares of Fannie and Freddie soaring to their highest levels since September 2014, according to Reuters.
A Dec. 16 story by Bloomberg said that Paulson’s Advantage Fund pared its losses for 2016 from more than 20 percent to 16 percent because of the runup in shares of Fannie and Freddie. Fannie shares were at 3.89 early Thursday afternoon, up from a 52-week low of 0.98.
The second question the Senate Finance Committee might ask Mnuchin (his confirmation hearing remains unscheduled) is whether his comments about Fannie and Freddie were calculated or off-hand.
The last question speaks to what The Times called “a financial mystery.” Mnuchin says he will retain control of Steven T. Mnuchin Inc. What is it exactly, and what assets does it hold?