American Winner

Treasury Secretary Steven Mnuchin embodies the plutocratic principle that a crisis is a terrible thing to waste.

Illustration: Joe Darrow
Illustration: Joe Darrow
Illustration: Joe Darrow

Steve Mnuchin knows his way around a crisis. Twelve years ago, the Treasury secretary was still a middling multi-millionaire of little renown or historical import. But whenever God closes a door on an underwater home-owner, he opens a window to an unscrupulous speculator, and in 2008, the Big Man began closing a lot of doors. Mnuchin didn’t miss his opening. He may have been just a humble Goldman Sachs nepotism hire turned Hollywood financier back then, but he had a few million dollars to play with and a few friends with many millions more. Together, they bought up a failing mortgage lender, rapidly foreclosed on thousands of borrowers, and resold the homes at a nifty profit. By the end of his tenure as a bank CEO, Mnuchin had earned himself the title “Foreclosure King” — and a return of $200 million. That’s the kind of money that can buy you entrance into the good graces of a Republican nominee, especially if he’s already alienating a lot of the party’s biggest donors. And from there, it’s walking distance to the White House.

Thus far, the COVID-19 crash has been as kind to Mnuchin as the Great Recession once was. If the last global economic crisis made him rich enough to purchase a lofty perch in our government, this one is making the Treasury secretary powerful enough to claim a prominent place in U.S. history. Before the novel coronavirus made its presence felt, Mnuchin’s most memorable achievement as a public servant may have been commandeering a government plane for a solar-eclipse-themed day trip. Since the pandemic sickened global markets, he has brokered the largest stimulus legislation ever passed and won control of a multi-trillion-dollar bailout fund.

Which is to say: We’ve put one of the primary beneficiaries of America’s inequitable response to the last economic crisis in charge of crafting our nation’s response to this one.

Of course, it wasn’t really God who opened the window to Mnuchin’s foreclosure profiteering or the profiteering of all the well-heeled investors who bought low during the financial crisis, then sold high amid the bailout-buoyed recovery (the Almighty contracts out those jobs to protect his brand integrity). Rather, it was an economic system that keeps a wide swath of Americans one bad break from financial ruin — and another tiny class draped in gold-plated armor.

From the first capital-gains-tax cut of the modern era in Jimmy Carter’s day to the supply-side bonanza of Donald Trump’s, this system’s essential rationale has remained the same: If capitalists cannot reap big rewards from their winning bets, they will have no incentive to take the great personal risks that fuel collective prosperity.

Mnuchin’s career and the pandemic response he has overseen belie most of that sentence’s premises. In truth, the Treasury secretary owes his success to a series of low-risk, high-reward bets of little-to-negative social value. Which makes sense. After all, if America’s brand of capitalism actually required the superrich to assume great personal risk in order to reap outsize returns, they wouldn’t be so invested in it.

Steve Mnuchin wasn’t born on third base so much as a few inches to the left of home plate. His grandfather co-founded a yacht club in the Hamptons. His father was a Yale-educated partner at Goldman Sachs. If his family’s name didn’t secure Steve’s own Yale admission, its wealth certainly covered his tuition, books, personal Porsche, and “dorm” at New Haven’s Taft Hotel. From this perch, it would have been harder for Mnuchin to tumble down America’s class ladder than to climb higher still. The former would have required prodigious acts of self-destruction; the latter mere fluency in ruling-class social mores and the art of strategic sycophancy — and the wallflower cipher Steve Mnuchin is a master of both.

At Goldman, Mnuchin’s colleagues did not consider him “especially book smart.” And some have suggested that his steady ascent at the firm was fueled less by merit than pedigree (Mnuchin’s elevation to partner in 1994 came at the expense of Kevin Ingram, an African-American trader who’d risen from a working-class childhood up through MIT’s engineering school, then Goldman’s ranks, where he struck one colleague as both “much smarter than Steven” and more “accomplished”).

After Mnuchin paid his dues at Goldman, he founded a hedge fund called Dune Capital and a motion-picture-financing company called Dune Entertainment (both named after a stretch of beach near his house in the Hamptons). He helped bankroll Avatar and the X-Men franchise, hobnobbed in Beverly Hills, and hoarded his investment profits in a tax haven. He had everything America’s “temporarily embarrassed millionaires” imagine a person could want. But Mnuchin longed for higher things. And when the housing market collapsed, he knew he was in luck.

Early in his career, Mnuchin had watched his superiors turn America’s savings-and-loan crisis into their own buying-and-selling bonanza. In the summer of 2008, Mnuchin was watching television in his New York office when an invitation to emulate his old mentors flashed across the screen: Out in California, frightened depositors were lined up outside IndyMac, one of the nation’s largest mortgage lenders, waiting to withdraw their cash. “This bank is going to end up failing, and we need to figure out how to buy it,” Mnuchin told a colleague. “I’ve seen this game before.”

He played it like a natural. Mnuchin reached out to George Soros, John Paulson, and other billionaires whose trust he’d cultivated. They marshaled a $1.6 billion bid. Eager to unload the bank — whose balance sheet was chock-full of toxic assets — the FDIC agreed to cover any losses that might accrue to the investors above a certain threshold. Which is to say, the government agreed to partially socialize Mnuchin & Co.’s downside risk. This public aid came with one major condition: The new bank, which Mnuchin dubbed OneWest, would need to make a good-faith effort to help homeowners avoid foreclosure. The FDIC would ultimately pay OneWest more than $1.2 billion.

This was not enough to buy Steve Mnuchin’s good faith.

Purchasing IndyMac secured OneWest a claim on a lot of undervalued housing. The catch, of course, was that much of it was full of broke people. And California’s foreclosure laws make the process of separating low-net-worth humans from high-value housing stock long and arduous. But this was nothing a little entrepreneurship couldn’t solve: Mnuchin’s bank (ostensibly) bet it could get away with “robo signing” and backdating documents to expedite foreclosures. One-West got caught red-handed on the first count but emerged with a slap on the wrist. Investigators at the California attorney general’s office concluded the bank was guilty on the second and requested authorization to pursue an enforcement action. It’s unclear exactly why then–Attorney General Kamala Harris denied this request. But as the investigators themselves noted, to pursue legal action against an entity with OneWest’s resources would mean investing years of time — and large sums of the public’s money — in a deeply uncertain enterprise. The government could afford to take only so many risks, which meant the idea that the state could hold all its superrich residents accountable to its laws was a bluff. Mnuchin called it.

In the spring of 2016, another promising investment opportunity caught the eye of the now-former One-West CEO. Mnuchin had crossed paths with Trump several times over the years; his hedge fund had invested in (at least) two of the mogul’s projects. So when Donald invited Steve to swing by his tower on the night he won the New York primary, Mnuchin obliged. A dozenish hours (and a glass or two of Trump-branded wine) later, Mnuchin agreed to become the finance chairman of the future GOP nominee’s campaign.

This decision baffled some of Mnuchin’s Hollywood pals. The bankroller of The LEGO Batman Movie didn’t strike them as a political animal, let alone a Trumpist. But his motives weren’t mysterious. For someone in Mnuchin’s socioeconomic position, Trump’s presidential campaign was just another low-risk, high-reward bet. Or, as Mnuchin himself put it in an interview in August 2016, “Nobody’s going to be like, ‘Well, why did he do this?,’ if I end up in the administration.”

Mnuchin is the last of the “adults in the room” — that cabal of semi-credentialed advisers whose presence in the West Wing eased the troubled minds of Never Trump pundits circa 2017. None of the others — not Rex Tillerson, Gary Cohn, James Mattis, H. R. McMaster, or John Kelly — could marshal the requisite combination of unscrupulous sycophancy and patient politicking to weather each turn in Trump’s tempestuous moods. Only the former Foreclosure King has what it takes to unequivocally defend the president’s kind words for alt-right marchers in Charlottesville or echo his attacks on NFL players who dared to protest police abuse. So when the biggest economic crisis since the Great Depression hit, Mnuchin became — in The Wall Street Journal’s appellation — “Washington’s indispensable crisis manager.” Unburdened by ideological conviction or economic literacy, Mnuchin has proved to be the GOP’s most able dealmaker. Working out of a temporary office in the Capitol’s Lyndon Baines Johnson Room, Mnuchin spent the closing weeks of March running (and massaging) messages between the Senate’s Democratic and Republican camps as they sought consensus on a gargantuan coronavirus relief bill. “Mnuchin played the middleman, and he must have been in my office 20 times in three days,” Senate Minority Leader Chuck Schumer told the Journal, going on to praise the reliability of the Treasury secretary’s word. House Speaker Nancy Pelosi has said that she and Mnuchin can communicate through a “shorthand” devoid of time-wasting “niceties or anything like that.”

The soft skills Mnuchin had once deployed to ink billion-dollar investment deals now eased the passage of a $2.2 trillion economic-relief package. And there was much to admire in the legislation’s headline provisions: an unprecedented expansion in federal unemployment benefits that would leave many laid-off workers with as much — if not more — income than they’d earned at their old jobs, forgivable loans for small businesses that agreed to forgo layoffs during the crisis, and onetime cash payments to all nonaffluent Americans.

But this is still a Republican stimulus, however much schmoozing Steve has done with Chuck and Nancy this spring. Congress’s persistent underfunding of the small-business aid has kept America’s most vulnerable mom-and-pops out in the cold. And our nation’s decrepit unemployment-insurance offices have struggled to administer benefits as the ranks of the jobless grow millions stronger every week. The Treasury Department has allowed debt collectors to garnish the relief checks of cash-strapped Americans, and Congress has essentially refused to bail out hospitals whose budgets have suddenly been destroyed by COVID-driven shortfalls, meaning that over the next few years, whole essential health systems and services could abruptly be suspended.

Most of all, the legislation’s largest appropriation — $454 billion to backstop a $4 trillion Federal Reserve lending program to large corporations — gives Mnuchin significant personal discretion over which firms will have access to low-cost credit and on what terms, thereby leaving a connoisseur in the art of subverting federal crisis management for personal profit in charge of preventing America’s corporate titans from subverting federal crisis management for personal profit.

The White House’s next big idea for promoting economic recovery is, reportedly, to formally suspend the enforcement of labor and environmental regulations on small businesses, a measure that would enable petit bourgeois tyrants to suspend all pretense of concern for their workers’ health and well-being in the midst of a pandemic.

Nevertheless, could we have reasonably expected anything better, all things considered? A GOP president and Senate majority were always going to comfort the comfortable and toss crumbs to the afflicted. And when Congress approved $2.2 trillion in coronavirus relief funds last month, nurses were intubating patients without proper PPE, grocery-store clerks were jeopardizing their health to keep others fed, and delivery drivers were forfeiting the security of social distancing so others could more comfortably enjoy it. The legislation included zero dollars in hazard-pay benefits for those workers. It did, however, provide $90 billion in tax cuts to the owners of pass-through businesses, such as, for instance, the Trump Organization. Such “relief” was necessary, the American Enterprise Institute later explained, to mitigate the “penalty” on economic risk-takers.

*This article appears in the April 27, 2020, issue of New York Magazine. Subscribe Now!

*A previous version of this story incorrectly stated the year Mnuchin was elevated to partner at Goldman Sachs.

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