Consumer Finance Insights
January 2, 2017

Senate Democrats Press Treasury Secretary Nominee Mnunchin for Views on Bank Regulation and Fair Lending Laws

On December 21, 2016, the ranking member of the U.S. Senate Banking, Housing and Urban Affairs Committee, Senator Sherrod Brown (D-OH), sent a pointed letter to President-elect Trump’s nominee for Treasury Secretary, Steven Mnuchin.  The letter is an attempt to gain an understanding of Mr. Mnuchin’s views on topics over which the Banking Committee has jurisdiction.  Although Mr. Mnuchin does not appear before the Banking Committee as part of the nomination process, he will appear before the Senate Finance Committee, on which Senator Brown also sits.

Senator Brown explained that he is unaware of Mr. Mnuchin’s views on topics including “financial market operations and regulation, … industrial and international trade policy, terrorist financing and sanctions, and tax and fiscal policy,” noting that he is only aware of Mr. Mnuchin’s desire to “‘strip back parts of Dodd-Frank’ as [his] ‘number one priority on the regulatory side.’”

The letter poses eleven questions targeting Mr. Mnuchin’s views on Wall Street and housing rules, regulations and oversight.  A few questions, and in turn Mr. Mnuchin’s response thereto, are directly of interest to the consumer financial services industry:

  • As a former partner at Goldman Sachs, reportedly overseeing the mortgage-trading desk, you have described structured financial products as “an extremely positive development in terms of being able to finance different parts of the economy and different businesses efficiently.”  What are your views on the role these products played in the financial crisis of 2008?  Will you be a strong defender of the regulatory framework created by Dodd-Frank for complex securities and derivatives?  If not, why not?
  • As chairman and CEO of a financial institution that has been labeled a “foreclosure machine” do you believe the federal government should maintain its loss mitigation and foreclosure prevention programs or not?  Will you support the regulatory efforts of the Office of the Comptroller of the Currency, including those affecting mortgage servicers or not?
  • As a former executive at a bank that has been accused of “failing to effectively market, offer and originate mortgage loans and other loan products in communities of color,” what are your views on the importance of fair lending laws?
  • As a former executive of a bank that merged with a large regional bank under your leadership, please describe the investigation currently being conducted by the Office of the Inspector General of the Department of Housing and Urban Affairs, your involvement at OneWest during the period in question, and whether any continued cooperation with the investigation will impair your ability to serve as Secretary of the Treasury.
  • As a recent former board member of a large regional bank, what are your views on the proper role of regulation in overseeing large regional banks?
  • How will your past business—and presumably social—connections to hedge fund partners who invested in preferred shares of the Government Sponsored Enterprises, Fannie Mae and Freddie Mac, inform your views on efforts to reform those Enterprises?
  • You recently stated that, “We’ve got to get Fannie and Freddie out of government ownership.  It makes no sense that these are owned by the government and have been controlled by the government for as long as they have … [W]e gotta get them out of government control.”  Please explain what you meant by this statement.

Senator Brown requested Mr. Mnuchin’s response by January 6, 2017, which is before any nomination hearings would occur.

The letter serves as Senate Democrats’ latest attack on Mr. Mnuchin, who was formerly a Goldman Sachs executive and CEO of OneWest Bank.  Earlier in December, Senate Democrats set up a website soliciting people to submit complaints about Mr. Mnuchin in his role as CEO of OneWest, dubbing him the “Foreclosure King.”