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NEW YORK (AP) — It seems like a strange hodgepodge. A former Trump cabinet member says he wants to buy TikTok, days after leading a group that poured $1 billion into the battered bank. But all of this is actually consistent with Steven Mnuchin’s complicated history.
After all, the man who served as former President Donald Trump’s Treasury secretary has strong connections in the financial world. From 1985 until his 2002, he worked at Goldman Sachs, one of Wall Street’s most prestigious and criticized investment banks.
Mnuchin also has a background in media and entertainment. His Hollywood credits include Mad Max: Fury Road and The Lego Movie, for which he served as one of the executive producers. Think of them as a more expensive budget version of TikTok videos.
And Secretary Mnuchin certainly has experience taking risks with troubled financial institutions. He was famously appointed in a hurry to turn IndyMac Bank, which had fallen into financial trouble, after it collapsed in the 2008 financial crisis.
But for critics, Mnuchin’s consensus-building also raises ethical concerns. Robert Wiseman, chairman of the watchdog group Public Citizen, said the U.S. government could force Chinese owners to sell TikTok in particular. Imagine something similar happening in another country where a former finance minister ended up being the buyer, he said.
“When you’re at the top of the monetary policy-making hierarchy, you don’t have to jump down there and think about how you can help yourself,” Wiseman said.
Other former Treasury secretaries left for Wall Street after their terms ended, including Robert Rubin, a Goldman Sachs executive who served under President Clinton. In both cases, Wiseman said, the move appears to be cashing in on the government’s tenure.
Secretary Mnuchin, who could not be reached for comment through his private equity firm, has often been controversial as it has generated money.
After leaving the Treasury Department in January 2021, he launched a private equity fund, Liberty Strategic Capital, which raised $2.5 billion by September 2021, according to reports.
Much of that money came from government-controlled investment funds in Saudi Arabia and other Persian Gulf states, which Mnuchin frequently visited as Treasury secretary. He had been in the Middle East in the weeks before his departure, cutting his trip short after the Jan. 6 riot at the Capitol.
His rapid transition from international travel to business dealings in the country prompted the Washington watchdog group Citizens for Responsibility and Ethics to ban senior government officials from doing business abroad for one year after leaving office. I asked.
Earlier this month, Mnuchin was back in the headlines when his private equity firm led an approximately $1 billion investment in the struggling New York Community Bancorp.
NYCB is looking for a lifeline, and at one point its stock price has fallen more than 80% since the beginning of the year. The bank has suffered from declining investment values related to commercial real estate and growing pains from some of its past acquisitions.
It’s all a reminder of a move that may have defined Mnuchin’s career.
In 2009, OneWest Banking Group, where Secretary Mnuchin was chairman and CEO, acquired struggling IndyMac after federal regulators took over the bank. Other notable backers included funds associated with George Soros and hedge fund manager John Paulson.
OneWest bought IndyMac’s deposits and assets at a discounted price of $4.7 billion following an auction by the Federal Deposit Insurance Corporation. The FDIC also agreed to share in losses incurred by certain mortgage loans related to single-family homes.
Kevin Kaiser, an adjunct professor of finance at the Wharton School, said such investors can profit by buying at deep discounts during times of market panic. But to ensure their investments pay off, investors like Secretary Mnuchin must make tough payments to borrowers who are at risk of defaulting, he said.
“They’re a little bit sharp,” Kaiser said of the group of distressed real estate investors. “And what that means is they’re not shy about getting into some conflict situations.”
Mr. Mnuchin was Mr. Trump’s biggest fundraiser in the 2016 election, after Mr. OneWest. He was criticized in Congress when he was appointed to the Treasury post after it was revealed that OneWest had foreclosed on tens of thousands of homes after the U.S. housing bubble burst.
Supporters found it particularly difficult for the bank to cooperate under the government’s mortgage modification program. Some of the people who lost their homes voted for Trump in 2016 and were disappointed in Mnuchin’s nomination.
Maxine Waters, the top Democrat on the House Finance Committee, called Mnuchin “the foreclosure king” at the time.
Mnuchin testified before the Senate committee considering his nomination that he has worked hard to help homeowners stay in their homes and that his company has provided more than 100,000 loan modifications to borrowers. He said he went.
Mnuchin served as Treasury secretary in 2020, when the Trump administration brokered a deal for Oracle and Walmart to take large stakes in TikTok. The deal ultimately fell through for several reasons, but the popular Video apps are under pressure again.
On Thursday, Mnuchin said in an interview with CNBC that he had talked with “a number of people” about forming an investor group to acquire TikTok.
And President Mnuchin may not be finished yet.
Chris Caulfield, a banking expert at consulting firm West Monroe, said Mnuchin has many potential targets for distress given the banking industry’s woes.
In addition to his background in bringing new leadership teams to troubled banks, Mnuchin also has experience in the potentially onerous world of regulation.
“He also has access to capital,” Caulfield said of Mnuchin. “If we need more capital, he’s very good at putting together a consortium.”
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Lugabar reported from Washington.
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