NEW YORK (AP) — It seems like a strange mishmash: A former Trump cabinet official says he wants buy TikTok just days after leading a group that pumped $1 billion in a broken bank. But in fact, it all fits into Steven Mnuchin’s complicated career.
The man who served as former President Donald Trump’s Treasury Secretary is nevertheless well-connected in the financial world. From 1985 to 2002, he worked at Goldman Sachs, one of the most famous and criticized investment banks on Wall Street.
Mnuchin also has a history in media and entertainment. His Hollywood credits include Mad Max: Fury Road and The Lego Movie, where he was one of the executive producers. Think of them as much more budget-friendly versions of TikTok videos.
And Mnuchin certainly has a track record of taking risks with troubled institutions. He famously swooped in to turn around struggling IndyMac Bank after it failed in the 2008 financial crisis.
But for critics, Mnuchin’s deal also raises ethical concerns. Robert Weissman, president of the watchdog group Public Citizen, points to TikTok in particular, where the US government could force its Chinese owners to sell. Imagine something similar happening in another country where its former finance minister turned out to be a buyer, he said.
“When you’re at the top of the financial policy hierarchy, you don’t jump out there to figure out how you can help yourself,” Weissman said.
Other former Treasury secretaries have gone to Wall Street after their terms ended, including Robert Rubin, a Goldman Sachs executive who served under President Clinton. Either way, the move looks like they’re cashing in on their time in government, Weissman said.
Mnuchin, who could not be reached for comment through an inquiry through his private equity firm, is often controversial as he generates cash.
After leaving the Treasury Department in January 2021, he launched his private equity fund, Liberty Strategic Capital, which raised $2.5 billion by that September. according to news reports.
Much of that money came from government-controlled investment funds in Saudi Arabia and other Gulf states that Mnuchin visited frequently as Treasury secretary. He was in the Middle East just weeks before leaving office, cutting the trip short after the Jan. 6 Capitol riot.
The rapid shift from government travel abroad to business dealings in those same countries prompted a watchdog group, Citizens for Responsibility and Ethics in Washington, to call for one-year ban for senior government officials doing business abroad after leaving office.
Earlier this month, Mnuchin returned to the headlines when his private equity firm made an investment of about $1 billion in the troubled New York Community Bancorp.
NYCB was looking for a lifeline, and its shares at one point fell more than 80% year-to-date. The bank has been grappling with falling values of commercial real estate investments and mounting problems related to some of its past acquisitions.
It all goes back to the move that arguably defined Mnuchin’s career.
In 2009, OneWest Bank Group, where Mnuchin was chairman and CEO, bought troubled IndyMac after federal regulators took over the bank. Other notable backers include funds linked to George Soros and hedge fund manager John Paulson.
OneWest bought all of IndyMac’s deposits and assets at a $4.7 billion discount after a Federal Deposit Insurance Corp. auction. The FDIC also agreed to share in losses created by certain mortgages related to single-family homes.
Kevin Kaiser, assistant professor of finance at the Wharton School, said such investors can profit by buying at deep discounts when markets panic. To make sure the investment pays off, however, investors like Mnuchin must pay hard with borrowers at risk of default, he said.
“They’re a little sharp,” Kaiser said, referring to distressed property investors as a group. “And that means they’re not shy about getting into a bit of a conflict situation.”
After OneWest, Mnuchin was Trump’s top donor in the 2016 election. He came under fire in Congress when he was nominated for the Treasury post after it was revealed that OneWest had foreclosed on tens of thousands of homes after the bubble burst of US housing.
Lawyers believe the bank is particularly difficult to work with under the government’s mortgage modification programs. Some of those who lost their homes had voted for Trump in 2016 and were disappointed by Mnuchin’s nomination.
Maxine Waters, the top Democrat on the House Finance Committee, called Mnuchin the “foreclosure king” at the time.
In testimony before a Senate committee considering his nomination, Mnuchin said he has worked to help homeowners stay in their homes and that his company has provided more than 100,000 loan modifications to borrowers.
Mnuchin was Treasury Secretary in 2020 when the Trump administration struck a deal that would see Oracle and Walmart take a large stake in TikTok. That deal ultimately fell through for several reasons, but the popular video app is under pressure again after the House of Representatives passed a bill on Wednesday to ban it in the US if its China-based owner doesn’t sell its stake.
On Thursday, Mnuchin said in an interview with CNBC that he had talked to “a bunch of people” about creating a group of investors to buy TikTok.
And Mnuchin may not be ready.
Mnuchin has many potential, difficult targets given the banking industry’s problems, said Chris Caulfield, who leads the banking practice at West Monroe, a consulting firm.
In addition to having a history of bringing in new management teams at the right troubled banks, Mnuchin also has experience in the potentially thorny world of regulation.
“He also has access to capital,” Caulfield said of Mnuchin. “If he needs more capital, he’s a guy who’s very good at putting together consortia.”
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Rugaber reported from Washington.
