Steven Mnuchin, the Trump campaign's finance director, arrives at U.S. President-elect Donald Trump's Trump Tower in New York, U.S., November 29, 2016.MIKE SEGAR/Reuters
During some of the darkest days of the financial crisis in 2008, Steven Mnuchin spied opportunity.
IndyMac, a California bank, had been seized by federal regulators after collapsing under the weight of bad loans. In November, Mr. Mnuchin gathered a group of investors, including former colleagues from Goldman Sachs Group Inc., to buy the troubled lender from the government for $1.5-billion (U.S.). He renamed it OneWest and in 2014, he struck a deal to sell it for $3.4-billion.
Now president-elect Donald Trump has tapped Mr. Mnuchin, who was chief fundraiser for his campaign, to become the next Treasury Secretary of the United States. The OneWest deal helps demonstrate why his nomination is being greeted with celebration in some quarters and dismay in others.
For Wall Street, Mr. Trump's picks are a boon. Mr. Mnuchin has a long pedigree in the financial industry – both he and his father worked at Goldman – and a history of ideological flexibility. He will oversee the country's finances and the effort to roll back financial regulation.
Also expected to join the cabinet is Wilbur Ross, a private-equity titan and former banker who was nominated to become Commerce Secretary. Meanwhile, Mr. Trump is reportedly considering naming Gary Cohn, a senior Goldman executive, to a key budgetary post in the White House.
"It's night and day," said Gerard Cassidy, a banking analyst at RBC Capital Markets in the United States, comparing Mr. Trump's personnel choices to those of the current administration. Mr. Trump is "bringing in people who want to do things that make business sense."
Mr. Mnuchin is promising to slash corporate taxes, boost economic growth and overhaul the post-crisis reforms. The landmark 2010 Dodd-Frank legislation is "way too complicated," Mr. Mnuchin said in an interview with CNBC on Wednesday. In particular, he pointed to the law's prohibition on proprietary trading, known as the Volcker Rule, as unmanageable.
While Mr. Mnuchin is expected to be confirmed by the Republican-controlled U.S. Senate – the vote requires only a simple majority – there will likely be fireworks. Mr. Mnuchin's career in finance and his years running OneWest are already a source of criticism. Mr. Mnuchin personally made hundreds of millions of dollars in the OneWest sale, according to The Wall Street Journal.
In a rare joint statement, Elizabeth Warren and Bernie Sanders, two Democratic senators and prominent Wall Street critics, called Mr. Mnuchin's nomination "hypocrisy at its worst" from Mr. Trump, who pledged to reduce the influence of wealthy elites. What's more, the two senators said, Mr. Mnuchin made a fortune running a bank "that aggressively foreclosed on families still reeling from the crisis."
Mr. Mnuchin, now 53, was born in New York. After spending 17 years at Goldman, he worked for several hedge funds, including one headed by George Soros, the Democratic megadonor (Mr. Soros would also partner with Mr. Mnuchin to buy OneWest). Later, Mr. Mnuchin founded his own hedge fund and helped bankroll movies such as Avatar and American Sniper. Along the way, he became friendly with Mr. Trump.
When Mr. Mnuchin stepped forward to become Mr. Trump's chief fundraiser earlier this year, it left friends and colleagues mystified. Although a registered Republican, Mr. Mnuchin has made repeated donations to Democratic presidential candidates, including Barack Obama and Hillary Clinton.
A lack of attachment to conservative dogma is something Mr. Mnuchin shares with Wilbur Ross, the buyout king whom Mr. Trump is nominating as Commerce Secretary. Mr. Ross, 79, has an estimated net worth of $2.9-billion and lives in Palm Beach, Fla., near where Mr. Trump has a home. Mr. Ross specializes in investing in distressed companies, especially in industries such as steel and coal.
Like Mr. Trump, Mr. Ross is a vocal critic of U.S. trade policy. "We've been doing a lot of dumb trade, and that's the part that's going to get fixed," he said in an interview Wednesday with CNBC. Prior to the election, Mr. Ross had predicted that the United States was likely to experience a recession within the next two years – "or sooner if Hillary Clinton is elected," he told Bloomberg News.
Mr. Trump is not the first president-elect to select financiers for key posts in his cabinet. Henry Paulson Jr. left Goldman to become Treasury Secretary under George W. Bush, while Robert Rubin, another Goldman executive, held the same position during Bill Clinton's administration.
Mr. Cassidy of RBC asserted that such career moves by bankers weren't a way to gain financial advantage. "These guys are very, very wealthy," he said. "They want to leave on their tombstone, 'Yeah, we made a ton of money at Goldman Sachs but we also spent some time for the betterment of our country.'"