If Donald Trump nominates campaign finance chairman Steven Mnuchin to head the Treasury Department, he’s sure to get a fight from advocacy groups that think the banker exacerbated the foreclosure crisis in California.
“It’s very troubling to think of basically a foreclosure kingpin running our Treasury Department,” said Joseph Ridout, manager of consumer services for the San Francisco-based advocacy group Consumer Action.
Mnuchin is a former Goldman Sachs banker and hedge-fund mogul. He led a group of powerful investors in 2009 that purchased the assets of failed lender IndyMac Bank, which had specialized in loans to weaker borrowers and was taken over by the government during the financial crisis. As part of the deal, the government agreed to absorb some of the potential losses.
From the ashes of IndyMac came OneWest Bank, based in Pasadena, Calif. It was owned by a holding company led by Mnuchin and composed of hedge fund giants. They included billionaire George Soros and John Paulson, who famously made billions betting on the collapse of housing finance. They were part of the plot of the book and movie “The Big Short.”
Just four years later, they all roughly doubled their investments when it was announced that New York-based CIT Group would purchase OneWest Bank for $3.4 billion. Mnuchin sits on the CIT board of directors.
The merger galvanized housing advocacy groups, who unsuccessfully lobbied federal regulators to prevent it or at least to demand more fairness from OneWest Bank in its foreclosures. Advocates argued to regulators that the bank’s foreclosures across California, especially around Sacramento and Los Angeles, disproportionately had been brought against Hispanics, African-Americans and the elderly.
During that debate, Mnuchin’s company took the unusual step of starting an online form letter in order to pressure Fed Chair Janet Yellen to accept the merger without a public hearing.