Former Goldman Sachs partner and Hollywood financier Steven Mnuchin, nominated to be the next treasury secretary, reviews his notes as he finishes his opening statement before the Senate Committee on Finance on Thursday. Photo by Mike Theiler/UPI | License Photo
Jan. 19 (UPI) -- President-elect Donald Trump's nominee for treasury secretary started his confirmation process Thursday facing questions in the Senate about tax shelters, bank rules and increasing funding to the Internal Revenue Service.
Mnuchin, a wealthy Hollywood financier who has backed more than 30 films in the last three years, was questioned by the Senate Committee on Finance, which is composed of 14 Republicans and 12 Democrats.
Mnuchin, 54, immediately faced skepticism and questions relating to his views on -- and own his uses of -- offshore tax shelters.
"With the right advice, the most fortunate individuals in our country can decide for themselves how much tax to pay and when to pay it," Sen. Ron Wyden, D-Ore., the top Democrat on the panel, said in his opening remarks. "There is no clearer example than Mr. Mnuchin's hedge fund setting up outposts in Anguilla and the Cayman Islands -- an action that can be explained only by the islands' zero percent tax rate."
"We didn't have any employees in Anguilla ... we didn't have any customers that resided in Anguilla ... we did not have an office ourselves there," Mnuchin responded during terse questioning by Wyden about what the senator called "the Mnuchin web of bank accounts and shell companies."
"In no way did I use them whatsoever to avoid any U.S. taxes," Mnuchin responded. "They were merely as an accommodation to pension funds and nonprofit institutions."
The 17-year veteran of Goldman Sachs also fought off claims that he greedily ran thousands of Americans out of their homes after purchasing subprime mortgage lender IndyMac from the federal government in 2009, at the height of the financial crisis.
The bank, rebranded as OneWest, modified tens of thousands of troubled home loans while Mnuchin ran it for six years -- and foreclosed on many of those properties. The venture was highly profitable for the institution.
On Thursday, Mnuchin said he had little choice but to foreclose on some of those homes, due to the government's guidelines.
"It has been said that I ran a 'foreclosure machine.' This is not true," he said. "On the contrary, I was committed to loan modifications intended to stop foreclosures. I ran a 'loan modification machine.'"
Mnuchin has said nearly 200,000 homes that OneWest inherited were already in foreclosure when he took over IndyMac.
"The responsibility landed on me to clean up the mess that we inherited."
Funding the IRS
Mnuchin faced questions about his vision for the IRS, which has received declining operating budgets in the last few years at the behest of congressional Republicans.
The former Wall Street banker said he has concerns that the IRS is underfunded, signaling a possible break from the GOP on the issue.
"I am concerned about the staffing of the IRS, that is an important part of fixing the tax gap. And I am also very concerned about the issue of ... technology at the IRS," Mnuchin told the committee.
Republican lawmakers have largely rejected requests for additional IRS funding by President Barack Obama's administration for the last six years. Some of that is likely due to the GOP's ire over the scandal over tax-exempt applications from conservative groups purportedly being overly scrutinized.
"I was particularly surprised ... that the IRS head count has gone down quite dramatically, almost 30 percent," Mnuchin added. "I don't think there's any other government agency that's gone down 30 percent, and especially for an agency that collects revenues. This is something that I'm concerned about."
Mnuchin expressed support for the so-called Volcker Rule, which is part of the reforms passed in 2010 in response to the financial crisis. The rule prohibits banks from proprietary trading -- making speculative investments with its own money, for profits that do not benefit their customers.
The rule was passed as part of the Dodd-Frank reform act to limit questionable practices by banks that can contribute to future crises.
"I do support the Volcker Rule," Mnuchin said. "The concept for proprietary trading doesn't fit banks that are FDIC insured."
The former banker, though, said he wanted to modify the rule so it doesn't restrict market liquidity.
If Mnuchin's nomination passes the committee, it will be put to a vote in the full Senate.