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to Section One | to Arts & Entertainment
posted Friday, December 2, 2016 - Volume 44 Issue 49
Drain the swamp?

Trump appoints crocodiles to Treasury and Commerce departments
Section One
ALL STORIES
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Drain the swamp?

Trump appoints crocodiles to Treasury and Commerce departments

by Mike Andrew - SGN Staff Writer

In spite of earlier promises to 'drain the swamp' of Washington insiders, Donald Trump announced appointments of his campaign finance chair, Steve Mnuchin, as Treasury Secretary and a former business associate, Wilbur Ross, as Secretary of Commerce.

Both picks come from the world of investment capital and both have records of making big money at the expense of ordinary working people.

Before Mnuchin was involved with Trump's campaign, he was a Goldman Sachs executive - following his father, who also worked for the investment firm - and then a venture capitalist and mortgage banker.

Mnuchin left Goldman Sachs in 2002, and in 2004 founded the hedge fund Dune Capital Management. His company invested in at least two Trump real estate developments before Trump sued him. He and Trump subsequently settled without - apparently - any hard feelings.

After the 2008 economic crash, Mnuchin bought the bankrupt mortgage bank IndyMac, renamed it OneWest, and launched an orgy of home foreclosures. MSNBC estimates that Mnuchin's bank foreclosed on at least 36,000 homeowners.

According to the New York Times, OneWest 'was involved in a string of lawsuits over questionable foreclosures, and settled several cases for millions of dollars.'

Through so-called 'shared loss agreements' that Mnuchin secured from the FDIC when he bought IndyMac, he was able to get paid by federal regulators for foreclosing on people's homes, as well reselling the properties afterwards.

According to FDIC reports, as of December 2014 the agency had already paid out over $1 billion to OneWest for the costs of failed loans that resulted in foreclosures. The FDIC estimated it would have to pay out another $1.4 billion to OneWest before the end of 2019.

Fair-housing groups also filed a complaint with the federal government, charging that OneWest was not meeting its legal obligation to make loans in minority neighborhoods.

Mnuchin bought IndyMac/OneWest for $1.6 billion and subsequently sold it to the CIT Group in 2015 for $3.6 billion, more than doubling his original investment. According to Bloomberg, Mnuchin retains $97 million in CIT stock.

Wilbur Ross, nominated to be Secretary of Commerce, also made his money investing in failing companies.

In the late 1990s, Ross started a $200 million fund at Rothschild Inc., where he worked as an investment consultant, to buy up distressed assets. Later, on April Fools' Day 2000, Ross raised an additional $450 million to invest in failing companies.

Like Mitt Romney and other 'vulture capitalists,' Ross made money off bankrupt firms through what are called 'leveraged buyouts.' In a leveraged buyout, the buyers put up the assets of the company they want to buy as collateral for the loan to buy it.

Once they've bought the company, they then start to sell off parts of the business, shut down unprofitable plants, and lay off workers. If the remaining parts of the business turn into something profitable, they make money. But even if they can't turn the business around, they can liquidate all the assets and still make money because they didn't risk any of their own capital in the original purchase.

Ross and Trump have an existing business relationship dating back to the early 1990s, when Ross invested in Trump's failing Atlantic City casinos and helped him shed a substantial portion of his debts by the strategic use of bankruptcy laws.

Ross made most of his estimated net worth of $2.9 billion gaming the financial system in that way, but that didn't stop him from chiseling his business partners.

In February 2014, for example, Ross settled a lawsuit brought by investors in South Carolina for $81 million. Again, in August this year, Ross agreed to reimburse investors $11.8 million and pay a fine of $2.3 million to settle a Securities and Exchange Commission probe into his company's misappropriation of fees.

In addition to Mnuchin and Ross, who have already been selected, Trump is reportedly considering Goldman Sachs president Gary Cohn for a senior post, possibly as director of the Office of Management and Budget (OMB). Cohn met with Trump on November 29.

If appointed to the OMB, Cohn would be in charge of Trump's budget policy after he takes office in January.

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