A divided Senate late Monday approved Steven Mnuchin to serve as the Trump Administration's Treasury Secretary, in a move that came over Democratic objections to the ex-Goldman Sachs banker's views on tax reform and the post-crisis Dodd-Frank Act.
The senate vote split almost completely down party lines, 53 to 47, in a vote where Sen. Joe Manchin, D-W.V., was the only Democrat to back Mnuchin.
The approval comes after Republicans on the Senate Finance Committee on Feb. 1 used parliamentary procedures to bypass a Democratic boycott and approve Mnuchin 14-0, with no Democrats participating.
Before the senate vote, Democrats one-by-one took to the Senate floor to raise concerns about a variety of issues, including Mnuchin's backing of Trump's tax reform proposal, which they contend will increase the deficit even if the economy grows once corporate tax rates are cut.
A number of Democrats voted against Mnuchin's confirmation after they raised worries that he would dismantle key aspects of the Dodd-Frank statute, written in the wake of the 2008 financial crisis. Others raised questions about whether Mnuchin misled senators at his confirmation hearing about tax consequences for foreign investors in a hedge fund he helped manage.
Mnuchin told Sen. Debbie Stabenow, D-Mich., at his January confirmation hearing, that off-shore entities for the hedge fund set up in the Cayman Islands, were not formed not to help him avoid taxes, but rather to accommodate foreign investors, pension funds and non-profits, that wanted to invest in his fund. "You helped other people, foreign investors, avoid paying U.S. taxes," Stabenow said on the Senate floor.
Republicans, defended Mnuchin, arguing that he will oversee a much-needed reform of the U.S. tax code, at the same time that he will explore ways to improve U.S. infrastructure.
In an interview with TheStreet, Sen. Sheldon Whitehouse, D-R.I., acknowledged that Democrats can no longer filibuster Republican appointments, after the Democratic-controlled Senate in 2013 approved rules allowing presidential nominees to be confirmed by a simple majority vote. Republicans have a slim 52-48 majority in the Senate, but they no longer need a filibuster proof 60 votes to have their candidates confirmed. "With the filibuster eliminated [for appointments], Republicans only need 51 votes now," Whitehouse said.
Republicans and Democrats also debated their expectation that Mnuchin will play a key role in Republican efforts to make changes to the Consumer Financial Protection Bureau, an agency set up by Dodd-Frank to write rules for mortgages and credit products after financial regulators failed to oversee the sector effectively in the buildup to the 2008 crisis. At his confirmation hearing, Mnuchin said he supported Republican-backed legislative efforts that would require the CFPB get its funding under congressional approval rather than the current way it is automatically funded from the Federal Reserve.
Democrats argue that the CFPB's oversight and current funding structure are vital after regulators failed the financial system in the build-up to the crisis by permitting borrowers to take out loans with no income or employment documentation, often known as "no-doc" loans. But Republicans charge that the bureau's oversight is a huge cost for financial institutions, particularly smaller banks, and needs to be pared down.
Republicans and Democrats also clashed over what role Mnuchin may have played in what became known as a "robo-signing" foreclosure document scandal that occurred at many major financial institutions in the build up to the 2008 financial crisis, in which bank employees rapidly approved numerous foreclosures with only cursory glances at the glut of paperwork to determine if all the documents are in order.
Put under a spotlight was Mnuchin's oversight of OneWest, a mortgage lender he headed during the financial crisis that faced allegations of questionable practices and foreclosed on thousands of homes.
Mnuchin in 2009 led a group of investors that bought embattled mortgage lender IndyMac from the government for $1.6 billion. They renamed it OneWest. OneWest was sold to CIT Group (CIT) in 2015 for $3.4 billion. Bloomberg estimates Mnuchin may have made $380 million on the deal.
Sen. Ron Wyden of Oregon, the highest-ranking Democrat on the Senate Finance Committee, said that he opposed Mnuchin's confirmation, arguing that OneWest under Mnuchin's leadership engaged in "robo-signing" foreclosure documents. Wyden cited a OneWest vice president, under Mnuchin, who admitted to "robo-signing" 750 foreclosure documents a week.
Mnuchin at his confirmation hearing disputed that assertion, saying that OneWest did not engage in robo-signing under his leadership. Senate Finance Committee Orrin Hatch, R-Utah said he supported Mnuchin's assertion, arguing that the robo-signing criticism appears to have come from a deposition from a OneWest employee that said she rapidly signed foreclosure documents weekly without fully verifying their accuracy, but that she was not the employee responsible for verifying everything in the documents. Hatch said essentially Democrats were making a mountain out of a molehill.
The Democrat boycott of the Senate Finance Committee vote on Mnuchin last month came as tensions flared after Trump dismissed Acting Attorney General Sally Yates for refusing to backing an executive order seeking to ban certain immigrants and refugees from seven majority-Muslim countries from entering the U.S.