Interest in TikTok, distressed NY bank has echoes of Mnuchin’s pre-Trump investment playbook
NEW YORK — It seems like a bizarre mix: A former Trump Cabinet official says he wants to buy TikTok, just days after leading a group that pumped $1 billion into a defeated bank. But it really all fits in with Steven Mnuchin’s complicated career.
After all, the man who was President Donald Trump’s former Treasury Secretary has good connections in the financial world. From 1985 to 2002, he worked at Goldman Sachs, one of the most legendary – and criticized – investment banks on Wall Street.
Mnuchin also has a history in media and entertainment. His Hollywood credits include “Mad Max: Fury Road” and “The Lego Movie,” where he was one of the executive producers. Think of them as bigger budget versions of TikTok videos.
And Mnuchin certainly has experience taking risks at troubled institutions. He famously helped rebuild the troubled IndyMac bank after its failure during the 2008 financial crisis.
But for critics, Mnuchin’s dealmaking also raises concerns about ethics. Robert Weissman, chairman of the watchdog group Public Citizen, points mainly to TikTok, where the US government can force its Chinese owners to sell. Imagine something similar happening in another country, where the former finance minister ended up as the buyer, he said.
“When you’re at the top of the financial policy hierarchy, you don’t jump down from there to figure out how to help yourself,” Weissman said.
Other former Treasury secretaries have gone to Wall Street after their terms end, including Robert Rubin, a Goldman Sachs executive who served under President Clinton. In all cases, this move has the appearance of cashing in on their time in government, Weissman said.
Mnuchin, who could not be reached for comment via a request through his private equity firm, has often courted controversy for generating money.
After leaving the Treasury Department in January 2021, he launched his private equity fund, Liberty Strategic Capital, which raised $2.5 billion in September, according to news reports.
Much of that money came from government-controlled investment funds in Saudi Arabia and other Persian Gulf states, which Mnuchin had visited regularly as treasury secretary. He was in the Middle East just weeks before leaving office, cutting his trip short after the Jan. 6 insurrection at the Capitol.
The rapid shift from his government travel abroad to business dealings in those same countries prompted a watchdog group, Citizens for Responsibility and Ethics in Washington, to call for a one-year ban on senior government officials from doing business abroad after their terms in office .
Earlier this month, Mnuchin jumped into the news again when his PE firm led an investment of about $1 billion in the embattled New York Community Bancorp.
NYCB was looking for a lifeline and its shares were down more than 80% at one point since the start of the year. The bank is grappling with declining commercial real estate investment values and the growing pains associated with some of its past acquisitions.
It all points to the move that may have defined Mnuchin’s career.
In 2009, OneWest Bank Group, where Mnuchin was chairman and CEO, bought troubled IndyMac after federal regulators took over the bank. Other major backers included funds tied to George Soros and hedge fund manager John Paulson.
OneWest purchased all of IndyMac’s deposits and assets at a discount of $4.7 billion following an auction by the Federal Deposit of Insurance Corp. The FDIC also agreed to share in the losses caused by some mortgages tied to single-family homes.
Kevin Kaiser, an adjunct professor of finance at the Wharton School, said such investors can profit by buying at deep discounts when markets panic. To ensure the investment pays off, however, investors like Mnuchin must punish borrowers at risk of default, he said.
“They’re a little sharply elbowed,” Kaiser said, referring to distressed real estate investors as a group. “And that means that they are not afraid of ending up in a conflict situation.”
After OneWest, Mnuchin was Trump’s top fundraiser in the 2016 election. He came under fire in Congress when he was nominated for the Treasury post after it was revealed that OneWest had foreclosed on tens of thousands of homes after the US housing bubble collapsed. snapped.
Advocates have found it particularly difficult to work with the bank on government mortgage modification programs. Some of those who lost their homes had voted for Trump in 2016 and were disappointed with Mnuchin’s nomination.
Maxine Waters, the top Democrat on the House Finance Committee, called Mnuchin the “foreclosure king” at the time.
In testimony before a Senate committee considering his nomination, Mnuchin said he had worked to help homeowners stay in their homes and that his company had provided more than 100,000 loan modifications to borrowers.
Mnuchin was Treasury secretary in 2020, when the Trump administration brokered a deal that would see Oracle and Walmart take a major stake in TikTok. That deal ultimately fell through for several reasons, but the popular video app is under renewed pressure after the House of Representatives passed a bill on Wednesday to ban it in the US if its China-based owner doesn’t sell its stake.
On Thursday, Mnuchin said in an interview with CNBC that he had spoken to “a group of people” about creating an investor group to buy TikTok.
And Mnuchin may not be done yet.
Mnuchin has plenty of potential distressed targets given the banking industry’s troubles, said Chris Caulfield, who heads the banking practice at a West Monroe consulting firm.
In addition to his history of bringing in new leadership teams at troubled banks, Mnuchin also has experience in the potentially thorny world of regulation.
“He also has access to capital,” Caulfield said of Mnuchin. “If there is a need for more capital, he is someone who is very adept at putting together consortia.”
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Rugaber reported from Washington.