WASHINGTON – Steven Mnuchin, President-elect Trump’s choice for secretary of the Treasury, defended his involvement with offshore entities, emphasizing that they were not used to avoid paying taxes in the United States.
During Mnuchin’s confirmation hearing before the Senate Finance Committee today, Sen. Bob Menendez (D-N.J.) said the former Goldman Sachs executive’s initial questionnaire responses left out his role in a Cayman Islands corporation and $100 million in real estate. Menendez said corrections were made after the committee staff brought the omissions to his attention.
“You were helping them avoid U.S. taxes, otherwise they could have invested here,” Menendez said of Mnuchin’s clients.
“I will tell you, and I’ve said this before and I will repeat it again, I assure you that these forms were very complicated. I don’t have the form in front of me, but I believe it said to the best of my knowledge this is true and when I certified those forms I thought it was correct. Perhaps it was a mistake in giving the committee information early and I should have waited until I had finished the 278 [form] and the ethics office,” Mnuchin told the committee.
“It doesn’t take a rocket scientist to understand the word list ‘all’ positions, all positions,” Menendez said to Mnuchin.
“Senator, with all due respect I had a lot of complicated entities. You are referring to, I didn’t list the director. I listed the entity, so the fact that I didn’t list I was a director was not intended to hide anything,” he replied.
As for the $100 million in real estate not being mentioned on the initial questionnaire, Mnuchin said, “My lawyer, who is quite sophisticated in this stuff and actually has done it for many, many nominees before, believed that we filled out the form correctly.”
Menendez pressed Mnuchin to answer if he created offshore entities to help his clients avoid U.S. taxes.
“No, not necessarily, OK?” Mnuchin answered. “This was done so different entities could invest, so sometimes it had nothing to do with taxes. It had to do with what they could invest in and couldn’t invest in, and as I’ve said to you, if you want to put me on for the entire hedge fund and pension fund, you know, we should have an IRS session to go through these issues.”
Menendez said he “appreciated” the offer but went on to blast Mnuchin’s answer.
“One does not go and create offshore entities at the end of the day other than to avoid in some form or fashion the tax laws of the United States, that’s pretty simple – that maybe even legal, in which case we should definitely close it,” he said. “But you have to question whether or not that’s the essence of what we want as leadership.”
Menendez asked if he is committed to working with the administration and Congress to close tax loopholes.
“I’m absolutely committed to work with you and your office on tax simplification and not cut down and make sure we don’t let anybody avoid taxes. In certain cases it was not a function of avoiding taxes, it was to create eligible investments for certain nonprofits,” Mnuchin said. “It may have been an eligibility issue and not a tax issue, but I agree with you this does not make sense and I will work with you and your office. I’m committed to do that.”
Sen. Orrin Hatch (R-Utah) said he found it a “bit hypocritical” that Democratic members of Congress have suddenly found “religion” on offshore account holdings.
“Evidently, memories are short. At least two of President Obama’s nominees who now serve in his cabinet had Cayman Islands holdings. Now that includes the current Treasury secretary, who also ran a business unit at Citigroup that bailed out Mega Bank, from which he received close to $1 million in bonuses – that unit has been sanctioned by the SEC for selling toxic assets that ‘harmed investors,’” Hatch said.
Mnuchin told the committee he has worked with the Office of Government Ethics to “dispose” of all his investments that could pose any conflicts.
Mnuchin was also asked to address the roughly 10,000 foreclosures at OneWest Bank, previously known as IndyMac. Mnuchin said he had to “clean up the mess that we inherited.”
“It has been said that I ran a ‘foreclosure machine.’ This is not true. On the contrary, I was committed to loan modifications intended to stop foreclosures. I ran a ‘loan modification machine,’” he told senators.
Sen. Sherrod Brown (D-Ohio) said OneWest initiated foreclosures on 54 active duty members of the military.
“We unfortunately did foreclose on certain people in the military and it was unfortunate and inappropriate, and we responded and made them whole,” Mnuchin said. “Every single person had the opportunity to have their mortgage reviewed and we corrected errors.”
The nominee vowed to make America the best place for companies to do business.
“Sensible regulation is a necessity for healthy markets. However, I saw firsthand how regulatory excess can inhibit lending by financial institutions, resulting in a lack of access to capital for small businesses and entrepreneurs,” he said.
Mnuchin referred to first Treasury Secretary Alexander Hamilton, who said the wealth of a nation may be promoted by multiplying the objects of enterprise.
“Hamilton knew the unique value of entrepreneurial activity to a thriving economy. From our nation’s earliest days, American business has been the greatest repository of ingenuity and entrepreneurial spirit in the world,” Mnuchin said.
“We need to unleash that power to generate jobs and create abundance for Americans of all backgrounds. We will work diligently to limit regulations, lower taxes on hard-working Americans and small business, and get the engine of economic growth firing on all cylinders again.”