Steven Mnuchin is an emblematic beneficiary of a rigged system, who has made an extraordinary amount of money by virtue of insider advantage and willingness to use it to take advantage of vulnerable people.
Mnuchin’s early years were spent following a path paved by his father, from Yale to Goldman Sachs.
At Goldman Sachs, he helped build the market for risky mortgage products from the ruins of the S&L crisis of the 80’s.
- He spent his years at Goldman earning how to “profit from the savings and loan crisis of the 1980s by buying the assets of capsized banks on the cheap,” trading the very products that would cause the massive foreclosure crisis from which he would later profit.
- He was “front and center for the advent of instruments like collateralized debt obligations (CDOs) and credit default swaps (CDSs).”, which he described as ‘an extremely positive development.’
- Mnuchin left Goldman with $46mm to try as a hedge fund manager to capitalize on the new financial markets he’d spent his career building.
After leaving Goldman, he leveraged relationships with wealthy friends to float through some cushy jobs.
Mnuchin’s time at his own hedge fund – Dune Capital Management – had all the hallmarks of the boom years:
- Becoming entangled with Bernie Madoff’s notoriousponzi scheme – and getting out with millions in allegedly ill-gotten profits shortly before its collapse.
- Flirting with some of the most unsavory crisis-era financial products such as the macabre Life Settlement contracts, which made bets on the life insurance policies of the elderly.
Mnuchin’s hedge fund, and Mnuchin himself, became best-known as a Hollywood producer and financier.
Dune and Mnuchin were embroiled in scandal through their web of relationships with the bankrupt and currently-under-investigation entertainment company Relativity Media.
- Dune invested millions in the Hollywood media firm Relativity Media, and Mnuchin served as co-chairmain of its board. During Mnuchin’s tenure, Relativity also borrowed heavily from Mnuchin’sOneWest Bank. Relativity ran into serious financial trouble, ultimately filing for Bankruptcy protection in 2015. Just months earlier, Mnuchin abruptly resigned from the board, and shortly afterward OneWest swept millions from Relativity’s bank accounts. Relativity was accused by creditors, who lost millions, of essentially being a Ponzi scheme, and is currently the subject of an FBI Investigation.
When the financial crisis hit in 2008, Mnuchin was sought to capitalize on the unfolding disaster.
Armed with a cadre of billionaire friends and an intricate knowledge of exotic financial instruments, Mnuchin struck a deal that would quickly make him the Foreclosure King.
IndyMac, the large west-coast mortgage lender that specialized in the the most toxic kinds of loans, had failed and was taken over by the FDIC, which was desperately seeking a buyer to take on the hundreds of thousands of mortgage loans in its portfolio.Mnuchin swooped in and in 2009, his group purchased most of IndyMac’s $23.5 billion of assets and re-named it OneWest Bank in a deal that kept the FDIC on the hook for billions in losses.
As the foreclosure crisis deepened across the country, OneWest got to work trying to maximize the profit from IndyMac’s books, which included the thousands of residential mortgages. It dedicated most of its resources to- and derived most of its profit from – pushing IndyMac’s base of troubled homeowners into foreclosure, exacerbating the foreclosure crisis in the process.
Although the loss-sharing deal crafted with the FDIC was meant to encourage loan modifications and payment plans that could keep homeowners in their homes, OneWest found it more profitable to foreclose on more than 50,000 homeowners, often aggressively and even illegally.
Mnuchin foreclosed on thousands, becoming known as the Foreclosure King
While foreclosing on tens of thousands of homeowners, OneWest earned a reputation for widespread malfeasance:
- OneWest was at the center of the Robosigning scandal, which revealed how OneWest rushed homes through the foreclosure process by using fraudulent documents and doctored paperwork
- The California department of Justice found evidence of widespread misconduct, including fraud, tax evasion, and violation of other state laws
Mnuchin’s foreclosure practices also targeted vulnerable communities:
- The Elderly – OneWest preyed on the elderly through their Reverse Mortgage unit, which foreclosed on over 16,000 elderly homeowners in California alone, accounting for 40% of all CA reverse mortgage foreclosures.
- Communities of Color Targeted communities of color, with ⅔ of their foreclosures occurring in these neighborhoods in addition to evidence of redlining throughout their districts.
- Servicemembers Nearly a quarter of the $8.5 million federal authorities ordered OneWest to pay in compensation for thousands of cases of foreclosure misconduct went to Servicemembers, who has been illegally foreclosed on in violation of specific laws protecting them from abuse.
- Hurricane Sandy VictimsOneWest blocked the release of millions in aid due to the victims of Hurricane Sandy, and was found to be one of the worst offenders in an investigation by New York State authorities
Foreclosure was the first choice not the last resort for OneWest bank:
Despite federal programs to incentivize loan modifications and keep struggling families in their homes, OneWest only completed modifications for 23,000 – they evicted more than twice as many people as they completed modifications for.
There is, however, one example of a loan Mnuchin was willing to modify in the face of borrower financial distress: Donald Trump, who sued Dune in 2008 to modify a loan he’d received for Trump Tower in Chicago.
Mnuchin Cashed out of OneWest, and sets sights on loftier goals.
In 2015 – after paying themselves $1.5bn in dividends – Mnuchin and the investors sold OneWest to CIT Group for $3.4bn.Mnuchin personally made hundreds of millions on the deal. The sale faced strenuous opposition from community groups, and scores of OneWest foreclosure victims shared stories of the terrible impact of the bank’s abuse and misconduct.