Trump Treasury Secretary, Washington, USA - 19 Jan 2017

WASHINGTON — Treasury Secretary-designate Steven Mnuchin came under fire at a contentious Senate confirmation hearing Thursday, as the ranking Democrat on the panel charged that he sat on a committee that “routinely mismanaged and underfunded”  Sears, Roebuck & Co.’s employee pension fund — one of a series of charges leveled at the former Goldman Sachs executive.

Mnuchin spent more time at his confirmation hearing defending criticism and allegations of predatory lending practices and foreclosures while he was the chief executive of One West Bank Group — the renamed failed California mortgage lender known as IndyMac — and his offshore holdings in the Cayman Islands, than on his views on the economy, taxes, trade and China’s currency.

President-elect Donald Trump nominated Mnuchin to head the Treasury Department at the end of November.

Sen. Ron Wyden (D., Ore.), the panel’s ranking member, aimed a litany of criticism at Mnuchin.

“Mr. Mnuchin spent years as a director of the holding company that owned Sears, an iconic American brand. He served on the committee that watchdogged the Sears’ employee pension fund,” Wyden said. “The record shows the plan was routinely mismanaged and underfunded. Retirees recently saw their pensions cut, losing a monthly health-care stipend that was enough to offset roughly a third of the premiums seniors pay for Medicare Part B.”

“Sears has also shuttered hundreds of stores nationwide over the last few years, and recently announced another round of closures,” Wyden said. “Once again showing his impressive capacity to advantage himself while others fell behind, Mr. Mnuchin joined a small group of investors that spun off the company’s real estate into a separate trust,” he alleged.

Wyden noted: “It was arguably the most valuable asset Sears had left. So as retirees watch their pensions shrink and Sears’ remaining workers worry face an uncertain future, this small number of powerful individuals made out fine.”

Sen. Bob Menendez (D., N.J.) chimed in later in the afternoon.

“Here’s where my concern is. You were director of Sears for 12 years where you had oversight over the administration and the investment into the pension fund,” Menendez said. “That pension fund has been underfunded. Its benefits were cut right around the time period that you were there. It now faces a $2.1 billion funding obligation debt. Sears has sold off most of its valuable assets while you’ve been on the board.”

Menendez said he is also concerned about Edward S. Lampert, chairman and chief executive officer of Sears, who were roommates at Yale and his alleged “large interest in the properties that were sold.”

“Should Sears go bankrupt and you are confirmed as Treasury Secretary and…the Pension Benefit Guaranty Corp. as an unsecured creditor attempts to recover the $2.1 billion in underfunded liabilities while simultaneously trying not to lose money in your hedge fund investments in Sears that you hold with your college roommate, who is ceo of Sears, how is it that you are going to do that?” Menendez asked.

“My original involvement with Mr. Lampert was in Kmart coming out of bankruptcy, where all of the professionals thought that  Kmart should be liquidated and Mr. Lampert, and I working for him, saved tens of hundreds of thousands of jobs,” Mnuchin said.

He stressed that Sears also contributed “multibillion[s in] dollars to the pension fund,” adding that the fund had issues predating their involvement.

Mnuchin said he would recuse himself if such a scenario did play out.

In response to a query about Wyden’s earlier comments, Sears said in a statement: “Sears Holdings has and will continue to meet its employee pension obligations. In fact, the company has contributed more than $2.5 billion since 2009. We are a major employer operating more than 1,400 stores and like many other retailers, are taking steps to ensure our long-term viability in an extremely competitive industry.

Mnuchin resigned from the boards and CIT Group Inc. in early December, ahead of his confirmation hearings.

He joined the Sears board in March 2005, when Kmart Corp. merged with Sears, Roebuck & Co., after which the combined entity was renamed Sears Holdings Corp. Before that, he had been named to Kmart’s board in May 2003.

Mnuchin  spent much of the hearing defending his time at IndyMac and the totality of his banking career.

“I want to correct the record about my investment with IndyMac Bank. Since I was first nominated to serve as Treasury Secretary, I have been maligned for taking advantage of others’ hardship in order to earn a buck. Nothing could be further from the truth,” Mnuchin said in his opening remarks.

He said his group had “nothing to do with creation of risky loans for the IndyMac loan portfolio” and instead inherited the bad loans made by previous management.

Mnuchin said his responsibility at One West (the renamed failed IndyMac) was to “clean up the mess others made but that we inherited.”

“We worked very hard to help homeowners remain in their homes through loan modification wherever possible,” he said.

One West ultimately extended over 100,000 loan modification to delinquent borrowers, he added.

“In the press it has been said that we ran a foreclosure machine. This is not an accurate description of my role at One West Bank,” Mnuchin said. “On the contrary I was committed to loan modifications to stop foreclosures. I ran a loan modification machine.”

On trade, Trump has railed against China and accused the of manipulating its currency, lowering the value of the currency to give it a competitive advantage over U.S. producers.

As head of Treasury, Mnuchin will be tasked with assessing China’s currency to determine whether the country is in violation.

“Among the President-elect’s signature issue in this campaign was reviving trade policies that put American workers first,” Mnuchin said. “I will enforce trade policies that keep our currency strong on the world exchanges…and protect American jobs.”

Mnuchin stressed that Trump is interested in “free and fair trade.” He has also said the administration believes in bilateral trade deals and Trump has indicated he might be open to a bilateral trade deal with the United Kingdom.

“He just wants better deals,” Mnuchin said. “He wants us to grow exports and he wants better deals.”

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