(Bloomberg Businessweek) -- If you want to understand U.S. Secretary of the Treasury Steven Mnuchin, you have to know why he sometimes avoids Pebble Beach. The spot on the North Lawn of the White House has nothing to do with the luxurious golf resort in California or, for that matter, President Donald Trump’s favorite weekend sport. The last few administrations have relegated the 24-hour media scrum here, a once-graveled-now-paved space that still invites plenty of mudslinging. Indeed, more than a few of Trump’s advisers have strolled onto Pebble Beach to go live with their frustrations about working in an infamously adversarial White House—and found themselves in quagmires.
But not Mnuchin, who takes a 200-foot jaunt through the west side of the Treasury Department, past a replica of the Liberty Bell, to reach the White House for private talks with his boss. That’s one way he’s managed so far to stay in the good graces of a president who values loyalty above all—and rates his advisers on their media performances. The strategy of selective silence, keeping any hint of disagreement with Trump out of the press, has also become Mnuchin’s way of remaining faithful to the economic agenda he helped craft—one that’s sometimes put him at odds with others in the White House—and preserving his credibility with financial markets. For now it’s kept Mnuchin, 55, employed in an administration that’s seen, according to the Brookings Institution, 22 high-level officials resign or be forced out since Trump took office. One, Anthony Scaramucci, was cashiered after just 10 days.
Despite Mnuchin’s Wall Street pedigree, Washington insiders and the New York finance elite doubted the political neophyte would last. Yet 18 months after his appointment, Mnuchin has proved them wrong—outlasting even Gary Cohn, the storied Goldman Sachs president who resigned as Trump’s chief economic adviser after just a year. Now the Treasury secretary remains a voice of prudence, if not reason, amid the turbulence stirred up by his volatile master. Not that he complains about it. “Sometimes he’ll agree with me, and sometimes he won’t agree with me,” Mnuchin says, dutifully sticking to script. “He’s the president of the United States. And he got here because he understands lots of issues.”
One of only a few moderates left in the White House, Mnuchin has acted, not always successfully, as a bulwark against some of the administration’s more reactionary forces, trying to dissuade Trump from launching a full-blown trade war with China and other allies, which many believe could devastate the global economy. He’s also the lead enforcer of sanctions against Russia—a country of controversial, emotional importance to his boss and an issue that may figure into the midterm elections. “He’s on a balancing bar,” says Scaramucci, the hedge fund manager who was Trump’s short-lived communications director. “He wants to stay true to the MAGA-Trump agenda, and he wants to be respectful to what I would call the centrism of Wall Street.” A current White House official who asked to remain anonymous describes Mnuchin’s ideological bent less flatteringly, calling him a Wall Street Democrat.
The coming months will determine if the Treasury secretary’s selective silences will effectively keep the country’s economic policies—and his own political career—upright. Mnuchin has often found himself having to explain that Trump really didn’t mean what he just said or tweeted. In July, for instance, he arrived in Buenos Aires for the Group of 20 finance ministers meeting just as the U.S. president was lashing out at Europe and China in tweets about their currencies. Trump also blasted the Federal Reserve for raising rates, which made it sound like he was challenging the independence of his country’s central bank, the sort of questionable behavior you might expect from the leader of a developing nation. “I can assure you, because I’ve spoken to the president, that his intention is not in any way to put pressure on the Fed,” Mnuchin said. But with Trump, how does anyone know for sure? French Minister of the Economy and Finance Bruno Le Maire decried Trump’s trade approach as a return to “the law of the jungle.”
Even so, by the time he left Buenos Aires, Mnuchin had for the most part allayed fears about presidential interference with the Fed. If only he could do the same for Trump’s bellicose trade war rhetoric.
That Mnuchin has to tidy up after Trump’s economic gaffes is a reversal of the traditional role of Treasury secretary. Previous presidents had delegated the management of economic policy to some of Wall Street’s deftest talents. Robert Rubin, Bill Clinton’s Treasury chief and a former Goldman Sachs co-chairman, is seen as the father of the strong-dollar policy that successors have carefully nurtured for more than two decades. George W. Bush—fighting wars on two fronts—trusted Hank Paulson, another ex-Goldman CEO, to handle the first tremors of the financial crisis in 2007. Timothy Geithner, Barack Obama’s first Treasury secretary, cut his teeth in lower-level Treasury Department positions and later became president of the New York Fed. They all had prior experience in government; Mnuchin had none.
The son of a former Goldman Sachs partner, Mnuchin spent 17 years at the company overlapping with predecessors Rubin and Paulson, as well as Mario Draghi, who now heads the European Central Bank. Lloyd Blankfein, Goldman’s current CEO and Mnuchin’s former boss, has nothing but praise. “He was a star,” Blankfein says, adding that it puzzles him that some people still “undervalue” his ex-colleague. Mnuchin ventured into hedge fund territory, financing real estate deals, including at least two Trump projects, and such movies as Avatar, James Cameron’s 2009 blockbuster. He’s also listed as a producer of Warren Beatty’s Rules Don’t Apply, a Howard Hughes biopic that flopped despite the future Treasury secretary’s cameo as an unnamed Merrill Lynch executive.
Unlike Trump, who has a breezy Rat Pack-ish persona, Mnuchin is rather stilted. The two have known each other for years. During the campaign, when Mnuchin served as Trump’s finance chairman, they traveled together almost every day. Before he won, Trump was already saying Mnuchin would be his Treasury secretary. Despite that friendship, Mnuchin studiously prepared for the job interview (one person familiar with the vetting process says he sat in on at least one of the president-elect’s interviews with another candidate for the position). He also sought advice from Paulson and Rubin, both of whom he knew at Goldman. After he was confirmed in February 2017, he says every living former Treasury secretary turned out for a dinner in his honor in Washington. “You realize the seriousness of this job and the tradition that this goes all the way back to Alexander Hamilton,” Mnuchin says.
The Treasury secretary is expected to maintain an air of gravitas, however, which has sometimes proved challenging for Mnuchin. There were catcalls last November when he posed for a photo holding a fresh sheet of dollar bills bearing his signature. He was accompanied by his wife, the Scottish-born actress Louise Linton, who wore black leather gloves. A commentator said they looked like villains from a James Bond movie. Mnuchin shrugged it off, saying he took it as a compliment.
He’s shown acute sensitivity about remaining in the good graces of his boss. Mnuchin stood by Trump in August 2017 when the president spoke of the “very fine people on both sides” at a white nationalist rally in Charlottesville, Va., that turned violent. Soon after, he said Trump “can use whatever language he wants” when the president used the phrase “son of a bitch” to describe black NFL players who refused to stand during the national anthem. Breaking an unspoken tradition of Hamilton’s successors’ not to disparage their sitting peers, former Treasury Secretary Larry Summers tweeted that “Mnuchin may be the greatest sycophant in cabinet history.” Mnuchin says he didn’t take the attack personally.
That public self-restraint, at least when it comes to dealing with personal attacks, may be an advantage as Mnuchin pursues more moderate policies. Trump’s pronouncements have put Mnuchin in predicaments that he’s had to patiently work his way out of—while preserving his own strategies for Treasury. During the campaign, Trump said that whoever became his Treasury secretary would label China a currency manipulator. It wasn’t a course Mnuchin pursued, and in April 2017 he signed off on a report taking the opposite position, sticking to a policy trajectory established by the Obama administration. The position angered some White House officials, one of whom says it undermined the president’s ability to deliver on a campaign promise.
“He wants to stay true to the MAGA-Trump agenda, and he wants to be respectful to what I would call the centrism of Wall Street”
Trump also wanted a study on the financial regulatory system created by the Dodd-Frank Act of 2010—which he’d called “a disaster.” There were concerns inside Treasury that the administration would eviscerate the law meant to prevent another global financial crisis. Instead, people who worked on the resulting reports say Mnuchin did little to unravel the reforms. “The vast majority of the most meaningful elements of Dodd-Frank are still in place today,” says David Dworkin, a former senior housing policy adviser in the department.
Mnuchin seemed less than prepared when the time came to promote Trump’s proposed reduction of corporate taxes from 35 percent to 15 percent. He knew how to be a cheerleader, declaring the cuts would ignite so much growth that they’d pay for themselves. But his promise to back that up with a rigorous analysis conducted by the department’s Office of Tax Policy produced only a one-page justification that critics called a political document. However, in the final days to push through the legislation, Mnuchin and his team put all holiday plans on hold to lobby for the cuts. Two former officials say the administration was reluctant to have the Treasury secretary, a millionaire, promoting a plan that critics complained would help the rich. Others applaud Mnuchin’s role. “No doubt about it, Secretary Mnuchin played a fairly critical role in all of that,” says Jeb Hensarling, a Texas Republican who chairs the House Financial Services Committee.
He’s also received an education on the consequences of off-the-cuff comments. Shortly after Trump signed the tax cuts into law, Mnuchin said that “a weaker dollar is good for us as it relates to trade and opportunities” at the annual economic forum in Davos. That was consistent with what Trump himself had declared earlier when he lamented the strong dollar was “killing us.” However, on Mnuchin’s remark, the U.S. currency plummeted to a three-year low. Draghi asked if the U.S. was embarking on a currency war. Mnuchin spent several days walking back his statement, saying it had been misinterpreted. That hasn’t stopped Trump from occasionally jawboning since, undermining the Treasury chief’s responsibility as the only official who should talk about America’s dollar policy.
Mnuchin has struggled to protect his turf at Treasury. An ongoing battle in the White House over trade policy had pitted economic moderates such as Mnuchin and Cohn against pro-tariff nationalists like U.S. Trade Representative Robert Lighthizer and Trump’s special trade adviser Peter Navarro, a silver-haired former economics professor who wrote the book Death by China. Lighthizer and Navarro have encouraged what some consider to be Trump’s worst protectionist impulses. Career Treasury staff members were stunned early last year when the administration nearly pulled out of the North American Free Trade Agreement, a move Navarro had championed. According to one source, Cohn blocked the effort, saying, “That’s the stupidest f---ing idea I’ve ever heard.”
Another source familiar with the jockeying says Lighthizer was able to ram through proposals as part of the Nafta renegotiations, such as a five-year sunset clause that angered officials in Canada, America’s largest trading partner and a close ally. (Lighthizer declined to be interviewed, saying through a spokesman that “Secretary Mnuchin is a friend” and “one of the most knowledgeable people I’ve ever worked with on trade issues.” Navarro couldn’t be reached for comment.)
In March, Mnuchin’s primary ideological ally, Cohn, resigned over Trump’s decision to move forward with steel and aluminum tariffs. He was replaced as White House National Economic Council director by Larry Kudlow, a former Reagan administration official and CNBC commentator. Despite condemning tariffs in the past, Kudlow said he could now stomach them.
That left Mnuchin in a weaker position as he struggled to avert a trade war with China. Under previous administrations, the Treasury secretary has been the point person in economic negotiations with China. Early on, however, Trump put Secretary of Commerce Wilbur Ross, a China hawk, in charge of negotiating a new trade deal with their Chinese counterparts. Talks between the two nations stalled in July 2017 after a disappointing meeting in Washington.
Tired of the confusion, China asked the U.S. for one person with whom to negotiate economic matters. Trump designated Mnuchin to be the point person, which, according to multiple sources, was fine with Chinese officials, who preferred dealing with the moderate Treasury secretary. But in May, when Mnuchin traveled to Beijing for negotiations, Trump also dispatched Ross, Lighthizer, Navarro, and Kudlow to accompany him. (A Treasury spokesman says Mnuchin asked Ross and Lighthizer to join.) Predictably, there were tensions within the U.S. delegation. A White House official says Mnuchin and Navarro argued repeatedly, including in rooms where the Chinese could hear them.
Their dispute, two sources say, escalated when Mnuchin insisted on meeting one-on-one with Chinese Vice Premier Liu He, President Xi Jinping’s chief economic adviser. Navarro wandered around outside sulking, they say, and ended up yelling at Mnuchin when he discovered that Lighthizer and Ross also joined the talks. “[Mnuchin] just dealt with it the best he could,” an official says. “Anyone else would’ve cracked. I don’t know how he did it.” The Treasury spokesman says Navarro was combative with everyone on the trip.
Chinese officials were also frustrated. According to one of them, Mnuchin didn’t have the same influence in the White House as his Obama administration predecessors. (Treasury’s spokesman disputes this.) Another Chinese government official who participated in the talks saw Lighthizer and Mnuchin as Trump minions who didn’t seem to know what they’d come to negotiate. “All they have is confidence,” the official said. The Treasury spokesman says that, on the contrary, the team had a 30-page document outlining what they wanted to rebalance the trade relationship. Mnuchin did manage to work up a tentative agreement in which China would buy more U.S. goods to reduce the trade imbalance, a deal he announced on May 20 on Fox News Sunday.
“Is there still a possibility of a trade war?” anchor Chris Wallace asked. “Well, Chris,” Mnuchin said, “we’re putting the trade war on hold.”
At first, Trump was ecstatic. “China has agreed to buy massive amounts of ADDITIONAL Farm/Agricultural Products - would be one of the best things to happen to our farmers in many years!” he tweeted. Lighthizer’s office soon issued a statement that the U.S. might still use “all of its legal tools to protect our technology through tariffs.” Lou Dobbs, a Fox Business Network commentator and Trump favorite, piled on, accusing Mnuchin of appeasing China. The president began to waver, telling reporters he wasn’t really happy with the agreement; the next day, Trump all but repudiated it.
Then it was Navarro’s turn to make an announcement. “So just a week ago we heard Secretary Mnuchin say the trade war was on hold,” Fox Business Network anchor Maria Bartiromo volunteered. “Yes, it was an unfortunate sound bite,” Navarro said, chuckling.
Soon after, Trump slapped tariffs on $50 billion in Chinese goods and threatened to add levies on $200 billion more. There was talk among Mnuchin’s foes that his days were numbered. That’s when he went silent and assiduously avoided Pebble Beach. Behind closed doors, Mnuchin was able to dissuade Trump from putting investment restrictions in the U.S. on Chinese companies. Inside Treasury, he couldn’t have been happy, but he kept quiet about it publicly, which officials say is his way of expressing his disagreement with the president.
At the June meeting of the G-7 finance ministers in Canada, Mnuchin all but acknowledged his powerlessness. “He was saying, ‘Don’t tell me. Go directly to President Trump,’ ” Japanese Minister of Finance Taro Aso told reporters. “Frankly, I felt sorry for him.” At another such meeting, Mnuchin listened quietly as a different G-7 finance minister lectured him on the odiousness of Trump’s tariffs, according to a source.
On Capitol Hill, Mnuchin was confronted in a July hearing by anxious Republican and Democratic House members who feared that their constituents would lose jobs because of retaliatory tariffs on Missouri soybeans, Kentucky bourbon, and other American exports. He told them he was aware of their problems and was trying to do something about them. U.S. Representative Gregory Meeks, a New York Democrat, became impatient with what he considered Mnuchin’s unwillingness to answer his questions directly. He reminded Mnuchin that he was working for a president who had once described himself as a “stable genius.”
“Are you a stable genius, Mr. Secretary?” Meeks asked.
Mnuchin was momentarily flustered. “Am I a stable genius? I’m stable,” he answered, “and I won’t refer to myself as a genius one way or another.”
The response broke the tension; even Meeks chuckled. “He’s said he’s a stable genius,” Meeks continued. “Is he listening to you or, because he’s a stable genius, he just does whatever the heck he wants to do without listening to your advice?”
“Yes, I can assure you that the president listens to my advice,” Mnuchin answered, then repeated his mantra about Trump: “Sometimes he follows my advice, and sometimes he doesn’t, which I respect, but I would not be in this job if I did not think he listens to my advice.”
The job Mnuchin took is wider in scope than those of his predecessors. The secretary’s mandate includes managing the Treasuries market, which has tripled, to $15 trillion over the past decade; leading a group of regulators on the Financial Stability Oversight Council, created in the aftermath of the 2008 crisis; and engaging in economic diplomacy internationally. Mnuchin is also tasked with combating money laundering and illicit financing and developing sanctions programs, which have grown in their sophistication. He also serves as head of the only finance ministry in the world with its own law enforcement arm, called FinCEN. And he has to oversee U.S.-imposed sanctions on the likes of Iran, North Korea—and Russia.
Mnuchin’s early weeks in office were predictably chaotic, exacerbated by delays by the White House and the Senate in vetting nominees for the more than two dozen political appointments needed at Treasury. Civil servants and members of different advisory boards at Treasury were adjusting to how he conducted meetings: more like a trader wanting quick information for quick decisions, unlike his predecessor Jacob Lew, who encouraged lengthy debates.
Some found Mnuchin’s freewheeling nature—like eschewing the need to stick to a prepared meeting agenda—refreshing. Five others who were there early on say they thought the new boss would have benefited from getting more input from his employees. Still, former Treasury employees say they were relieved to find that Mnuchin wasn’t out to decimate their department, as some other new cabinet members seemed bent on doing. He said hello to employees while strolling around Treasury headquarters and made some encouraging early decisions. Still, he has clearly defined his interests as sanctions, tax policy, and trade; department employees in units outside those spheres say he’s inaccessible.
Mnuchin isn’t shy about admitting what he doesn’t know—and sanctions were one thing he had no experience with. Ironically, on his first day, Mnuchin found himself at the White House announcing some against Venezuelan Vice President Tareck El Aissami for alleged drug trafficking. It was a part of his job that he took a fancy to, and he began poring over memos and intelligence related to sanctions programs run by Treasury. Civil servants in the Terrorism and Financial Intelligence unit say his interest in understanding and wielding the power of sanctions has given Treasury a more central role in foreign policy. “Secretary Mnuchin has been more personally involved in the sanctions policy formulation and implementation than any of his predecessors,” says Robert Kimmitt, a former deputy Treasury secretary in the George W. Bush era.
All that new expertise will only put him at the forefront of the next noisy battles in Washington as both Democrats and Republicans express outrage at Russian meddling in U.S. elections. Democrats, led by Maxine Waters, a California Democrat and the ranking member of the House Financial Services Committee, have repeatedly asked for FinCEN data that might shed light on Trump’s possible dealings with Russian investors. Mnuchin has been able to keep them at bay, but if the House flips in November, Waters will have subpoena power, complicating his efforts to shield his boss, who has made conflicting statements about whether he believes there was any election interference. “The bottom line is, this administration has been tougher with regard to Russian sanctions than they get credit for,” says Brian O’Toole, a former Treasury senior sanctions officer who served under Mnuchin early on. “But literally at every single turn, the president undermines the message.”
Mnuchin may try to avoid Pebble Beach, but he knows that’s not always possible. On July 26, he took questions in the area, reiterating official policy about monitoring China’s yuan and speaking about Russian sanctions and trade.
The Treasury secretary may still persuade Trump to abandon his trade war. In late July, Trump and Jean-Claude Juncker, president of the European Commission, agreed to hold off on further tariffs while they tried to reach a new trade agreement. Bloomberg also reported at the time that Mnuchin and Liu were flirting with the idea of resuming talks. Soon after, though, the U.S. and China were trading threats of escalated tariffs. For the time being, a White House official says, Trump remains fond of Mnuchin, but he’s tired of the failures in the China negotiations.
Luckily for Trump, the economic policies promoted by his Treasury secretary seem to be working—for now. The U.S. economy grew 4.1 percent in the second quarter, the highest rate in four years. “He might not be right in the long run,” Goldman’s Blankfein says. “But guess what? They didn’t think he’d be right in the short term.” Hopefully, Mnuchin’s tax cuts will end up paying for themselves; the federal deficit is expected to reach $1 trillion in 2020, two years earlier than projected. —With Jennifer Jacobs, Alan Crawford, Peter Martin, Yinan Zhao, Justin Sink, Birgit Jennen, and Margaret Talev
To contact the authors of this story: Devin Leonard in New York at dleonard12@bloomberg.netSaleha Mohsin in Washington at smohsin2@bloomberg.net
To contact the editor responsible for this story: Howard Chua-Eoan at hchuaeoan@bloomberg.net, Joel Weber
©2018 Bloomberg L.P.
