Steven Mnuchin, a former Goldman Sachs banker, is Donald Trump’s nominee for Treasury Secretary. The confirmation hearing was contentious for a number of reasons. Democrats on the Senate Finance Committee grilled Mnuchin on foreclosing on homes in California, failing to disclose $100 million in assets and running an offshore investment account. Mnuchin’s billionaire problems will not keep him out of the government. The real issue is what will Mnunchin mean for investors when he takes office. Many think Mnuchin is one of Wall Streets brightest mind’s – and perfect for this job – in this cycle.
Mnuchin has said he will review China’s currency manipulation. “As Treasury secretary, I will work with the president to examine the U.S. trade relationship with China and assess the damage to the American economy from China’s practice of intervening in currency markets to manipulate the yuan-dollar exchange rate, as well as other unfair tactics that violate free trade principles,” he said. And then, Mnuchin and Trump will turn around and take aim at devaluing the dollar. Mnuchin said that a strong dollar weakens the American economy and makes US industries less competitive. However, to go even further into this, Mnuchin believes that the value is flat out overvalued.
With economic uncertainty in Europe and the UK’s exit from the EU, the dollar can expect to appreciate 25 percent. Trump’s team will reverse the strong dollar as safe-haven strategy to counter falling worldwide currencies. “A stronger dollar increases US dollar purchasing power,” Mnuchin observed. “To the extent the dollar gains strength relative to other currencies, assets priced in those other currencies would become cheaper on a dollar basis.” Wall Street is watching and waiting as policies come more into focus, but international currency trading is heading away from the dollar as a protectionist approach looms.
Mnuchin will also review tax codes and revisit Dodd Frank. “It has been over 6 years since the passage of Dodd-Frank and it seems like an appropriate time to review all of the regulations from Dodd-Frank to understand their impact on the market, investors, small businesses and economic growth,” Mr. Mnuchin said in his written response to the questions. “I am of the view that taking a fresh look at all aspects of the Dodd-Frank legislation should be one of our highest priorities.”
Mnuchin also responded to a comment from Senator Mark Warner on Fannie Mae and Freddie Mac. In November, Mnuchin said on Fox Business Network that the two entities should be privatized and out of government control. Mnuchin backed off this hardline view in the hearing. “My comments were never that there should be recap and release,” Mnuchin said Thursday during his Senate Finance Committee confirmation hearing. “I believe that these are very important entities to provide the necessary liquidity for housing finance (…) “We need housing reform so we shouldn’t just leave Fannie and Freddie as is for the next four or eight years under government control without a fix.”