STAN CHOE and CHRISTOPHER RUGABER
Updated Sat, March 16, 2024
NEW YORK (AP) — It seems like a bizarre mishmash: A former Trump cabinet official is saying he wants to buy TikTok just days after leading a group that pumped $1 billion into a beaten-down bank. But it all actually fits in with the complicated career of Steven Mnuchin.
The man who served as former President Donald Trump’s Treasury secretary is well connected in the world of finance, after all. From 1985 to 2002, he worked at Goldman Sachs, one of the most storied — and criticized — investment banks on Wall Street.
Mnuchin also has a history in media and entertainment. Among his Hollywood credits are “Mad Max: Fury Road” and “The Lego Movie,” where he was one of the executive producers. Think of them as much bigger-budget versions of TikTok videos.
And Mnuchin certainly has experience taking risks with troubled institutions. He famously swooped in to turn around the struggling IndyMac bank after its failure in the financial crisis of 2008.
But for critics, Mnuchin's dealmaking also raises concerns about ethics. Robert Weissman, president of the watchdog group Public Citizen, points to TikTok in particular, where the U.S. government may force its Chinese owners to sell. Imagine something similar happening in another country, where its former finance minister ended up as the buyer, he said.
"When you’re at the top of the financial policymaking hierarchy, you don’t jump from that to figure out how you can help yourself,” Weissman said.
Other former Treasury secretaries have gone to Wall Street after their terms ended, including Robert Rubin, a Goldman Sachs executive who served under President Clinton. In all cases, the move carries the appearance of cashing in on their time in government, Weissman said.
Mnuchin, who couldn’t be reached for comment through a request via his private-equity firm, has often generated controversy as he has generated cash.
After leaving the Treasury Department in January 2021, he launched his private-equity fund, Liberty Strategic Capital, which raised $2.5 billion by that September, according to news reports.
Much of that money was from government-controlled investment funds in Saudi Arabia and other Persian Gulf states, which Mnuchin had frequently visited as Treasury secretary. He was in the Middle East just weeks before leaving office, cutting the trip short after the Jan. 6 Capitol riot.
The rapid shift from his government travel overseas to business dealings in those same countries prompted a watchdog group, Citizens for Responsibility and Ethics in Washington, to call for a one-year ban on senior government officials doing business overseas after leaving office.
Earlier this month, Mnuchin jumped back into the headlines when his PE firm led a roughly $1 billion investment in embattled New York Community Bancorp.
NYCB was looking for a lifeline, and its stock had at one point plunged more than 80% from the start of the year. The bank is struggling with falling values for investments tied to commercial real estate and the growing pains associated with some of its past acquisitions.
It all hearkens back to the move that may have defined Mnuchin's career.
In 2009, OneWest Bank Group, where Mnuchin was chairman and CEO, bought the troubled IndyMac after federal regulators took over the bank. Other big-name backers included funds tied to George Soros and hedge-fund manager John Paulson.
OneWest bought all of IndyMac’s deposits and assets at a discount of $4.7 billion following an auction by the Federal Deposit of Insurance Corp. The FDIC also agreed to share in the losses created by some mortgages tied to single-family homes.
Kevin Kaiser, an adjunct professor of finance at the Wharton School, said such investors can profit by buying at steep discounts when markets are panicking. To ensure the investment pays off, however, investors like Mnuchin have to pay hardball with borrowers at risk of default, he said.
“They’re a little bit sharp elbowed,” Kaiser said, referring to distressed-property investors as a group. “And what that means is they’re not shy to get into a bit of a conflict situation.”
After OneWest, Mnuchin was Trump’s top fundraiser in the 2016 election. He came under fire in Congress when he was nominated for the Treasury post, after it came out that OneWest foreclosed on tens of thousands of homes after the U.S. housing bubble popped.
Advocates found the bank particularly difficult to work with under government mortgage modification programs. Some of those who lost their homes had voted for Trump in 2016 and were disappointed in Mnuchin’s nomination.
Maxine Waters, the top Democrat of the House’s financial committee, at the time called Mnuchin the “foreclosure king.”
In testimony before a Senate committee considering his nomination, Mnuchin said he had worked to help homeowners remain in their homes and that his company had extended more than 100,000 loan modifications to borrowers.
Mnuchin was Treasury secretary in 2020, when the Trump administration brokered a deal where Oracle and Walmart would take a large stake in TikTok. That deal eventually fizzled for several reasons, but the popular video app is again under pressure after the House of Representatives passed a bill Wednesday to ban it in the U.S. if its China-based owner doesn't sell its stake.
On Thursday, Mnuchin said in an interview with CNBC that he had spoken with “a bunch of people” about creating an investor group to buy TikTok.
And Mnuchin may not be done.
Mnuchin has plenty of potential, distressed targets given the banking industry's troubles, said Chris Caulfield, who runs the banking practice at West Monroe, a consulting firm.
Besides having a history of bringing in new leadership teams to right struggling banks, Mnuchin also has experience in the potentially thorny world of regulations.
“He also has access to capital,” Caulfield said of Mnuchin. “Should there be need for more capital, he's somebody who’s very adept at putting consortiums together.”
___
Rugaber reported from Washington.
Trump official and Goldman Sachs alum Steve Mnuchin plots to buy TikTok as Gen Z panics about a possible ban
Dylan Sloan
Fri, March 15, 2024
On Tuesday, former Treasury Secretary Steve Mnuchin closed a $1 billion equity deal to rescue the faltering New York Community Bank. On Thursday, he said he was working to buy TikTok with a group of investors after the House passed a bill demanding that Chinese firm ByteDance sell the app. It's been the source of considerable Gen Z (and probably a lot of millennial) panic, as the realization dawns that the defining social-media platform of the 2020s really could go away.
After leaving the public eye for years after Joe Biden’s electoral defeat of Donald Trump in 2020, Mnuchin is back in the business pages. It’s just the latest in a wide-ranging career that’s brought him from the Goldman Sachs trading floor to Hollywood—Mnuchin has production credits on “Avatar” and “The Lego Batman Movie.”
Mnuchin’s interest in TikTok dates back at least to his time in Trump’s cabinet, when he urged the then-president to block Chinese company ByteDance from acquiring TikTok, back when it was called musical.ly. Mnuchin’s experience as a dealmaker and fundraiser, though, goes back much further, to the very beginnings of his career in business.
Mnuchin is a Wall Street veteran through and through. His father, Robert Mnuchin, was a partner at Goldman Sachs who worked at the bank for over three decades. After Steve graduated from Yale in 1985, he took a job at his father’s company, working in Goldman’s mortgage-backed securities department.
Working his way up to partner and Chief Information Officer, Mnuchin left Goldman in 2002 and spent over a decade bouncing around between various management roles, ranging from film to California-based OneWest Bank to serving on the Sears board. (Dune Capital, a hedge fund that Mnuchin co-founded with seed money from George Soros, put up some of the money for David Cameron’s 2009 movie Avatar, alongside other hits such as Magic Mike XXL.)
Donald Trump tapped Mnuchin to lead the finance arm of his presidential campaign in 2016, and nominated him to be Secretary of the Treasury after the election—the first Wall Street vet to hold the role since his old Goldman Sachs boss Hank Paulson nearly a decade earlier. Democrats were unanimously opposed to Mnuchin, pointing to his allegedly predatory track record of foreclosing on California homeowners while serving as OneWest Bank’s CEO. But Mnuchin was narrowly confirmed by the Senate, and was one of the few Trump cabinet members to remain in office for all four years of Trump’s term.
As Treasury Secretary, Mnuchin stuck close to the party line, emerging as an unflinching Trump ally: he pushed to enact Trump’s tax cuts and supported rolling back the Dodd-Frank Act passed after the 2008 financial crisis, which weakened the Consumer Financial Protection Bureau. But his work across the aisle during a crisis will likely be his legacy, as he worked with Speaker Nancy Pelosi to shepherd the Covid-19 stimulus bill that he helped through Congress: allocating nearly $1 trillion in federal aid and temporarily expanding the social safety net at a sorely needed time.
What has Mnuchin been up to during the Biden administration?
In 2021, after leaving office, Mnuchin founded Liberty Strategic Capital, a $3.1 billion private equity firm focusing on tech and fintech. By far its highest-profile investment to date came earlier this week, when it handed New York Community Bank a $1 billion lifeline to keep it afloat after the bank’s shares plummeted off ratings downgrades and concerns over its struggling commercial real estate portfolio.
“It’s a top-20 bank. We put up a lot of capital which will stabilize the business, brought in Joseph Otting as CEO, and I think there’s going to be a great turnaround,” Mnuchin said of the deal on CNBC on Thursday.
A potential TikTok purchase would be a far bigger—and far more complicated—prize. In a deal with high geopolitical stakes, Mnuchin’s fundraising ability can only take him so far.
“I’m assuming he can raise the money easily enough…I don't know what the price would be. [But] I think the identity of the CEO of the buyer is a pretty low level consideration,” Columbia Law professor and corporate governance expert John C. Coffee told Fortune. “This is not an ordinary business transaction between a buyer and a seller. It's two sovereigns facing off, and one may want to say, ‘You can't do that to us. Go ahead and do it, and we'll engage in economic reprisals of our own.’”
The House of Representatives voted 352-65 on Wednesday to pass a bill that would ban TikTok unless the app’s Chinese parent company, ByteDance, sells it. The bill isn't expected to pass the Senate, but it’s reignited debate over the risks of a Chinese company potentially having access to over 170 million American users’ data—as well as control over what they’re seeing on an app where close to a third of adults age 13-29 get their news, according to Pew Research Center data.
“I had President Trump sign an order that TikTok had to be sold, and I continue to believe that. So I think the legislation should pass…It’s a great business, and I’m going to put together a group to buy TikTok,” said Mnuchin on CNBC on Thursday. “It should be owned by U.S. businesses. There’s no way that the Chinese would ever let a U.S. company own something like this in China.”
Another feather in the cap
Buying TikTok would be a huge get for Mnuchin. The app reported $16 billion in annual sales on Friday, and an Oxford Economics report found that it contributed $24.2 billion to US GDP last year (TikTok contributed funding for the study). Bloomberg Intelligence recently valued TikTok’s U.S. business at an estimated $40-50 billion.
The last major social media buyout was Elon Musk’s Twitter takeover in 2022. Musk has taken a central role in Twitter (now X.com)’s operations ever since, dictating content moderation policies and experimenting with payment models. NYU Business professor and former Obama Assistant Secretary of State Michael H. Posner told Fortune that he wasn’t concerned about Mnuchin potentially exerting Musk-like control over TikTok.
“It's a very different thing than Elon Musk owning X, or even Mark Zuckerberg effectively having operational control of Meta. So, you know, I would be less concerned,” Posner said. “Elon Musk at X has inserted himself in a way that I think is very detrimental to the company and not good for our society…I think Mnuchin probably wouldn't have that kind of control.”
Posner pointed out that if legislators are concerned about Chinese influence over TikTok, forcing a sale is only one half of the equation: it would also be necessary to remove that all of the app’s data centers and engineering staff from any Chinese oversight, a process that could take a long time.
“Mnuchin and his group, if they had the money, and they were able to buy [TikTok], and separate not only ownership but the technology—making sure that the algorithms, all the engineering was also taken out of China—that would obviously, to me at least, be a very positive development,” Posner said.
This story was originally featured on Fortune.com
Dylan Sloan
Fri, March 15, 2024
On Tuesday, former Treasury Secretary Steve Mnuchin closed a $1 billion equity deal to rescue the faltering New York Community Bank. On Thursday, he said he was working to buy TikTok with a group of investors after the House passed a bill demanding that Chinese firm ByteDance sell the app. It's been the source of considerable Gen Z (and probably a lot of millennial) panic, as the realization dawns that the defining social-media platform of the 2020s really could go away.
After leaving the public eye for years after Joe Biden’s electoral defeat of Donald Trump in 2020, Mnuchin is back in the business pages. It’s just the latest in a wide-ranging career that’s brought him from the Goldman Sachs trading floor to Hollywood—Mnuchin has production credits on “Avatar” and “The Lego Batman Movie.”
Mnuchin’s interest in TikTok dates back at least to his time in Trump’s cabinet, when he urged the then-president to block Chinese company ByteDance from acquiring TikTok, back when it was called musical.ly. Mnuchin’s experience as a dealmaker and fundraiser, though, goes back much further, to the very beginnings of his career in business.
Mnuchin is a Wall Street veteran through and through. His father, Robert Mnuchin, was a partner at Goldman Sachs who worked at the bank for over three decades. After Steve graduated from Yale in 1985, he took a job at his father’s company, working in Goldman’s mortgage-backed securities department.
Working his way up to partner and Chief Information Officer, Mnuchin left Goldman in 2002 and spent over a decade bouncing around between various management roles, ranging from film to California-based OneWest Bank to serving on the Sears board. (Dune Capital, a hedge fund that Mnuchin co-founded with seed money from George Soros, put up some of the money for David Cameron’s 2009 movie Avatar, alongside other hits such as Magic Mike XXL.)
Donald Trump tapped Mnuchin to lead the finance arm of his presidential campaign in 2016, and nominated him to be Secretary of the Treasury after the election—the first Wall Street vet to hold the role since his old Goldman Sachs boss Hank Paulson nearly a decade earlier. Democrats were unanimously opposed to Mnuchin, pointing to his allegedly predatory track record of foreclosing on California homeowners while serving as OneWest Bank’s CEO. But Mnuchin was narrowly confirmed by the Senate, and was one of the few Trump cabinet members to remain in office for all four years of Trump’s term.
As Treasury Secretary, Mnuchin stuck close to the party line, emerging as an unflinching Trump ally: he pushed to enact Trump’s tax cuts and supported rolling back the Dodd-Frank Act passed after the 2008 financial crisis, which weakened the Consumer Financial Protection Bureau. But his work across the aisle during a crisis will likely be his legacy, as he worked with Speaker Nancy Pelosi to shepherd the Covid-19 stimulus bill that he helped through Congress: allocating nearly $1 trillion in federal aid and temporarily expanding the social safety net at a sorely needed time.
What has Mnuchin been up to during the Biden administration?
In 2021, after leaving office, Mnuchin founded Liberty Strategic Capital, a $3.1 billion private equity firm focusing on tech and fintech. By far its highest-profile investment to date came earlier this week, when it handed New York Community Bank a $1 billion lifeline to keep it afloat after the bank’s shares plummeted off ratings downgrades and concerns over its struggling commercial real estate portfolio.
“It’s a top-20 bank. We put up a lot of capital which will stabilize the business, brought in Joseph Otting as CEO, and I think there’s going to be a great turnaround,” Mnuchin said of the deal on CNBC on Thursday.
A potential TikTok purchase would be a far bigger—and far more complicated—prize. In a deal with high geopolitical stakes, Mnuchin’s fundraising ability can only take him so far.
“I’m assuming he can raise the money easily enough…I don't know what the price would be. [But] I think the identity of the CEO of the buyer is a pretty low level consideration,” Columbia Law professor and corporate governance expert John C. Coffee told Fortune. “This is not an ordinary business transaction between a buyer and a seller. It's two sovereigns facing off, and one may want to say, ‘You can't do that to us. Go ahead and do it, and we'll engage in economic reprisals of our own.’”
The House of Representatives voted 352-65 on Wednesday to pass a bill that would ban TikTok unless the app’s Chinese parent company, ByteDance, sells it. The bill isn't expected to pass the Senate, but it’s reignited debate over the risks of a Chinese company potentially having access to over 170 million American users’ data—as well as control over what they’re seeing on an app where close to a third of adults age 13-29 get their news, according to Pew Research Center data.
“I had President Trump sign an order that TikTok had to be sold, and I continue to believe that. So I think the legislation should pass…It’s a great business, and I’m going to put together a group to buy TikTok,” said Mnuchin on CNBC on Thursday. “It should be owned by U.S. businesses. There’s no way that the Chinese would ever let a U.S. company own something like this in China.”
Another feather in the cap
Buying TikTok would be a huge get for Mnuchin. The app reported $16 billion in annual sales on Friday, and an Oxford Economics report found that it contributed $24.2 billion to US GDP last year (TikTok contributed funding for the study). Bloomberg Intelligence recently valued TikTok’s U.S. business at an estimated $40-50 billion.
The last major social media buyout was Elon Musk’s Twitter takeover in 2022. Musk has taken a central role in Twitter (now X.com)’s operations ever since, dictating content moderation policies and experimenting with payment models. NYU Business professor and former Obama Assistant Secretary of State Michael H. Posner told Fortune that he wasn’t concerned about Mnuchin potentially exerting Musk-like control over TikTok.
“It's a very different thing than Elon Musk owning X, or even Mark Zuckerberg effectively having operational control of Meta. So, you know, I would be less concerned,” Posner said. “Elon Musk at X has inserted himself in a way that I think is very detrimental to the company and not good for our society…I think Mnuchin probably wouldn't have that kind of control.”
Posner pointed out that if legislators are concerned about Chinese influence over TikTok, forcing a sale is only one half of the equation: it would also be necessary to remove that all of the app’s data centers and engineering staff from any Chinese oversight, a process that could take a long time.
“Mnuchin and his group, if they had the money, and they were able to buy [TikTok], and separate not only ownership but the technology—making sure that the algorithms, all the engineering was also taken out of China—that would obviously, to me at least, be a very positive development,” Posner said.
This story was originally featured on Fortune.com
No comments:
Post a Comment