What to expect from the new fiscal course of the United States


The long-awaited Minister

Stephen Mnuchin, millionaire and former banker of Goldman Sachs, was supported by 53 senators, 47 voted against it; all Senate Democrats, except one, opposed his candidacy. The purpose Mnuchin fits into the logic of the selection of other members of the team of Donald trump: he has no experience of public service and he is absolutely loyal to the new President.

“Working at Goldman Sachs, I have gained huge experience in the sphere of financial markets and in technology — I believe that it is very important for work as the head of the Ministry of Finance, told Mnuchin on January 19 at the Senate hearings on his candidacy. — I also have experience in the investment business and regional banking”. Trump paid tribute to the competence Mnuchin directing Finance his presidential campaign. “Our financial system is placed in safe hands, said trump at the inauguration ceremony Mnuchin office. We will solve all the problems”.

In the competence Mnuchin as the head of the Ministry of Finance will also be the issues of sanctions. Mnuchin was in favour of maintaining restrictive measures against Russia during the Senate hearings: “the President has made clear that sanctions will change only if we receive something in return.” He reiterated his position and after his appointment, on Tuesday, February 14.

The power vacuum

Legislators, lobbyists and business were looking forward to the arrival of the new Minister, who in the USA is responsible for both the economic and financial policy. Mnuchin will immediately tackle several important tasks. The most urgent of them — the staff of the Department. Vacant in Ministry are about 20 key positions, including the position of Deputy Minister for terrorism and financial intelligence. A few people refused the offer of posts or has withdrawn their consent, according to Bloomberg.

Himself the post of Minister was vacant for 22 days — record time of financial anarchy in the entire history of the United States, reported Bloomberg, citing data from U.S. lawmakers. Vacuum formed artificially as the result of the efforts of Senate Democrats tried to delay or block the approval of certain proposed trump candidates for the new administration.

The decapitated the Ministry of Finance has created the conditions for contradictory statements by various members of the administration on the financial-economic course, although they do not know how he will end up with the columnist Bloomberg’s Marty Schenker. Agree with him Erik Nielsen, chief economist at Unicredit Bank: “the Confusion, apparently, will continue for a long time, in the best case everything will be done in a slipshod manner”.

“Mafia” Goldman Sachs

Personnel policy of the new us authorities has provoked criticism of the Democrats, who accused the White house that he relies on immigrants from Goldman Sachs. Posts in the administration right now is Gary Cohn, the head of the National economic Council (an Agency of USA), Stephen Bannon, senior adviser to the President of the United States and Dina Powell, assistant to and adviser on economic issues, all former employees of the investment Bank.

For the post of Deputy Mnuchin on matters of domestic Finance, the White house is considering Goldman banker Jim Donovan reported Bloomberg referring to the informed source. In his area of responsibility is the Treasury security market capacity of us $13.8 trillion. The post of another Deputy — international Affairs — may take the former chief economist of the bankrupt investment Bank Bear Stearns (purchased by J. P. Morgan Chase) David Malpass, said the Agency.

Financial aggressor

Steven Mnuchin was born on 21 December 1962 in new York. He is the youngest son of Robert Mnuchin, who for 30 years was a partner at Goldman Sachs. Steven worked for Goldman Sachs for 17 years, he was a partner, responsible for trading securities, and also served on the Board of the Bank.

Mnuchin graduated from Yale University in 1985. After his studies, he interned at the investment Bank Solomon Brothers and then went to Goldman. In 2004, together with two colleagues at Goldman Steven founded the hedge Fund Dune Capital Management. One of the investors of the Fund was billionaire George Soros. In 2006, the company engaged in financing film production, after signing a contract with film Studio 20th Century Fox and invested in the shooting of a sci-Fi movie “Avatar” and some films from the series “X-Men”. She later undertook the financing of the film “American sniper” and “Mad Max: fury Road.”

In 2009, Mnuchin together in partners becomes bankrupt California Bank IndyMac and decapitalising it at $1.6 billion the New structure received the name of OneWest Bank. During the year the partners managed to return the business to profit, partly due to the aggressive practices of deprivation of property rights holders of the mortgage. At the end of 2009, the court in new York nullified the debts of the borrowers, to punish OneWest for “cruel, disgusting, shocking and repulsive” actions when working with problem loans. A year later the appeals court overturned that decision. In total, over the next six years, the Bank was deprived of the rights of ownership of housing about 36 thousand of their debtors. In 2015 OneWest was sold to a Finance company CIT Group for $3.4 billion Deal brought Mochino $380 million When trump was discussing with friends the deal, he said he was most impressed by his amount managed to gain Mochino.

Urgent tasks

In the first days in office Mochino have to solve several urgent problems. Even before the appointment of Mnuchin called it a priority to prevent a default of the United States. March 15, the authorities should revisit the issue of the debt ceiling, which will take effect, unless lawmakers again does not reconcile his suspension. Himself Mnuchin called the amount of debt at $20 trillion too large and said that its reduction will contribute to economic growth. He estimated that the task of the authorities is to achieve US GDP growth of 3-4% per year.

The second urgent question is the meeting of Finance Ministers and chairmen of Central Banks of the countries big twenty on 17-18 March in Baden-Baden (Germany), the first to Mnuchin in a new position. To the statement of the Minister will be the centre of attention as his colleagues in the top twenty will be able to interpret verbal intervention to influence exchange rates as a violation of the obligation “to refrain from currency devaluation to gain competitive advantages and all forms of protectionism”, indicated the communiqué of the G20 adopted in September 2015, and fomenting the currency wars.

Main on the agenda of the Ministry of Finance will be the issues of tax reduction and revision of trade policy. In his November interview with CNBC Mnuchin promised to cut taxes for the middle class and business. The latter measure is a good opportunity to create jobs, he explained. Trump the reform of the tax system proposed to reduce corporate tax to 15% from 35% and to reduce the number of stages tax scales from seven to three.

Answering questions of senators, Mnuchin also repeated the thesis of trump on the exchange rate policy, calling the current dollar exchange rate “very strong.” “Too strong dollar” could have a negative impact on the economy in the short term, said Mnuchin. In January, trump’s comments on this issue provoked the weakening of the U.S. currency. The statements of colleagues Mnuchin — head of the National trade Council American President Peter Navarro about the Euro and the candidate to the Ministers of trade of Wilbur Ross on Canada and Mexico — has also caused the depreciation of the dollar against the Euro, canadian dollar and peso.

The development of economic relations with China, Mexico and other trading partners of the United States, who are concerned about trompowsky strategy “put America first” — also among the main tasks Mnuchin in his new post. “Will this administration to isolate itself from international monetary cooperation in the field of exchange rates, international organizations or global regulatory policy — the big question”, — quotes Reuters the words of Edwin Truman, a former employee of the Ministry of Finance and the fed, who now works at the Peterson Institute for international Economics.

Source