April 22, 2019 | 59° F

DEMAREST: Mnuchin proves to be good pick for U.S. Treasury Secretary

Opinions Column: Tax and Turmoil


Since the election on Nov. 8, Donald Trump has been watched closely during his transition into the presidency. Although I may be quick to criticize Trump’s pick for certain cabinet positions, his selection of Steven Mnuchin for Treasury Secretary was a coherent and responsible decision.

If there is anything that is going to be closely examined in the Trump administration it will be the new administration's approach to commerce in the United States, and the Treasury Secretary is one of the most influential cabinet position in terms of the economic development of the country. Trump repeatedly claimed he was the candidate to vote for because he was the only candidate suitable to benefit the economy, and also promised to bring large amounts of jobs to the United States working class. Also many Americans were eager to see this particular selection after his promise to “drain the swamp” in Washington.

Trump is already beginning to receive criticism for his selection of Steven Mnuchin as the head of  the Treasury. The claims criticizing the pick focus either on the fact that Mnuchin was a member of the “swamp” because of his career at Goldman Sachs, that his personal wealth increased from betting against the US economy during the 2008 financial collapse, or his ties to the hedge fund community in more recent years. But these claims are highly unfounded considering that the effectiveness of the Treasury is dependent on the Treasury being run by individuals who thoroughly understand the current economic state of the country, and that there is nothing that gives a person a more thorough and realistic understanding of our economy than directly buying and selling securities on the open market.

Mnuchin has a career track record of being market-savvy in various different lines of banking and investment related positions in U.S. markets, most notably coming out wealthier after the 2008 financial collapse by wisely betting against the liquidity of various mortgage-backed securities on the open market. This gives me some sense of security in knowing this is an individual who thoroughly understands securities, and most importantly understands that debt markets that are the core of our economy.

The reality of the United States economy is that we are always going to be focused on expansion and we need the large scale economic development provided by corporate activity to maintain our economic health. Corporate lending and development are the first moving cogs in every economic upturn. The institutions that we've all come to love to vilify — the large scale insurers and lenders — dictate the major shifts in economy through the influence they exert on the securities markets. Understanding the behavior of these institutions is critical to keeping the American economy back on track.

All things considered, it almost seems childish to think about appointing someone who doesn’t have a background in a growth-based role at a bank running the Treasury department would be a good idea. Mnuchin has never been a regulator of any market and has no official ties to D.C. so he is as much of an outsider as anyone can be.

To add to how beneficial his experience can be, Mnuchin also spent the first years of his partnership at Goldman Sachs overseeing Money Market operations. Money market instruments such as money market mutual funds are highly popular at the retail banking level, and the risk associated with them was hotly debated in 2008 because they are not insured by the Federal Deposit Insurance Corporation (the federal government insures a select group of financial products to protect retail banking functions). Selecting an individual that has already made decisions and risk assessments related to this hotly debated and widely purchased financial instrument could lead to a more proactive and effective regulatory regime that won’t be a detriment to businesses and will ultimately help millions of ordinary Americans who utilize these instruments.

I cannot speak for the character of any of the appointees of the incoming administration, but I can objectively research whether the career experience of the individuals meet the requirements of the positions they are going to fill. In Mnuchin’s case his experience in growth-based roles and profiting in the securities markets are more than sufficient objective achievements that qualify him for his newly offered role in our government.

Nicholas Demarest is a Rutgers Business School senior majoring in accounting. His column, “Tax and Turmoil,” runs on alternating Mondays.

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Nicholas Demarest

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