Treasury Secretary Steven Mnuchin emerged over the weekend as one of the staunchest defenders of Donald Trump in the Cabinet, bringing stability to the administration’s economic policy agenda as it heads into what’s expected to be an unpredictable debt-limit debate.
From dissolving business councils to following the fates of White House economic adviser Gary Cohn—who’s in—and strategist Stephen Bannon—who’s out—the palace intrigue has rattled financial markets as investors try to assess what the administration can accomplish.
Trump is becoming increasingly isolated from the Republican establishment and the stability of his economic agenda, including even the simple matter of the U.S. government’s solvency, isn’t being taken for granted. Trump is finding that his choice of a loyalist as Treasury chief, one who joined his presidential campaign early as national finance chair, is paying off.
Mnuchin stood next to Trump on Aug. 15 as the president delivered polarizing off-the-cuff remarks on race, in the days following violence at a white nationalist rally in Charlottesville, Virginia that turned deadly. Over the weekend, Mnuchin rejected demands by his former classmates at Yale University that he resign from Trump’s cabinet.
The 54-year-old said it was “hard to believe” he even had to defend himself or the president to the nearly 300 Yale alumni who signed the letter.
It was the first time in recent history a Treasury secretary has had to reaffirm his commitment to the job. His remarks make Mnuchin one of the few in Trump’s Cabinet and party to publicly stand up for the president after he was widely criticized for blaming “many sides” for the Virginia violence, following the example of Vice President Mike Pence who doubled down his support for Trump on a trip abroad last week.
‘Good Thing’
Mnuchin’s commitment to the president is a positive sign for accomplishing Trump’s economic initiatives, including tax reform, passing a budget and dealing with the debt limit, said Terry Haines, head of U.S. policy and political analysis at Evercore ISI. “He’s very important to that process and it’s a good thing he’s staying,” Haines said by phone.
Mnuchin is heading into a busy September. He’s told Congress that it is “critical” to raise the debt limit by Sept. 29. Yet turmoil inside the White House—combined with Trump’s often combative relationship with the Republican-controlled Congress—has Goldman Sachs Group Inc. economists expecting a “more unpredictable than usual” debt-limit debate.
While Republican leaders are confident their party can set aside its differences to resolve the latest debt impasse before the clock runs out, which is expected to be some time between late September and mid-October, investors are shying away from Treasury bills earlier than they have in the past. Last month, they pushed up costs at a sale of three-month bills to the highest since 2008.
“Everybody just gets a little concerned that with the volatility of this administration, some different path could be taken,” said Deborah Cunningham, chief investment officer for money markets at Federated Investors, which oversees $242 billion in money funds.
Tight Schedule
Mnuchin and Cohn have also promised to deliver details on their tax plan in September. That leaves them a tight schedule to pass legislation in both houses of Congress before the end of the year, as Trump has repeatedly promised. The kind of once-in-a-generation tax overhaul Trump wants will require a delicate balancing act, and one that has bedeviled negotiators in the past. A major tax revamp hasn’t been passed in more than three decades. Trump is also under pressure after another legislative effort—repealing and replacing Obamacare—failed in July.
Mnuchin is also pushing for significant changes to the Volcker Rule—which was designed to contain risky trading—as part of the administration’s bid to deregulate financial markets. Treasury is expected to release a report in the coming months on the process for deeming financial institutions as systemically important. He’s seen challenging how those institutions are designated.
The administration’s economic agenda won’t be thrown off course “as long as a Trump appointee is Treasury secretary,” Ian Katz, an analyst at Capital Alpha Partners LLC, wrote in a note to clients. “We don’t see the White House volatility affecting Treasury’s work on financial reform.”
Republican lawmakers, corporate executives and even some conservative activists have criticized Trump’s race-related comments and infighting in the White House over the past week. Mnuchin, who needs support from lawmakers to implement Trump’s economic agenda, is keeping an open line to GOP leaders, hitting the road Monday with Senate Majority Leader Mitch McConnell to deliver a speech in Louisville, Kentucky.
While Mnuchin, who is Jewish, has proven to be a faithful member of Trump’s cabinet, he has taken note of the impact Trump’s inflammatory comments may have had on some of his aides. The day after the president’s remarks at what was supposed to be a press briefing on infrastructure, Treasury officials were told that Mnuchin didn’t stand beside Trump with the intent to lend credibility to such comments.
—With assistance from Alexandra Harris
