Mnuchin set for clash with Waters after IRS memo on Trump taxes

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Treasury Secretary Steven Mnuchin headed for another clash with Representative Maxine Waters as Democrats ratchet up pressure over his refusal to turn over President Donald Trump’s tax returns.

Mnuchin testified before the House Financial Services Committee on Wednesday. An April session with the panel ended in acrimony after Mnuchin and Waters, the California Democrat who chairs the panel, bickered over when to end the questioning.

The conflict reflects a broader standoff between the Trump administration and the House, as Democrats seek to build on Robert Mueller’s Russia probe and delve into the the president’s personal finances. The administration is stonewalling. Mnuchin has refused to hand over Trump’s tax returns, and the White House has instructed some current and former officials not to appear for hearings, including former White House Counsel Don McGahn and Attorney General William Barr.

In response, Democrats have more seriously considered opening impeachment proceedings.

Mnuchin on Friday rejected House Ways and Means Chairman Richard Neal’s subpoena for six years of Trump’s personal and business tax returns, setting up a potential court battle over the documents. The move prompted Representative Lloyd Doggett, a Texas Democrat, to conclude that Mnuchin should be arrested for “inherent contempt.”

Earlier this month House Speaker Nancy Pelosi joked that there is a “little jail” on Capitol Hill for the Treasury chief, if needed.

A 10-page IRS memo obtained by the Washington Post contradicts Mnuchin’s justification for withholding Trump’s returns. The paper reported on Tuesday that the memo concludes it is “mandatory” that the Treasury secretary release the information requested by chairmen of the tax-writing committees.

Mnuchin said Wednesday he didn’t know of the memo before the department was contacted by the Post and that he didn’t believe it addressed the same issues that led the Department of Justice to advise him not to hand over Trump’s tax returns. He said the memo was written by an IRS attorney, but that the department didn’t know who it was or why it wasn’t sent to more senior Treasury officials.

Mnuchin repeated that he had “no conversations ever with the president or anyone in the White House” about sending the returns to Congress.

The comments mirrored comments from a Treasury spokesman who said no one in the agency’s leadership had seen the IRS’ memo and that the decision to withhold Trump’s financial records was based on advice from the Justice Department.

Acrimonious Hearing

At the April hearing before Waters’s panel, Mnuchin asked for the session to end so that he could attend a scheduled meeting with Bahrain’s interior minister. Waters asked for Mnuchin to remain for another 10 minutes. He said he could stay for 5 minutes, and offered to return to testify in May. She refused to formally dismiss him.

“If this is the way you will treat me, I will rethink” returning, Mnuchin said.

Waters complained that no Treasury secretary had previously attempted to set a time limit on his testimony. Mnuchin, who’d testified earlier in the day before a Senate panel, retorted that no other secretary had been treated like him.

Aides to Mnuchin and Waters didn’t respond to questions this week about whether the two leaders had made amends.

Lawmakers on Wednesday also will have the chance to ask about Treasury’s role in policing money-laundering activities -- a likely point of interest after the New York Times reported on Sunday that some bank transactions by Trump and his son-in-law, Jared Kushner, raised suspicions among anti-money laundering specialists at Deutsche Bank AG.

‘Unanswered Questions’

“There has been an overabundance of unanswered questions to ask Mnuchin,” said Jeff Hauser, executive director of the Revolving Door Project at the Center for Economic and Policy Research in Washington. “Too many issues were overlooked when Republicans held the majority” in the House.

That includes Mnuchin’s business interests, Hauser said.

Mnuchin has been Treasury chief for more than two years, but his investments before that remain of interest to some lawmakers. Mnuchin is the wealthiest Treasury secretary in recent history and had to divest himself of 43 business investments to avoid conflicts of interest when he took the job.

Last month, Mnuchin was named as a defendant in a lawsuit filed by the bankrupt estate of Sears Holdings Corp. The complaint alleges that he and other investors improperly transferred $2 billion of the company’s assets beyond the reach of creditors in the years leading up to Sears’ bankruptcy.

Housing policy -- a key priority for Waters — is also likely to be discussed during the hearing. Trump has said freeing Fannie Mae and Freddie Mac from government control is a “pretty urgent problem” that his administration plans to work with Congress to address. Mnuchin has said he wants to release the companies from conservatorship, something lawmakers have failed to do for years.

In March, the Trump administration released an outline for overhauling the housing-finance system that directed Treasury and the Department of Housing and Urban Development to write plans for an overhaul.

Lawmakers will also have the chance to ask about Trump’s stalled trade negotiations with China that led to another round of tariffs between the world’s two largest economies. American farmers, among Trump’s most loyal supporters, are facing mounting financial pain from the trade war, raising the risk that the economic damage will outlast the conflict.

— With assistance from Joe Light

Bloomberg News
Tax returns Steven Mnuchin Donald Trump Maxine Waters IRS