When you’re as successful in business as the Trump administration’s pick for Treasury Secretary, Steven Mnuchin, your financial interests pop up in unexpected places.
In Mnuchin’s confirmation hearing before the US Senate on Thursday, Senator Bob Menendez (D-NJ) focused on just one small part of the nominee’s assets — his investment in failing retailer Sears.
Sears is controlled by hedge fund billionaire Eddie Lampert, who was Mnuchin’s college roommate at Yale University. Mnuchin has invested in Lampert’s hedge fund, ESL, and served as a director on Sears’ board for 12 years according to his testimony.
Menendez pointed out that during that tenure, a hole in Sears pension fund grew to $2.1 billion. Now that the company is facing a real threat of bankruptcy, that matters to Mnuchin’s appointment. Lampert loaned Sears a bunch of money, so as it stands now, he could gets paid before any other part of the company, including the pension.
If he becomes Treasury Secretary, he will sit on a three person board called the Pension Benefit Guarantee Corporation. The PBGC will then have the power to decide whether or not Sears’ pension plan is accepted or denied after it goes bankrupt.
“How is it that you’re going to be able to do that,” Menendez asked.
Mnuchin said that he was “well aware of the pension issue” and that Sears was “already failing” when Lampert purchased the company and combined it with Kmart in 2004. He said that he would recuse himself from any decision-making on the matter if it came to the PBGC, but that didn’t seem to assuage Menendez because Mnuchin’s recusal would leave 2 people to vote on the pension benefits 200,000 Americans.
Add this to a litany of questions about the Mnuchin portfolio, from millions worth of property and other assets he didn’t disclose, some held in known tax havens like Anguilla. Mnuchin got grilled hard on this stuff, and he should have been. Just one single part — just Sears — has the power to impact 200,000 people.
“Sears inherited an underfunded [pension fund],” Mnuchin tried to explain, “…and [ESL] has contributed billions…”
That’s where Menendez cut him off. “it may have inherited it, but it [Sears] continued to underfund it.”
Let the grilling continue.
For more on the Sears bankruptcy, listen to BI’s Linette Lopez and Josh Barro talk about it on their podcast, Hard Pass.
The opinions expressed in this article are those of the author.
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