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Mnuchin's Wall Street Testimony Eclipsed by Trump's Comey Saga

Image: Mnuchin's Wall Street Testimony Eclipsed by Trump's Comey Saga
US Secretary of Treasury Steven Mnuchin (ALBERTO PIZZOLI/AFP/Getty Images)

Wednesday, 17 May 2017 03:13 PM

Steven Mnuchin will be overshadowed during his first congressional testimony as Treasury secretary on Thursday by a deepening political crisis at the White House that threatens his aspirations for tax and regulatory overhauls.

President Donald Trump’s firing of FBI director James Comey and the aftermath is beginning to color all business in Congress, especially after the emergence on Tuesday of a memo Comey wrote in which he said Trump tried to end an investigation of links between his associates and the Russian government. Democrats have raised the specter that Trump attempted to obstruct justice, an impeachable offense.

Mnuchin’s testimony before the Senate Banking Committee was previously scheduled, and he is unconnected to the Comey controversy. But the questions he faces -- especially from Democrats -- aren’t likely to remain confined to Mnuchin’s plans to ease Wall Street regulations and pass what he’s called an historic tax overhaul.

Democrats may ask Mnuchin whether he’s loyal to the president or to the country, after reports -- denied by the White House -- that Trump asked Comey for his personal loyalty at a private White House dinner in January. Senator Sherrod Brown, an Ohio Democrat, declined to say whether he’d ask Mnuchin about his loyalty. He doesn’t want the secretary to prepare an answer, he said.

Outraged Democrats

The committee’s Democrats demonstrated their outrage over the unfolding Comey saga on Tuesday during a nomination hearing for lower-level Treasury appointments. Senator Brian Schatz of Hawaii asked the nominees where their loyalties lay: with the American people and the law, or the Republican party and the White House. Brown professed shock that he and his colleagues felt obligated to pose the question.

“I hope you’re not put in that position but the first 120 days or so of this president suggests that you might be,” Brown said.

Democrats also asked the nominees if they knew whether Russian President Vladimir Putin owns assets in the U.S.

“There may come a time when you’re asked to do something that is not in the interest of the American people and that is not in the interest of our checks and balances system in the constitution and that will in fact jeopardize our national security,” Senator Heidi Heitkamp, a Democrat from North Dakota, warned the nominees at Tuesday’s hearing.

Senator Mark Warner, a member of the banking panel and senior Democrat on the Intelligence Committee, said he will withhold support for the nominee for Treasury’s under secretary of terrorism and financial intelligence unit, Sigal Mandelker, until the agency’s criminal investigation office provides documents related to Trump and his team’s dealings with Russia. The Intelligence Committee is probing ties between the president’s associates and the Russian government.

Jeopardized Agenda

Trump’s economic agenda -- an overhaul of the tax code, an infrastructure development plan in the hundreds of billions of dollars, and slashing government regulations -- will require political capital that’s rapidly being spent on managing tumult at the White House.

“The longer the political turmoil lasts, the more risk it will present to banks and housing,” said Jaret Seiberg, an analyst for Cowen Group Inc.

The U.S. stock market, which had rallied to record highs since Trump was elected in November, suffered a steep drop on Wednesday as doubts grew about the administration’s ability to achieve its legislative goals. The Dow Jones Industrial Average was down about 240 points, while the dollar dropped for a sixth straight day and Treasury 10-year yields tumbled to 2.25 percent.

The banking panel will likely ask Mnuchin for an update of a review Trump ordered of Obama-era financial rules. The first part of that study is due to be delivered to the White House next month, kicking off what the administration has promised will be a broad rewrite of regulations enacted under the 2010 Dodd-Frank law.

As head of the Financial Stability Oversight Council, Mnuchin has directed key agencies to re-examine what’s permitted under the Volcker Rule, according to people familiar with the matter. The provision, widely despised on Wall Street, bars banks from wagering on markets with their own capital.

© Copyright 2017 Bloomberg News. All rights reserved.

 
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Economy
Steven Mnuchin will be overshadowed during his first congressional testimony as Treasury secretary on Thursday by a deepening political crisis at the White House that threatens his aspirations for tax and regulatory overhauls.
mnuchin, wall street, testimony, trump, comey
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2017-13-17
Wednesday, 17 May 2017 03:13 PM
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