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The crushing burden on Mnuchin’s shoulders

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Via Financial Times

No one has ever thought of Steven Mnuchin, the US Treasury secretary, as Hercules. But circumstances have thrust Atlas on his shoulders. The coronavirus has turned the former Goldman Sachs dealmaker into the most critical figure in Donald Trump’s administration.

Among Mr Trump’s economic advisers, only Mr Mnuchin is trusted both on Capitol Hill and the White House. That makes him the key figure in hammering out the $1tn plus stimulus bill over the next 48 hours — and the larger packages that almost certainly lie beyond. Few would have imagined Mr Mnuchin in this role. “He would not have been my first pick,” said Jason Furman, who was a senior adviser to Barack Obama. “But you go to war with the Treasury secretary you have.”

Mr Mnuchin has landed in this critical role by process of elimination. None of Mr Trump’s other advisers are taken seriously at both ends of Pennsylvania Avenue, or at either end in some cases. This includes Larry Kudlow, Mr Trump’s senior economic adviser and former business television anchor. Mr Kudlow is seen as amiable but ineffectual. He shot whatever credibility he had three weeks ago by insisting the coronavirus had been “contained” and that the US was “close to airtight.” The number of US infections has risen from 35 cases then to about 15,000 on Friday.

The same applies to Jared Kushner, Mr Trump’s son-in-law, who is playing a key role behind the scenes in spite of lacking a background in economics. Mr Kushner reportedly encouraged Mr Trump to believe the epidemic had been exaggerated. He showed similar self-belief in running the stillborn Israel-Palestine two-state plan.

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Finally, there is Peter Navarro, Mr Trump’s hardline trade adviser and author of Death by China. Mr Navarro is seen as unhinged by many on Capitol Hill, including a number of Republicans. He is nevertheless capable of swaying the president. Mr Navarro is pushing hard for Mr Trump to create opportunity out of chaos by giving a push to reshoring US pharmaceutical production.

As a result, Mr Mnuchin is dominating the executive branch’s side of the negotiations. One big plus is that he gets along with Nancy Pelosi, the Democratic Speaker of the House. Mr Trump refuses to talk to Ms Pelosi. Mitch McConnell, the Senate Republican majority leader, has also said he will not negotiate contents of the stimulus package with the Democratic House. That leaves Mr Mnuchin as the key go-between.

As a former Wall Street and Hollywood-based deal maker, Mr Mnuchin has some skills in this regard. Last week he helped push through a smaller $100bn package to extend sick pay and family leave. He is also the Trump administration’s longest serving senior official still to be in the same job. “Trump doesn’t really listen to anybody except himself,” said Anthony Scaramucci, Mr Trump’s estranged former communications chief. “But at least Steve [Mnuchin] is still in the room.”

Yet there are questions about whether Mr Mnuchin grasps the scale of the challenge. “I would say he’s the tallest dwarf in the room,” says one of Mr Mnuchin’s former colleagues. “He’s a good guy and well-intentioned but he’s more like a Trump family retainer than a Treasury secretary.”

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The only comparable moment is the aftermath of the 2008 financial crash. “Then we had to encourage people to go out and shop and buy and boost economic activity,” said Lawrence Summers, who was Mr Obama’s senior adviser. “Today the job is to put the economy in a coma without doing harm to people so as to keep people apart. It is arguably an even bigger challenge.”

Three of the key figures in 2008 — Tim Geithner, chair of the New York Fed, Hank Paulson, the US Treasury secretary, and Ben Bernanke, chair of the US Fed — wrote a book about how to handle financial crises called First Responders. It says nothing about a pandemic. “I looked through it the other day and realised no one imagined this situation,” said Mr Furman. “Mnuchin has no road map.”

Given the steep odds of pulling off an effective economic response to what is a public health emergency, Mr Mnuchin starts off with a serious handicap. In addition to the technical challenges, he also faces a political minefield. Mr Trump is enthusiastic about providing direct subsidies to companies, such as Boeing, and specific industries, such as airlines, hotels and tourism.

This week it emerged that two senators, Richard Burr of North Carolina, and Kelly Loeffler of Georgia, had sold millions of dollars worth of stocks in February after having been briefed by federal officials about the scale of the oncoming epidemic. Ms Loeffler then bought stock in Cisco and Oracle, two teleworking providers that are likely to see business growth from mass self-quarantine. Both senators have denied insider trading.

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The scope for more egregious breaches of public trust is legion. The first package is likely to include at least $200bn in aid to industries. In this respect, urgency is the enemy of integrity. The quicker Congress approves financial injections into the economy the better — but at great risk to oversight.

“The only thing that terrifies me more than giving the Trump administration discretion over huge sums of money is not giving it the money it needs,” said Mr Furman. “That means giving the Treasury, and Steven Mnuchin, a lot of sway over how the funds are used.”

Like it or not, America is heading into war on a disease with the Treasury secretary it has.

edward.luce@ft.com

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