President-elect Donald Trump recently announced his pick for Secretary of the Treasury, Steven Mnuchin. Mr. Mnuchin is a well-known Wall Street executive who worked at Goldman Sachs for many years and has no public sector experience. Many pundits have commented on the pick as going against Trump’s rhetoric on the campaign trail, as Trump regularly criticized Wall Street’s connections to politicians in Washington.
With the nomination of Mnuchin, stocks continued to rise, in addition to the boost that they previously received from Trump’s presidential nomination several weeks ago. The most excitement on Wall Street surrounds the future of Fannie Mae and Freddie Mac. Ever since the 2008 financial crisis, the two firms have been under government oversight. Recently, Mnuchin asserted that one of his priorities in Trump’s administration will be to privatize the two firms. The two firms’ stock prices each rose roughly 30% after the appointment and have increased two-fold since election day.
In addition to the privatization of Fannie Mae and Freddie Mac, Mnuchin aims to loosen the regulations imposed by the Dodd-Frank Act of 2010 to give banks more freedom in trading and lending. Mnuchin has indicated that he shares some of Trump’s positions on loosening regulations in other sectors of the economy and lowering taxes. Some of Trump’s constituents are dismayed from his choice, given Mnuchin’s close ties to hedge fund managers and other Wall Street executives.
Mnuchin’s policies could mark a turning point in the United States economy. While Vice President Joe Biden stated that the Obama administration’s policies were designed to “get the car out of the ditch and moving” (referring to the 2008 stimulus package and ensuing economic recovery policies), Mnuchin will face a new set of problems, notably, expanding America’s middle class and improving financial conditions for such citizens.