Although he may seem an unlikely retail bank chairman, Mnuchin’s career made him an expert on perhaps the most important part of a banker’s job: assessing risk. His father, Robert Mnuchin, was a partner at Goldman Sachs in the 1960s. The second-youngest of five siblings, Steven attended the prestigious Riverdale Country School and then Yale University, where his roommate was Edward Lampert, who would go on to become a hedge fund manager and owner of Sears. Mnuchin started his career in the early ’80s as a trainee at Salomon Brothers before moving to Goldman Sachs in 1985. He was front and center for the advent of instruments like collateralized debt obligations (CDOs) and credit default swaps (CDSs), which he calls “an extremely positive development in terms of being able to finance different parts of the economy and different businesses efficiently.” The pitfalls of securitization came later, he says. He spent 17 years at Goldman, working his way up to partner and becoming head of the mortgage department before joining Hank Paulson in the executive suite, becoming the firm’s chief information officer in 1999.
In 2002 he left Goldman to join Lampert’s ESL Investments hedge fund as vice chairman, before starting SFM Capital Management in 2003 with George Soros, who invested $1 billion in the fund. The next year, with two other ex-Goldman partners, he formed hedge fund Dune Capital. Among other things, Dune Capital invested $500 million in a slate of Twentieth Century Fox films, including Avatar.
One of the deals Dune looked at in early 2008 was a distressed portfolio of CDOs being unloaded by Merrill Lynch. Mnuchin worked for a few months on the deal, eventually being outbid by private equity firm Lone Star for $6.7 billion. Still, Mnuchin had seen enough to know that the heavily discounted $31 billion portfolio had been a good value. With the failure of IndyMac, which owned a similar portfolio of residential mortgage-backed CDOs, he recognized an opportunity. “This was something that Steven was steeped in for decades,” says David Fawer, a former mortgage trader who has worked with Mnuchin at Goldman, Dune, and OneWest. “The entire asset base are things we’ve spent a lot of time doing.”
