Steven Mnuchin
Steven Mnuchin Image Credit: Bloomberg

Washington: Steven Mnuchin is struggling to contain his first real crisis as Treasury secretary, failing to assuage investors unnerved by turmoil in Washington and making him a target of President Donald Trump’s wrath over stock market losses.

An emergency meeting with top US regulators that Mnuchin convened on Monday and a call with executives from six major banks the previous day failed to address concerns about the administration that have intensified in the wake of a report that Trump had discussed firing Federal Reserve Chairman Jerome Powell.

Trump’s frustration with Powell over the market’s performance — expressed in tweets and interviews — now may turn to his Treasury chief. One person familiar with the president’s thinking says that Trump has weighed dismissing Mnuchin, while another said that Mnuchin’s tenure may depend in part on how much markets continue to drop.

Since taking office, Trump has looked to the stock market as a benchmark for his presidency. Yet much of the gains in equities since his election have been erased by months of turmoil, as investors grow increasingly concerned about the impact of the administration’s trade battles with China and Europe.

After Mnuchin’s call, which produced no public statement, stocks continued their Christmas Eve slide, ending the day with the benchmark S&P 500 down 2.7 per cent, hitting its lowest level in 20 months. The president will continue looking for a scapegoat. Now that he’s acknowledged that he can’t fire Powell, Trump’s target could become Mnuchin.

“There are plenty of people inside the White House who are not fans of Mnuchin who are happy to throw him under the bus,” said Stephen Myrow, managing partner at Beacon Policy Advisors. “Up until now, he’s been protected by the fact that Trump liked him and he’s been a loyalist.”

In a sign Trump may have lost some faith in Mnuchin, the president has asked whether one or more of his advisers could meet with Powell. That would be seen as undermining the authority of the Treasury chief, who sees Powell for lunch once a week and is normally the official designated to deliver the administration’s views.

Publicly, the president lashed out on Monday (December 24) at the Federal Reserve as “the only problem our economy has” because it keeps raising interest rates.

Over the weekend, Mnuchin sought to reassure financial markets that Powell’s job is safe after the report last week that Trump had consulted advisers many times in the previous few days about firing Powell. Mnuchin tweeted that Trump told him he didn’t he even have the authority to remove the central bank chief, a message that an administration official confirmed the president had authorised.

With the government partially shut down and Trump’s holiday trip to Mar-a-Lago called off, the president has kept busy at the White House on Twitter, parcelling out praise for Acting Attorney-General Matthew Whitaker (“for whom I have great respect”) and condemnation for the Fed (“like a powerful golfer who can’t score because he has no touch — he can’t putt!” )

Mnuchin may want to watch that space for any assessment by Trump of his recent performance.

Stock markets will have lots to worry about

Investors have many reasons to worry. Trump’s trade war with China is creating uncertainty for businesses.

US government debt is approaching $22 trillion (Dh80.8 trillion). A partial government shutdown is raising concerns about Washington’s ability to find bipartisan solutions to pressing problems. The president’s musings about firing Jerome Powell and the abrupt departure of Defence Secretary James Mattis add to the sense of turbulence.

Representative Maxine Waters, a California Democrat and the incoming chairwoman of the House Financial Services Committee, said in a statement that “The financial markets need certainty, and a Federal Reserve that can independently set monetary policy. The recent actions of the president and the Treasury secretary, however, have been erratic and are creating uncertainty and instability in the markets.”

While Trump regularly took credit for the stock market’s rise, he has consistently pointed elsewhere to explain its decline. Unlike others Trump has cut loose, the president goes way back with Mnuchin, 56, a former Goldman Sachs Group Inc partner and movie financier who served as Trump’s chief campaign fund-raiser.

But Mnuchin’s standing with Trump may be undermined by moves that risk his reputation on Wall Street, a Treasury secretary’s stock in trade.