President-elect Donald Trump on the campaign trail (Photo: AP)

Former Goldman Sachs Group Inc. partner Steven Mnuchin has been recommended by Donald Trump’s transition team to serve as Treasury secretary, according to two people familiar with the process, and the choice is awaiting the president-elect’s final decision.

Mnuchin, the campaign’s national finance chairman, has been considered the leading candidate for the job. Trump has displayed a pattern of loyalty to his closest campaign allies in early administration selections, and Mnuchin, 53, had signed on at a time when many from Wall Street stayed away.

Before joining Trump, Mnuchin rose through the kind of elite institutions the president-elect spent his campaign vilifying. Mnuchin was tapped into Yale’s Skull and Bones secret society, became a Goldman Sachs partner like his father before him, ran a hedge fund, worked with George Soros, funded Hollywood blockbusters and bought a failed bank, IndyMac, with billionaires including John Paulson. They renamed it OneWest, drew protests for foreclosing on U.S. borrowers, and ultimately generated considerable profits, selling the business last year to CIT Group Inc. for $3.4 billion.

Mnuchin, who co-founded hedge fund Dune Capital Management LP, was seen at Trump Tower Monday. Asked by reporters why he was there, he said, “I’m here just helping with the transition this week. A lot of work to do.” He had no immediate comment when reached about the Treasury post.

Goldman Connections

Mnuchin would become the third former Goldman Sachs executive to head the Treasury since the mid-1990s. Robert Rubin and Henry Paulson both ran the Wall Street firm before becoming Treasury chiefs under presidents Bill Clinton and George W. Bush, respectively.

It’s a longstanding pattern that has earned Goldman the nickname “Government Sachs,” and it currently extends to the Federal Reserve and abroad. New York Fed President William Dudley is the firm’s former chief U.S. economist. Bank of England Governor Mark Carney was a managing director at the firm. European Central Bank President Mario Draghi was vice chairman of its international arm.

On Sunday, Trump named another Goldman alumnus, the former Breitbart News chief Steve Bannon, to one of his top posts in his White House, chief strategist and senior counselor.

The investment bank’s shares have climbed 15 percent since the Nov. 8 election.

The next Treasury chief’s challenges will include a budget deficit that’s forecast to widen and require increased debt issuance; an economy that’s been stuck in a period of slow growth and exacerbated income inequality; and international partners wary about the new president’s approach to trade. During the campaign, the real estate mogul indicated that among his first moves will be a Treasury designation naming China a currency manipulator.

Joining the campaign this year, Mnuchin was charged with a seemingly insurmountable task: Go up against the Hillary Clinton money machine that was out-organizing and out-raising Trump. The campaign had no organized fundraising operation because Trump relied mostly on his own money to get through the primaries.

If Mnuchin is confirmed for the Treasury role, it could save him millions in taxes. A 1989 rule allows him to sell stock tax-free if he reinvests the proceeds in Treasuries or in government-approved funds. The loophole was designed for executives who need to sell shares to comply with conflict-of-interest rules.

Mnuchin owns $97 million of CIT Group, according to a February ownership filing, the latest available. Because he received most of those shares when CIT purchased OneWest Bank in 2015, the exact cost basis that would be used to calculate his taxes isn’t immediately clear.

Previous Treasury secretaries have taken advantage of the rule. Henry Paulson was eligible to save about $48 million on roughly $495 million of Goldman Sachs shares when he was nominated to run the department in 2006, the New York Times reported at the time.

Goldman Experience

Mnuchin started his career in the early 1980s as a trainee at Salomon Brothers. He went on to spend 17 years at Goldman Sachs, where a mentor showed him how the firm could profit from the savings-and-loan crisis of the 1980s, buying up assets cheap. Mnuchin oversaw mortgage-backed-bond trading at Goldman before becoming the investment bank’s chief information officer in 1999. He left in 2002 and two years later founded Dune Capital, named for a spot near his house in the Hamptons.

The 2008 financial crisis lured Mnuchin back into banking. That summer, he was in his New York office when he saw a TV news shot of customers lined up outside a branch of IndyMac, a California lender, trying to pull out their money.

“This bank is going to end up failing, and we need to figure out how to buy it,” he told a colleague, recalling the lessons of the savings and loan crisis. “I’ve seen this game before.”

The bank collapsed that July, just months before Lehman Brothers Holdings Inc.’s failure set off a global emergency. At one of the murkiest moments of the crisis, Mnuchin gathered investors for a $1.6 billion bid to buy IndyMac. He got an agreement that guaranteed the Federal Deposit Insurance Corp. would absorb almost all the loan losses after a certain threshold. He renamed the bank OneWest. Within a year, it was profitable.

In October 2011 about 100 protesters marched on his Los Angeles mansion, angry about foreclosures. “Steve Mnuchin,” one sign read, “Stop taking our homes.” He and his partners completed the bank’s sale in August 2015.

Copyright 2018 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.