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Wall Street back in favour with Trump cabinet picks

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The nominations of Steven Mnuchin and Wilbur Ross to the Trump cabinet on Wednesday positions Wall Street to exert renewed influence over the US economy after retreating somewhat in the Obama years.

[NEW YORK] The nominations of Steven Mnuchin and Wilbur Ross to the Trump cabinet on Wednesday positions Wall Street to exert renewed influence over the US economy after retreating somewhat in the Obama years.

Mr Mnuchin, 53, President-elect Donald Trump's pick to head the Treasury Department, spent 17 years at Goldman Sachs, where he worked on complex financial derivatives that were later at the heart of the 2008 financial crisis.

Mr Ross, 79, Trump's designee for secretary of Commerce, was nicknamed the "king of bankruptcy" for a record of profiting off dying industries.

The picks drew quick praise in business circles, with Financial Services Roundtable chief executive Tim Pawlenty praising Mr Mnuchin as a "seasoned and results-oriented leader."

A senior Wall Street banker praised as "thoughtful" Mr Mnuchin's reservations about the Dodd-Frank banking regulations enacted after the 2008 crisis.

Business Roundtable President John Engler said, "President-elect Trump is putting together an economic team with an impressive record of business accomplishment, a deep understanding of the US and global economy and a clear vision of how to help all Americans share in the nation's success."

But there also was plenty of criticism.

"We are witnessing the wholesale takeover of government by an extremist faction of the corporate class," said Robert Weissman, president of public policy group Public Citizen.

Senate Democrats signaled they intend tough scrutiny for Mr Mnuchin, who led an investment group that bought failing California bank IndyMac for US$1.55 billion in 2009, then sold the renamed OneWest five years later for US$3.4 billion.

Part of OneWest's earnings came from driving homeowners into foreclosure in order to collect loss-sharing payments from the government.

"Steve Mnuchin is the Forrest Gump of the financial crisis - he managed to participate in all the worst practices on Wall Street," said Democratic Senator Elizabeth Warren, who sits on the Senate Banking Committee, which will question Mr Mnuchin in confirmation hearings early next year.

"His selection as Treasury Secretary should send shivers down the spine of every American who got hit hard by the financial crisis, and is the latest sign that Donald Trump has no intention of draining the swamp and every intention of running Washington to benefit himself and his rich buddies."

Senator Sherrod Brown, the top Democrat on the Senate Banking Committee was equally critical. "This isn't draining the swamp - it's stocking it with alligators."

During the presidential campaign, Mr Trump attacked Democratic candidate Hillary Clinton over her close ties to Wall Street.

Mr Trump's closing television campaign ad even included a shot of Goldman Sachs chief executive Lloyd Blankfein, part of a global financial and political elite that Mr Trump depicted himself as challenging.

But since winning office, Mr Trump has turned to several financial insiders. Stephen Bannon, who is slated to be a top White House advisor, worked at Goldman Sachs, as did Anthony Scaramucci, a member of Mr Trump's transition team.

Wall Street has spent much of the Obama years playing defence in the wake of the financial crisis, with the Justice Department undertaking myriad investigations of unethical financial practices in the sale and packaging of securities linked to subprime mortgages.

The six largest US banks, JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs and Morgan Stanley have paid more than US$110 billion to turn the page on the debacle.

But the industry's fortunes appear to be on upswing, as signaled by the stocks rally since the election which has pushed share prices to their highest level since 2009.

Since Mr Trump's election, Goldman Sachs has surged 20 per cent, Morgan Stanley 21 per cent, JPMorgan 14 per cent, Bank of America 23 per cent, Citigroup 15 per cent and Wells Fargo 16 per cent.

But Mr Trump's lurch back towards big finance could revive concerns about excessive coziness between the Treasury Department and Wall Street. In the 1990s, then-President Bill Clinton, with backing from his Treasury Secretary Bob Rubin, a Wall Street veteran, repealed a bank law that separated investment banking from the retail side.

During the financial crisis of 2008, several large banks were saved from bankruptcy with public funds under a programme overseen by President George W. Bush's Treasury Secretary Henry Paulson, former chief executive of Goldman Sachs.

AFP