Mnuchin defends controversial loan to private equity-backed firm in contentious Hill testimony

YRC is backed by Apollo Global Management, a large private equity firm. One of its founders, Joshua Harris, advised the administration on infrastructure policy in 2017, the New York Times reported. Later that year, Apollo lent $184 million to the family real estate company of top White House official Jared Kushner, President Trump’s son-in-law, to help it refinance its mortgage on a Chicago skyscraper.

At the hearing, Bharat Ramamurti, a member of the Congressional Oversight Commission, asked Mnuchin if he was aware at the time of the loan that YRC was backed by Apollo. Mnuchin replied that he was aware. Ramamurti also cited a new report by the Government Accountability Office, which found that Treasury accelerated the loan to YRC even though other firms faced similarly urgent circumstances.

“So again we have a fast-tracked, extremely generous loan, that just so happened to help the private equity giant, Apollo,” Ramamurti said.

Mnuchin cited letters from members of Congress, saying there was “tremendous interest” to expedite the loan, and that the Department of Defense had certified that YRC qualified for the loan.

“So of course we were going to prioritize this,” Mnuchin said. “There was a tremendous risk to the Department of Defense, and a tremendous risk to the number of jobs.”

Rep. French Hill (R-Ark.), a former commercial banker and investment manager, also criticized the terms of the loan, suggesting that U.S. taxpayers’ investment was at risk. He cited YRC’s past financial woes and high debt, saying that the company had found “itself exactly in the same position before the pandemic.”

Mnuchin acknowledged that Treasury may lose money on the YRC loan, but said that members of Congress had encouraged the agency to “take losses” when providing relief to firms.

“I do believe that ultimately Treasury and the taxpayers will be very well compensated because the economy came back quicker than people thought,” Mnuchin said. “We analyzed it, and in many scenarios we thought we would lose money.”

A YRC spokesman did not immediately respond to a request for comment.

Mnuchin also at the hearing adamantly defended his decision to terminate several emergency lending facilities under the Federal Reserve.

The Treasury secretary last month announced he would end a number of the central bank’s lending programs, such as the Main Street Lending Program and the municipal liquidity facility. Democrats have called the decision a politically motivated attempt to hamstring President Elect Joe Biden.

Mnuchin told the oversight commission he had no choice but to do so under the laws written by Congress, citing verbal guidance he had received from department attorneys. At the hearing, Mnuchin also pulled out a white binder with the Cares Act and read the statute aloud. “If Congress wants to reallocate this money from the Fed … Congress can do that now,” Mnuchin said.

Ramamurti called the termination of the facilities a “political decision … intended to hamstring the incoming administration.”

“Let me put it this way: Does anyone think the Treasury would have ended these programs if Donald Trump was reelected?” Ramamurti said.

Congressional Republicans have backed Mnuchin’s interpretation of the law, with Sen. Pat Toomey (R-Pa.) arguing the Treasury secretary had no choice but to pull the funds back from the central bank.