FOR A TIME, IT LOOKED as though Steve Mnuchin might stay at Goldman Sachs until retirement, just like his father, who spent thirty-three years at the firm before departing in 1991 to open an art gallery on the Upper East Side.1
On paper, it certainly seemed like he was following in his father’s footsteps. Steve steadily ascended the Goldman ladder, and in 1994 he made partner and was appointed head of the mortgage securities department. By 1999, he was a member of the firm’s executive committee.
But a life at Goldman was not to be. “There’s a never-ending politics that rages at these firms regardless of where you are in the pecking order,” said journalist William D. Cohan, author of the 2001 book Money and Power: How Goldman Sachs Came to Rule the World, which serves as the definitive history of the investment bank. Cohan told me that Steve Mnuchin never made his mark at Goldman Sachs; he never did a deal or made a trade that forced his colleagues and competitors to stand up and take notice. In fact, Cohan doesn’t mention him once in his 672-page tome. “Nobody would have said that Steve Mnuchin was someone that I needed to talk to,” the author explained. “His father, yes. His father was Goldman royalty, but Steve, absolutely not.”
Then, in November 2000, Michael Mortara died of a brain aneurism in his home in Connecticut. It took everyone by surprise. Stunned, like all who knew him, Steve Mnuchin announced Mortara’s passing to the world.2 He was just fifty-one years old.
Mortara had been more than a friend and exemplar to Steve Mnuchin. He was also his “rabbi”—in the parlance of Wall Street, someone who protected him at bonus time, who made sure he got promoted, and who helped him navigate the politics of the firm. In each of his promotions over the years, Mnuchin had followed in Mortara’s footsteps, stepping up into his mentor’s old job as he was promoted. Now Mortara was dead. There was a power vacuum, but with his protectors gone, Mnuchin wasn’t in the position to fill it.
“We’re talking about alpha male land, where it’s not enough for you to succeed. Other people have to fail,” Cohan says. “If you understand that concept, then you understand Wall Street and you understand why Steve Mnuchin had to leave Goldman.”
After seventeen years at Goldman, Mnuchin left with an estimated $46 million of company stock and $12.6 million in compensation that he received in the months prior to his departure.3 He was thirty-nine years old, and, aside from a single summer internship, Goldman was the only place he’d worked since college graduation. But Steve Mnuchin was too young to retire. It was time for him to go out on his own.
IT DIDN’T HAPPEN right away. There would be a couple of interim steps, but each of them helped Mnuchin come into his own, building relationships that allowed him to make his big play, scooping up the remains of IndyMac after the housing market crashed in 2008.
His first stop was ESL Investments, a hedge fund run by his old Yale roommate Eddie Lampert. Like Mnuchin, Lampert had majored in economics and gone from Yale to Goldman, but he’d left after just three years to form his own firm. Also, like Mnuchin, Lampert had spent his early years in comfort, in a wealthy enclave in Roslyn, Long Island. But that changed when Lampert was fourteen and his father died of a heart attack at age forty-seven, throwing the family into financial crisis.
“That was the end of camp or going away to Europe like other children,” Lampert’s mother, Dolores, told the Wall Street Journal in 1991.4 (Her assumption about European travel is telling.) Though Lampert’s father had been a lawyer, he left his family with almost no savings. His stay-at-home mom was forced to give up her regular tennis games and ladies’ lunches and get a job as a department store clerk. Eddie chipped in, too, working in warehouses after school, on weekends, and over the summer to help his mother and younger sister. “Eddie was very strong,” his mother said, and tried “to be the man of the family.”5 Unlike Mnuchin, Lampert needed financial aid to attend Yale.
Those early struggles did not make him generous or charitable in his business dealings. Instead, he pursued investments with a chip on his shoulder. “Warm and fuzzy Edward S. Lampert is not,” Geraldine Fabrikant wrote in a 2002 New York Times profile, shortly before Mnuchin joined the firm. “He is known as secretive, controlling, and so impatient for success and obsessed with work that some who know him say he takes little note of people unless he needs them.”6 But Lampert’s personality did not matter to his investors, who eventually included media mogul David Geffen; Thomas Tisch, the son of Laurence Tisch, the CEO of CBS television networks; and Michael Dell, the founder of the Dell Computer Corporation. What mattered to them was that ESL consistently beat the market. It had “scored an extraordinary 14-year record of value investing, with an average annual return of 24.5 percent.”
When Mnuchin arrived at ESL in 2002, Lampert’s big plays were AutoZone and Kmart, in which he had just bought a majority stake. The latter was bankrupt, so Lampert closed six hundred stores and laid off thousands of workers.7 Critics said he was less interested in selling clothes and housewares than he was in pocketing huge sums of money by liquidating Kmart’s valuable real estate. When the company emerged from bankruptcy the following year, Lampert put Mnuchin on its board.8
Mnuchin remained there for eleven years, as Kmart merged with Sears, in which Lampert also owned a controlling share. By most measures, the company’s failure under his watch was spectacular. The number of Sears and Kmart stores shrank from nearly four thousand at their peak to just over a thousand when Mnuchin exited. More than two hundred thousand employees lost their jobs.9 Meantime, the pension fund for retired Sears workers was underfunded by $2.1 billion.10 But though the company was tanking, the board, with Mnuchin on it, made sure that Eddie Lampert benefitted. The company’s most valuable assets, including Lands’ End, Sears Canada, and most of Sears’s real estate, were sold off to another entity, the largest shareholder of which also happened to be Lampert’s hedge fund.11 Then Lampert forced the failing retailer to pay hundreds of millions of dollars in rent to his hedge fund12—racking up huge amounts of debt in the process.
It was Lampert’s way of stripping the company. When he finally took Sears into bankruptcy in October 2018, Lampert was able to do so while holding on to the parts of the company that he liked. The workers got screwed. Sears creditors got pennies on the dollar. In April 2019 the company sued Lampert and a string of high-profile former board members, including Mnuchin, accusing them of executing a “multiyear and multifaceted scheme” to steal billions of dollars from the once-storied retailer.13 In a statement, Lampert’s hedge fund, ESL, dismissed the complaint, saying its allegations were “misleading or just flat wrong. . . . We are confident that the processes we followed for each of these transactions are unimpeachable.”14 In any case, Lampert was sitting pretty. It was typical Mnuchin.
There were lessons in this evisceration, one of which stuck with Steve Mnuchin: the two iconic retailers were failing—and might have failed anyway. Why not make a profit off of it?
THOUGH MNUCHIN STAYED on the Sears board for years, he didn’t work directly for Lampert for long. Less than a year after he joined ESL, septuagenarian billionaire George Soros hired him away to start an investment fund buying risky debt.15 Working for Soros allowed Mnuchin to develop the relationships he would use in his big bid to buy IndyMac, and also enabled him to apprentice under one of the most successful hedge fund managers of all time.
Today the Hungarian-American Soros is known mostly as a liberal philanthropist with an interest in criminal justice, democracy, and Democratic Party politics. But back then, he was legendary as the man who “broke the Bank of England” in 1992, tanking the British stock market by placing huge bets against the pound. In those years, Soros was infamous for scouting the world, looking for ways to profit off distress that others hadn’t yet noticed. Some blamed his currency speculation for the 1997 Asian financial crisis that devastated economies from Indonesia to South Korea and hammered the stock markets of the United States and Japan.
Now, as the housing bubble built, Soros was looking to bet on America’s debt, and he enlisted Steve Mnuchin. In a letter to staff, Mark Schwartz, Soros Fund Management’s chief executive, said Mnuchin’s portfolio would include “senior secured loans to noninvestment-grade companies, mezzanine loans, receivables and mortgages, subordinated securities, and distressed asset purchases”—basically all the kinds of loans that no one else wanted to buy.
But, again, Mnuchin’s stint would be brief. In 2004, just a year after he arrived at Soros, he left to found his own hedge fund, Dune Capital Management, named for a spot near his weekend home in the Hamptons. (Schwartz described it as a spin-off.16) Finally out of the shadows of his father, Mortara, and Soros, Mnuchin was ready to make his own deals.
LOOKING BACK, IT seems that Mnuchin’s transformation from quiet partner at Goldman Sachs to front man for a major private equity deal began before Michael Mortara died. In 1999, after Mnuchin divorced his first wife, photographer Kathryn McCarver, he married Heather deForest Crosby, a Manhattan socialite who traced her lineage back to the Mayflower. The wedding echoed the Gilded Age nuptials of a century earlier. The ceremony took place at the exclusive restaurant Cipriani Wall Street, the former home of the New York Stock Exchange, in a Greek revival hall framed by monolithic columns, with a seventy-foot ceiling and a Wedgewood dome.17 A year later, the couple moved to a two-story, 6,400-square-foot apartment on Park Avenue, in an Art Deco monument that’s often called “the world’s richest apartment building.” They bought it from one of Mnuchin’s aunts, garment center heir Carol Lederman, for $10.5 million.18 Now Steve was on the map, if by address alone. 740 Park Avenue.
In his book about the building, author Michael Gross called Mnuchin’s union to Crosby “the ultimate modern 740 Park merger, the dark-haired child of a self-made Jewish philanthropist had married a stunningly beautiful, blond-haired descendant of several colonial families, including that of William Floyd, a signer of the Declaration of Independence.” Heather’s family also included a Supreme Court justice and Francis Scott Key, author of “The Star-Spangled Banner.”19
Thomas Tisch, Mnuchin’s fellow board member at Sears, lived across the hall on the eighth floor. Billionaire private equity magnate Steve Schwarzman, the founder of the Blackstone Group, lived seven floors above them in a sprawling two-level apartment once occupied by John D. Rockefeller Jr.
By 2006, John Thain lived on the top floor. Thain, who would later become a poster boy for the financial crisis, headed up Merrill Lynch, a storied investment bank that handed out billions of dollars in executive bonuses even as it collapsed in 2008.20 At Merrill, Thain was famous for his high-flying lifestyle, adorning his office with an $88,000 rug, a $35,000 commode, and a pair of curtains costing $28,000.21 His $27.5 million apartment on Park Avenue was similarly opulent. On its main level, the New York Times reported, a private elevator landing opened up to a windowed gallery twenty-seven feet long, with a grand elliptical staircase and entry onto a west-facing terrace that looks out on Central Park.22
Over the years, Steve Mnuchin would do business with all of them.
STEVEN AND HEATHER had three children together. In the early years of their marriage, Heather made more news than her husband. She was featured regularly in women’s magazines and the society pages: photographed chairing the Whitney Gala in a navy lace dress designed by Carolina Herrera;23 sitting in the front row at a spring fashion show in Bryant Park with their daughter, Emma; receiving a full, two-armed embrace and kiss on the cheek from developer Donald Trump at a ball on Forty-Second Street to raise funds to feed the poor.24 Women’s Wear Daily featured Heather in a “clip-and-save guide to the denizens of the party pages.”25 She was always good for a quote. “I tried to buy good, versatile basics—things that I can wear forever—whether it’s a tweed blazer or a velvet jacket,” she said in a profile in Harper’s Bazaar. Her everyday uniform? “Always a blazer—Dolce & Gabbana, Tuleh, and Chanel have great ones,” she said, along with “a white tee, because it’s so easy to accessorize with something like a chunky necklace.”26
But if Heather was featured in fashion magazines, including Vogue, Mnuchin mostly kept a low profile. Still, her partying and their new address offered entrée into one of Mnuchin’s new interests: the movie business. On November 18, 2005, the couple hosted an invitation-only advanced screening of the George Clooney spy vehicle Syriana, followed by an after-party at their Park Avenue apartment. Clooney attended, along with a who’s who of film and fashion elite. “George and I are old friends,” Heather told Women’s Wear Daily. “I know he always likes for a group of intelligent people to see his films.”
The entire gathering was a strange combination of exclusivity and showmanship. Though it was invitation only and held in a private home, it was also meticulously documented by the paparazzi. Photographers captured Steve Mnuchin, with a goofy grin, clad in a button-down shirt and blazer, holding a glass of wine, standing next to comedian Mike Myers. Steve and Heather are also pictured together with Clooney, actresses Patricia Clarkson and Rachel Weisz, and a variety of famous fashion designers.
Mnuchin had nothing to do with the production of Syriana, but two months later, in January 2006, his company Dune Entertainment invested $325 million in Fox Filmed Entertainment, an umbrella company that included 20th Century Fox and News Corp’s other Fox-branded film properties. A second $325 million investment came in November 2006, with hundreds of millions more in the years that followed.27 In financing these deals, Mnuchin relied on his Goldman connections: his partner at Dune Entertainment, Chip Seelig, had been a managing director at Goldman, charged for a time with running the investment bank’s mortgage division.
Like his time as publisher of the Yale Daily News, story and craft were not Steve Mnuchin’s priorities. He was all about the money. Dune Entertainment invested in not one or two movies at a time, but in slates of films—a structure that allowed him to simultaneously put money into nearly every motion picture produced by Fox. The first deal, in January 2006, covered twenty-eight films. The next deal, signed that November, covered sixteen more.
Over the years, this strategy would lead to some huge hits, such as Avatar and The Devil Wears Prada, but also plenty of critical and box office clunkers—like Pathfinder, a Viking Age action epic that the New York Times described as “all grunting, all goring, the witless action flick [that] has little to recommend it.” The San Francisco Chronicle called it “downright painful to sit through.”28
But the flops didn’t faze Mnuchin. “My criteria is simple,” he would tell CNBC. He wanted a “deep portfolio. Investing in any one film is always a risky proposition, but if you can invest in enough films, and create a large library of content, then long term, that content becomes more and more valuable.”29
It could be a school newspaper or movies, a discount retailer such as Kmart or mortgages on millions of Americans’ homes—it didn’t matter what the business was. His interest wasn’t in building companies for the long haul. The key for Steve Mnuchin in each venture was money and how to make a trade so that he could make as much as possible. Mnuchin had made a career out of pulling tarnished gems from a billionaire’s bargain basement. And in IndyMac’s collapse, Mnuchin saw the opportunity for a trade of a lifetime.