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INVESTING/PORTFOLIO STRATEGIES

Treasury Secretary Steven Mnuchin reinforces Trump infrastructure promise

Treasury Secretary Steve Mnuchin
Treasury Secretary Steve Mnuchin

Treasury Secretary Steven Mnuchin reiterated President Donald Trump's pledged to invest $1 trillion in infrastructure, mainly by way of public-private partnerships, and promised to reform Fannie Mae and Freddie Mac during a session Monday at the Milken Institute Global Conference in Beverly Hills, Calif.

Mr. Mnuchin gave few details on the infrastructure plan, but he said the administration would turn its attention to housing reform in the second half of 2017 or the beginning of 2018.

“The administration needs to make sure, on the one hand, to preserve the liquidity in the housing markets and, on the other hand, you can't have taxpayers at risk,” Mr. Mnuchin said.

“Right now, taxpayers are at risk,” he said.

There is liquidity in the housing market because Fannie Mae and Freddie Mac retain risk with government support, Mr. Mnuchin said.

Mr. Mnuchin said one thing he is focused on is to extend the proposed lower corporate tax rate to small and medium-sized sized businesses, including so-called pass-through companies that include private equity firms and the Trump Organization.

He also noted that the Trump administration is “open to listening to people.” “It's a friendly room here,” he said.

Mr. Mnuchin explained that administration officials have met with a dozen of business groups, including regional and large banks. “We make sure we catalog feedback … and put together the best ideas,” he said.

Drawing on Mr. Mnuchin's 15-year friendship with Mr. Trump, interviewer Maria Bartiromo, anchor and global markets editor at Fox Business Network, asked him what the media has gotten wrong, and he quipped, “You mean the fake news?”

Some panelists on a subsequent panel warned that the market had priced in a lot of optimism about the impact of the Trump presidency, but if the administration fails to deliver, it could have a negative impact on the economy.

“This is a moment when we need some delivery on promises made during President Donald J. Trump's campaign,” said Scott Minerd, chairman of investments and global chief investment officer of money manager Guggenheim Partners.

“If there is no movement on tax reform or health care … the market will doubt the administration's ability to deliver,” Mr. Minerd said.

“We need policy actions (by the Trump administration),” said Mohamed El-Erian, chief economic adviser at Allianz, who was on the same panel as Mr. Minerd. Administration announcements will not buoy the stock market forever, Mr. El-Erian added.

However, he noted that while the stock market is “doing great” there are other factors such as the gross domestic product, retail sales and inflation that suggest we're currently in a soft patch. “It's important to pay attention to factors that aren't that optimistic,” Mr. El-Erian said.

In a separate presentation, Commerce Secretary Wilbur L. Ross Jr. said renegotiating the North American Free Trade Agreement is still on the table. The only reason the Trump administration hasn't renegotiated NAFTA is due to the complicated so-called fast-track process, Mr. Ross said. “Only the Congress of the United States would consider it as fast track,” he quipped.

Mr. Ross added that he is not a fan of regional trade agreements. The Trans-Pacific Partnership took 10 years to be completed, he said.

“When someone spends 10 years of his life on one project, the object can be to get a deal rather than to get the deal,” he said.