JUAN GONZÁLEZ: We turn now to Trump’s pick for treasury secretary, Steven Mnuchin, who faces a—who faces scrutiny for his role at OneWest, a bank which has been called a “foreclosure machine” that profited from the collapse of the housing market. On Tuesday, The Intercept reported on a newly obtained memo that reveals [Mnuchin’s former bank] may have engaged in widespread misconduct while foreclosing on homeowners. The memo argued OneWest was guilty of a host of infractions, including backdating mortgage documents to speed up foreclosures and manipulating the results of home auctions, and it urged a top—California’s attorney general then to sue.

AMY GOODMAN: Mnuchin’s hedge fund bought out the failing California bank IndyMac in 2008, renaming it OneWest. Under his ownership, it foreclosed on 36,000 families, particularly elderly residents trapped in reverse mortgages.

For more, we go to Los Angeles to speak with reporter David Dayen, who broke this story for The Intercept. He’s also the author of the book Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud.

David, welcome back to Democracy Now! Lay out what you found. Explain what this previously undisclosed memo shows.

DAVID DAYEN: Yeah, so this is a memo from deputies in the California Attorney General’s Office, and it describes a year-long investigation that they conducted into OneWest, finding well over a thousand violations of California’s foreclosure process. California is a nonjudicial state. The courts are not involved in foreclosures. But there are very precise steps that lenders are supposed to take when they foreclose on a homeowner. And OneWest was found to have violated these. It was a somewhat limited investigation, because OneWest is a national bank, and states don’t have the jurisdiction to do widespread investigation of them. But they found over a thousand violations just in this limited investigation. And if they did file a civil enforcement action, there would be a discovery period, where they extrapolated, the deputies, that they could find thousands more violations. So they requested authorization to file this action, and the California Attorney General’s Office did not move on that.

AMY GOODMAN: And the California attorney general, of course, was now the current California senator, right, Kamala Harris?

DAVID DAYEN: That’s right. And she’ll have the opportunity to vote on Steven Mnuchin’s OneWest—or, on his treasury secretary nomination. Mnuchin actually was a donor to Kamala Harris as recently as February 2016. He gave $2,000 to Kamala Harris’s Senate election campaign. And there’s no real explanation that was given to these deputies as to why Harris decided not to move forward with the case. There’s a lot of speculation. But now we’re seeing sort of the blowback from failing to prosecute these banks and these top executives: Now one is potentially going to be the treasury secretary.

JUAN GONZÁLEZ: And this issue of backdating documents, because, obviously, the mortgage fraud crisis was—there was the original problem of all of the high-interest loans and no-doc loans that were issued, but then, after the collapse, the financial collapse, there were all the banks and financial institutions that came in to so-called clean up the mess and then engaged in massive fraud in terms of documentation of who owned what loan and who had paid back what. Talk about the importance of OneWest in this second stage of the crisis.

DAVID DAYEN: Yes, OneWest was definitely part of that cleanup crew. They were built out of the ashes of IndyMac, which was a failed lender that originated really bad toxic mortgages. And OneWest was brought in, and they engaged in a number of practices to do foreclosures. The backdating scandal here was, they would file notices of default—and that sort of kicks off the foreclosure process here in California—without actually designating what is known as a trustee, that would engage in the foreclosure sale. And so, when they would do that document to designate the trustee, to make it look like the notice of default was done correctly, they would backdate the document. And the way that the deputies at the AG’s Office figured this out is that some of the documents were backdated so far back, it was before OneWest became a bank. OneWest was inaugurated as a bank in March of 2009, and some of the documents had dates before that, that they were executing these what are known as substitutions of trustee before OneWest even became into being.

JUAN GONZÁLEZ: And the—any evidence, from what you’ve uncovered, that Mnuchin had direct knowledge of what was going on or approved it in any way?

DAVID DAYEN: No, we don’t. Right now the investigation was centered on OneWest’s practices. It did not sort of move up the chain to see who authorized and directed. As I said, it was a limited investigation. Presumably in discovery, those questions would be asked. I certainly asked those questions of the spokeswoman for Steven Mnuchin. And the spokeswoman basically dismissed the case, saying that the attorney general didn’t file anything. And so, presumably, that would have come out in a longer—you know, an actual enforcement action in a lawsuit. And that’s something that the Senate Finance Committee can take up when they go into hearings with Steven Mnuchin in the next few weeks.

AMY GOODMAN: Now, Donald Trump had sued Steven Mnuchin?

DAVID DAYEN: Yes, that’s true, regarding some sort of deal that was made prior. You know, Mnuchin was at Goldman Sachs for a long time, and then he started his own hedge fund, known as Dune Capital Management. And obviously, Trump has been involved in real estate and involved in also these sorts of hedge fund deals and using them as investment vehicles. And there was apparently a lawsuit between Trump and Mnuchin, but I guess they’ve—they’ve made up at this point.

AMY GOODMAN: And Mnuchin intends to eliminate government control of Freddie Mac and Fannie Mae to privatize the largest players in the U.S. home mortgage market?

DAVID DAYEN: Yeah, this is a very interesting deal. Mnuchin, one of the first things that he said as treasury secretary nominee is that he would seek to privatize Fannie Mae and Freddie Mac. Hedge funds, including former partners of Mnuchin’s in OneWest Bank, like John Paulson, purchased Fannie Mae and Freddie Mae—Fannie Mae and Freddie Mac stock at a very low rate, less than a dollar a share, on the expectation that if those were privatized and returned back and allowed to recapitalize themselves, that that stock would shoot back up. They filed lawsuits against the government, seeking this reprivatization of these two very large entities. And if the Trump administration is able to pull this off, it would be a massive windfall for these hedge funds that happened to make these purchases. And the fact that Mnuchin and Trump, by the way, because he’s invested in John Paulson’s hedge fund, are so, you know, involved with these actors that would seek to have this financial windfall is certainly concerning.

JUAN GONZÁLEZ: Well, but how would this work? We’re talking about two of the largest financial institutions in American home—in the American housing market. How would that work, the actual privatization?

DAVID DAYEN: Well, right now, the Treasury sweeps up all profits from Fannie Mae and Freddie Mac under a 2012 order, and that could be reversed. And then Fannie and Freddie would be allowed to rebuild capital. They’re currently under conservatorship, but if the conservatorship were to end, they still have that private—you know, quasi-private, quasi-public function, and we could go back to the days where you had them sort of in the private market and in the stock market, but they would have that implicit government guarantee. So the profits would be privatized, and the risk and the losses would be socialized. This is certainly possible. Certainly, you could—you could see the recapitalization. That just would happen by executive order. Then there would probably need to be legislation to fully privatize the market. But Republicans are certainly on board with that. It never happened during the Obama era, but now it’s a new day in Washington, and you could certainly see that coming to pass.

AMY GOODMAN: Finally, David Dayen, what do you think is the most important question for senators to ask, to put to the treasury secretary nominee, Steven Mnuchin?

DAVID DAYEN: I think you want to know what he knew about this large violation of foreclosure process, not just in California, but all over the country. How—was he an involved CEO when he ran OneWest from 2009 to 2015? Did he direct and authorize these types of misconduct, as the California Attorney General’s Office said it was? You know, you really want to understand what his role was at OneWest.

And this is another reason why it was just so toxic to fail to prosecute these types of behaviors in the aftermath of the financial crisis and during the foreclosure crisis, because now, you know, if they do press this issue, he has the alibi of saying, “Well, the California attorney general decided not to prosecute.” And it’s just so toxic that you end up rehabilitating the reputations of these types of actors who were, you know, involved in so much pain and suffering on the part of the American people and millions of people losing their homes.

AMY GOODMAN: David Dayen, thanks so much for being with us, author of a new exposé for The Intercept—we’ll link to it—”Treasury Nominee Steve Mnuchin’s Bank Accused of 'Widespread Misconduct' in Leaked Memo.”

This is Democracy Now! When we come back, your home assistant, as they call it—Alexa is the Amazon Echo—are they actually recording what you say in your house? We’ll talk about what’s the latest news on this. Stay with us.