CIT Group, Inc. (NYSE:CIT)

Trump Treasury Pick Could Boost Small Banks

"The big winners from Donald Trump’s pick for Treasury Secretary are unlikely to be Steven Mnuchin’s old haunts on Wall Street, but Main Street banks like the one he helped revive after the financial crisis.

Mr. Mnuchin’s background as a bond trader and executive at Goldman Sachs does seem at odds with the populist tone of Mr. Trump’s campaign, as does his history of donating to top Democrats. But just what this may mean for policy toward top Wall Street institutions is unclear.

Appearing on CNBC Wednesday, Mr. Mnuchin said his top regulatory priority is to “strip back parts of Dodd-Frank,” saying the law is too complicated and restricts lending. As with other pronouncements from Mr. Trump’s team on Dodd-Frank, this is frustratingly vague as to what exactly he would like to change about the financial regulation law.

For clues, it helps to look past Mr. Mnuchin’s Goldman pedigree. Perhaps the most interesting part of Mr. Mnuchin’s resume is his time at troubled lender IndyMac Bank. Mr. Mnuchin led a group of investors who bought the company from the federal government after the financial crisis. The bank was renamed OneWest and eventually sold to CIT Group, where Mr. Mnuchin currently has a board seat.

CIT is among the midsize lenders that critics say are most burdened by Dodd-Frank. With $66 billion of total assets, it is above the law’s $50 billion threshold for annual stress testing by the Federal Reserve. But without the scale of megabanks like J.P. Morgan Chase, it is burdened with significantly increased regulatory costs.

Fed oversight has also meant that CIT has been slow to return capital to shareholders. In July, CIT said the Federal Reserve had objected to the bank’s capital return plan on qualitative grounds.

Mr. Mnuchin will likely have to resign his board seat and divest his shares in CIT, and he will be keen to avoid any appearance of conflict of interest. But it wouldn’t be a stretch to suppose that his experience at CIT will make him more attuned than other regulators to the struggles of small and midsize financial institutions."

Valuation - its trading below TBV. The new leadership is solid, John Thain is a winner. Core business of middle market industrial lending is a strong franchise.