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Trump Went Broke, but Stayed on Top

"I've developed a great respect for bankers," he added.

Many Trump creditors gave a different explanation for the outcome. Mainly, they were guided by their fear of what might happen if their conflict with Trump escalated into a bitter bankruptcy proceeding, they said. "I did it because it was the only practical solution," said one banker, who declined to be identified.

The concerns that drove Trump's lenders were brought sharply into focus in a telephone conference call in June 1991, when people who had the right to seize the Trump Castle casino chose not to do so. The fear of bankruptcy dominated their deliberations, according to a tape recording of the discussion made available to The Washington Post.

Bankruptcy was "a huge wild card," a participant warned during the strategy session. "This would be a really drawn out, very, very nasty process," he said.

The lenders -- bondholders who had helped finance the Trump Castle casino and hotel -- expressed contempt for the way Trump had managed the casino. But their cynicism about the bankruptcy system outweighed their cynicism about Trump.

Warren Foss, an adviser to the bondholders, advocated letting Trump stay in charge of the casino and paying him an annual $1.4 million management fee, mainly to win Trump's support for a deal that would keep them out of bankruptcy court.

"What is he providing for the million and a half?" one bondholder asked, prompting hearty laughter.

"We hope as little as possible," Foss said, to even greater laughter. "We hope it becomes characterized as a nonmanagement fee."

Even Trump himself is said to have expressed amazement at the power a man in his position held over his lenders.

"Trump used to shake his head. He'd say, 'I don't understand why they don't at least put me in foreclosure and start the {legal} process running,' " the Trump associate said. Trump, who emphasized in interviews that his bankers showed good judgment, denied having made such comments.

Avoiding the Reckoning

There was a time when Trump was one of the lending community's favorite customers. For most of the 1980s, bankers were in a fierce competition to make loans, and Trump was a professional money borrower. The more he borrowed, the more they wanted to lend him. After all, they reasoned, who could be a safer credit risk than the obviously rich and successful Donald Trump?

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