March 3, 2016 at 3:00 AM
"It has not been easy for me. And you know I started off in Brooklyn, my father gave me a small loan of a million dollars."
–Donald Trump, at a town hall appearance, Oct. 26, 2015
"He (Marco Rubio) also said I got $200 million from my father. I wish. I wish. I got a very, very small loan from my father many years ago. I built that into a massive empire and I paid my father back that loan….The number is wrong by a factor of hundreds of — I mean, by a fortune. I got a small loan. I started a business."
–Trump, news conference, Feb. 26, 2016
A big part of Donald Trump's mythology is that he built a real estate empire by himself.
Yet his father, Fred Trump, was at one point one of the richest men in America after constructing apartment complexes for the middle-class in Brooklyn and Queens. Donald Trump's insight was to cross the river and start building in Manhattan, a much more prominent stage for the publicity-conscious would-be billionaire.
Rubio's claim that Trump received a $200-million inheritance appears too high, though the real figure is elusive. As far as we can determine, the assets distributed to Fred C. Trump's descendants before and after his death in 1999 has not been revealed. The Daily News in 2000 cited family estimates that his estate was worth $100 million to $300 million but The New York Times recently found documents in Queens Surrogate Court that show that Fred Trump, in his will, divided $20 million among his four surviving children, among other distributions after estate taxes. (The will was contested by the children of his oldest son, Fred C. Trump Jr., who had passed away.)
Trump's father, like most wealthy individuals, also set up trusts before he died. Donald Trump admitted in a 2007 deposition that he borrowed at least $9 million from his future inheritance when he encountered financial difficulties. The documents (appended at the end of this article) suggest some property—worth, after expenses, about $30 million–was kept in trust after Fred Trump's death to provide income to his wife, who died in 2000. So that also was presumably divided by the children after her death.
Let's examine in more detail Trump's claim that his rise to fortune was fueled by a "small loan."
The building of the Grand Hyatt hotel in 1978 near New York's Grand Central station was a key element of Trump's first big deal in Manhattan — obtaining an option on old Penn Central railroad properties. The new hotel, which replaced an aging Commodore property, helped put Trump on the map.
There was a nearly $1 million loan from Trump's father that was part of the deal — Fred Trump's Village Construction Corp. provided the loan to help repay draws on a Chase Manhattan credit line that Fred Trump had arranged for his son as he built the hotel. But that loan was only a small part of the father's involvement in the deal.
Trump's father — whose name had been besmirched in New York real estate circles after investigations into windfall profits and other abuses in his real estate projects — was an essential silent partner in Trump's initiative. In effect, the son was the front man, relying on his father's connections and wealth, while his father stood silently in the background to avoid drawing attention to himself.
Fred Trump — along with the Hyatt hotel chain — jointly guaranteed the $70 million construction loan from Manufacturers Hanover bank, "each assuming a 50 percent share of the obligation and each committing itself to complete the project should Donald be unable to finish it," according to veteran Trump chronicler Wayne Barrett in his 1992 book, "Trump: The Deals and the Downfall."
Fred Trump's signature on the guarantee ensured the new hotel would get built. "No document in the long paper trail attached to the Commodore deal better demonstrated the lack of bank confidence in the Donald or the project, and none made clear the limits of his promoter role," Barrett wrote. Trump simply did not have the credit or connections to obtain such financing on his own. "It was Fred's two-decade-old relationship with a top Equitable officer, Ben Holloway, that had helped entice them to do the project."
Donald Trump makes no mention of his father's secret — and essential — role in his 1987 memoir, "The Art of the Deal."
In 1976, The New York Times published a fawning profile of Trump in which he was quoted as saying he was worth $200 million, even though he was only 30. But that figure –which has been widely cited – was false, according to examination of Trump's finances in 1981 by the Casino Control Commission. (The document is embedded below.)
Trump's tax returns at the time indicated his salaried income in 1976 was less than $100,000 a year, which he received as an officer in his father's company. (His father remained chief executive of the company.) His income taxes reported $76,000 in income in 1975, $25,000 in income in 1976 and $118,000 in income in 1977. He paid no income tax in 1978 and 1979 as he reported negative income, likely because of tax shelters.
Trump also benefited from three trusts that had been set up for family members. In 1976, Fred Trump set up eight $1 million trusts, one each for his five children and three grandchildren, according to the casino document. (That today would be worth about $4 million in inflation-adjusted dollars.) The 1976 Trust paid Trump $19,000 in 1977, $47,200 in 1978, $70,000 in 1979, $90,000 in 1980 and $214,605 in 1981. Trump also received about $12,000 a year from a 1949 trust set up by his father and nearly $2,000 a year from another 1949 trust created by his grandmother. He also received a $6,000 gift every December from his parents.
The casino document lists several other loans from Trump's father to his son, including a $7.5 million loan with at least a 12-percent interest rate that was still outstanding in 1981.
[Update, Sept. 23: The Wall Street Journal reported that a 1985 casino-license document showed that Donald Trump owed his father and father's businesses about $14 million.]
In 1993, according to the 2005 book "TrumpNation," by Timothy O'Brien, the children of Fred C. Trump expected to receive about $35 million each when their father passed away. With his casinos failing in the early 1990s, Donald Trump needed to borrow about $10 million to fund his living and office expenses but could offer no collateral to his siblings. He later sought another $20 million but his siblings balked, and a smaller amount was arranged, O'Brien said.
Trump insisted to O'Brien he had made "zero borrowings from the estate" and later unsuccessfully sued the author for libel. In a 2007 deposition related to the lawsuit, Trump admitted he had borrowed "a small amount" from his father's estate: 'I think it was like in the $9 million range."
As Trump's casinos ran into trouble, Trump's father also purchased $3.5 million gaming chips, but did not use them, so the casino would have enough cash to make payments on its mortgage — a transaction which casino authorities later said was an illegal loan.
Trump protests too much when he says that Rubio's $200-million figure is "wrong by a factor of hundreds." Trump likely did not inherit $200 million by himself, though perhaps that was the size of the father's estate, before taxes.
Moreover, Trump's claim that he built a real-estate fortune out of a "small" $1 million loan is simply not credible. He benefited from numerous loans and loan guarantees, as well as his father's connections, to make the move into Manhattan. His father also set up lucrative trusts to provide steady income. When Donald Trump became overextended in the casino business, his father bailed him out with a shady casino-chip loan—and Trump also borrowed $9 million against his future inheritance. While Trump asserts "it has not been easy for me," he glosses over the fact that his father paved the way for his success — and that his father bailed him out when he got into trouble.
For ignoring and playing down the substantial advantages his father's wealth gave him, Trump earns Four Pinocchios.
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Trump testimony on borrowing $9 million from father's estate
Portion of Fred Trump's will
Portion of Mary Anne Trump's will