I met Donald Trump 30 years ago while reporting on his failing Atlantic City casinos. He was then and is now proof that the very rich are different from you and me.
The creditors could have crushed Trump and taken the property after he missed a $41 million payment. But it cost more to bring Trump down than bankrupt him.
Much of the deliberations on that June 1991 conference call concerned the fear of being stuck in bankruptcy court for years if they pushed Trump out. At one point, the creditors talked about paying Trump more than $1 million in an annual management fee even though they thought he had done a “terrible” job managing the casinos.
“What is he providing for the million and a half?” one bondholder asked, prompting others on the call to laugh.
“We hope as little as possible,” an adviser to the bondholders said, causing even louder laughter. “We hope it becomes characterized as a nonmanagement fee.”
When I interviewed Trump, he claimed he was financially successful because his bankers and backers trusted and respected him. “They love me because I’m good and I’m honest,” he said.
New York Attorney General Letitia James is trying to do what Trump’s financial backers have long failed to accomplish, which is to make him accountable for his failings and falsehoods as a businessman.
James is suing the former president on allegations he falsely inflated his net worth by billions. She says Trump used fraudulent accounting statements to obtain loans and tax breaks. She wants him to repay the $250 million she claims he illegally obtained.
The latest case against Trump illustrates how the extremely wealthy often walk away from dastardly deeds and poor business management with millions.
F. Scott Fitzgerald couldn’t have been more right when in his short story “The Rich Boy” he wrote: “Let me tell you about the very rich. They are different from you and me.”
From platinum pensions to eye-popping salaries, history favors affluent and influential company executives, even when they spectacularly fail at their jobs.
Many executives who oversaw financial companies that drove us into the Great Recession left or resigned — but had earned obscene bonuses, stock options, and years of multimillion-dollar paychecks. Lehman Brothers collapsed in 2008, yet its former chief executive Dick Fuld earned an estimated $34.38 million a year before the company filed for bankruptcy.
The House Oversight and Reform Committee held a hearing in October 2008 about the collapse of Lehman Brothers. The committee chairman at the time, Rep. Henry Waxman, said: “While Mr. Fuld and other Lehman executives were getting rich, they were steering Lehman Brothers and our economy toward a precipice.”
Waxman (D-Calif.) said Fuld depleted Lehman’s capital reserves by over $10 billion through year-end bonuses, stock buybacks and dividend payments.
“What is fundamentally unfair about the collapse of Lehman is its impact on the economy and taxpayers,” Waxman said. “Mr. Fuld will do fine. He can walk away from Lehman a wealthy man who earned over $500 million, but taxpayers are left with a $700 billion bill to rescue Wall Street and an economy in crisis.”
As I read the complaint against Trump, I kept thinking: What’s the culpability of the financial institutions? Given Trump’s history of corporate bankruptcies, why didn’t they double-check his math and triple-check appraisals?
The lawsuit claims that Trump, three of his children (Donald Trump Jr., Ivanka Trump and Eric Trump) and senior executives at the Trump Organization, armed with super hyped-up appraisals of various New York properties, got banks to lend money on more favorable terms than would otherwise have been available to the company.
Trump and his family, through an attorney, have denied any wrongdoing.
James’ lawsuit says that from 2011 to 2021, Trump and the Trump Organization intentionally created more than 200 false and misleading valuations of assets to defraud financial institutions.
I’m still stunned at how Trump has been allowed to prosper even as investors and financial institutions faced massive losses. Banks repeatedly renegotiated his debt to bail him out or preserve the value of the assets that served as collateral for loans made to Trump.
Trump survived and thrived because of the willingness of bankers and bondholders to prop him up.
But let struggling consumers default on their mortgages, student loans or credit card debt, and they face financial ruin.
I’ve often heard various versions of a comedy bit that says if you owe the bank $10,000, you don’t sleep. But if you owe the bank $10 million, the banker doesn’t sleep. The dollar amounts change depending on who tells the joke, but the underlying sentiment is that uber-rich people frequently get favorable treatment when they falter financially.
“For too long, powerful, wealthy people in this country have operated as if the rules do not apply to them,” James said in a statement. “Donald Trump stands out as among the most egregious examples of this misconduct.”
Thirty years ago, my colleague and I wrote the following in our Post investigation on his failing casinos: “What is clear is that Trump has not had to face the ultimate financial reckoning.”
Maybe that day has finally come.
Michelle Singletary on inflation and personal finance
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