What this country needs is a president who knows how to default.
Department of Irony: Republicans can’t stop howling about socialism. But nobody makes capitalism look worse than Donald Trump.
The president’s party is trying to set up the 2020 election as a war against the S-word. “America will never be a socialist country,” Trump announced in his last State of the Union speech. At a big gathering of conservatives, Mike Pence warned that “Medicare for all” and the Green New Deal were “the same tired economic theories that have impoverished nations … over the past century. That system is socialism.”
There have certainly been socialist disaster cases around the world, although the Republican definition seems to include everyplace that has universal health coverage. But the magic of the marketplace can get you into plenty of trouble, too. For a good example of when the system doesn’t work, just look at Trump’s relationship with Deutsche Bank, which has given him about $2 billion in loans over the years. Two billion dollars to a guy whose major financial talent seems to be defaulting.
The Times’s David Enrich took us through the story this week. It starts in the late 1990s when Deutsche Bank was a kind of minor league player who wanted to be cool and get into U.S. commercial real estate lending in a big way. Where better to start than Trump? He owned stuff.
Well, at least sort of. Earlier in the decade he had been in such bad shape I felt compelled to refer to him as a “financially embattled thousandaire.” Trump sent me a copy of that column with an arrow pointing to my picture, on which he had written “the face of a pig.” I’ve recounted that story many times in the past, but it’s always sort of fun.
About Deutsche Bank. Trump wanted to borrow $125 million to renovate a building on Wall Street. In theory, the laws of self-interest would have caused officials to look very carefully at their new client’s financial history to make sure he was going to pay back everything he borrowed.
And what did they see? Well, at that point Trump was a host of WrestleMania and a frequent guest of the Howard Stern radio show, in which he would talk with his host about, um, dames.
And he had gotten famous for not paying back loans. But what the hell. The Deutschebankers said yes. Maybe they had read “The Art of the Deal” without noticing that it was clearly written by somebody else.
The longer Trump hung around with Deutsche Bank, the more beloved a customer he became. He was such a good … borrower. “What’s that old adage — if you owe a bank $10,000, the bank owns you. But if you owe the bank $10 million, you own the bank,” mused Aaron Klein, a fellow in economic studies at the Brookings Institution.
In 2003, when Trump wanted to borrow another wad of cash, Deutsche Bank invited potential bond investors to come in and hear his pitch. Tons of people responded. The problem, as Enrich reports, was that the vast majority just wanted to get a glimpse of a celebrity and had no plans on entrusting him with their money.
See? Sometimes the system works. However, eventually, the bankers did manage to find some buyers. After which Trump defaulted.
And back again! Deutsche Bank gave him a $640 million loan for a skyscraper he wanted to build in Chicago. The bankers must have been nervous, but Trump made a great sales pitch — he even promised to put Ivanka in charge of the project.
Think about this. What was Ivanka’s best-known project to date? Jared.
At this point the bank did a review of Trump’s claim that he was worth about $3 billion and discovered it was more like $788 million.
But hey. He’s friends with Mike Tyson.
The skyscraper got built, but nobody seemed to want to live there. Trump, who had personally guaranteed $40 million of the loan, then went to court, pointing to a clause in the contract that said he wouldn’t have to cough up the money in the event of a natural disaster. And what about the recession? Was that a natural disaster or what?
Onward. More loans from Deutsche Bank. Some of which he used to pay back … Deutsche Bank. Nobody seemed to think that was crazy.
So, what’s the problem here? Anat Admati, a professor at the Stanford Graduate School of Business, said she found it shocking that “a corporation the size and complexity of Deutsche Bank is so poorly governed.”
The bank, however, didn’t run for president on the basis of its financial genius. Trump did, and it worked so well he is now running around making speeches about reducing business regulation.
Deutsche Bank, which had done so much to make him look like a financial titan over the years, was a little stunned by the election. The whole world was going to notice what a bad business risk this guy had been. How had the bank come to be his top underwriter?
Bring on the integrity committee! A Deutsche Bank investigation determined that its private-banking division really, really liked doing business with famous people and was prepared to overlook pretty much everything else.
Is that a great economic model or what? Eat your heart out, socialist countries. We’ve got Donald Trump.