Donald Trump is touted as
a smart businessman, one who grew his real-estate-driven financial empire by
shrewd strategies, careful design, catchy branding, and clever financial
structures. Donald’s father, Fred Trump, built a sizeable fortune – estimated at
over $300 million at his death in 1999. The elder Trump had already supported
his son with loans and investments by the time of his death, and while the
Trump family has never made public the amount of Donald’s inheritance, experts
suggest that the number could have been as much as $200 million. Popular
mythology tells us how the Donald managed to leverage that inheritance and some
underlying real estate holdings to a current estimated net worth of over $4
billion, a lot of money by anyone’s standards.
Because of his
“billionaire” status, his base passionately believes he is a very smart,
self-made businessman. They gloss over one of the largest collection of
lawsuits by and against an American businessman and his privately-held
companies. But as the August 20, 2015 Fortune Magazine states: “Trump’s net
worth has grown about 300% to an estimated $4 billion since 1987, according to
a report by the Associated Press. But the real estate mogul would have made
even more money if he had just invested in index funds. The AP says that, if
Trump had invested in an index fund in 1988, his net worth would be as much as
$13 billion… The S&P 500 has grown 1,336% since 1988.”
Trump brags about how he
put one over on a consortium of Hong Kong financiers, a group of high rollers
he spent years courting. “‘I beat China all the time,’ Mr. Trump declared in a
speech the day he announced his candidacy. ‘I own a big chunk of the Bank of
America building at 1290 Avenue of the Americas that I got from China in a war.
Very valuable.’” New York Times, 5/30/16. A little digging, and what is claimed
as a major victory over these Chinese investors turns out to be a settlement
that Trump was forced to accept when he lost a lawsuit he filed against these
self-same investors, when he claimed they sold a massive parcel of Manhattan
real estate out from under him without his consent at below market. The
investors denied that he was not completely aware of the transaction, and the
court sided with that Hong Kong group.
“[When] his Hong Kong
partners sold the property without his support, Mr. Trump waged a bitter,
long-shot legal battle against them. And far from winning his share of the Bank
of America building, according to court documents, he had to settle for it
after losing in court. In the end, Mr. Trump’s alliance and eventual rivalry
with some of Hong Kong’s richest men proved to be a tale of Mr. Trump at the
extremes. It showcased his unflagging confidence in his ability to turn a bad
financial situation around. But it also underscored his willingness to destroy
a fruitful relationship with aggressive litigation.
“Their partnership began
in 1994, after the collapse of the real estate market left Mr. Trump deeply in
debt. He could not afford to make the bank payments on a 77-acre swath of land
near Lincoln Center known as Riverside South, let alone to develop the
property…
“The judge ruled against
him. Instead of receiving the cash he wanted, Mr. Trump had to accept a 30
percent share in the profits from the two Bank of America buildings, tied up in
a partnership that is slated to last until 2044. But today, Mr. Trump counts
that legal defeat as a victory.” NY Times.
I suspect a large number
of Americans who bought real estate in the 1990s and held it for ten years or
more made a lot of money. Almost any real estate. Buy low, sell high. Donald’s
returns on investment were pretty modest when compared with other “self-made”
entrepreneurs during the same period (since 1987): “Other billionaires’ net
worths have beaten the stock market’s growth in that time. Bill Gates, for
example, saw his grow increase 7,173% since 1988 to $80 billion. Warren
Buffet’s wealth grew 2,612% in the same time period, to $67.8 billion.”
Fortune. Donald made less. But as the lawsuit with his Hong Kong partners
illustrates, Trump needed someone to blame for his obvious failure… his
struggles to stave off bankruptcy in the early 1990s. Blame, an essential
ingredient in the way The Donald has conducted his entire life.
Trump’s business failures
are substantial. Trump dabbled in the short-haul airline business with the East
Coast corridor Trump Shuttle (above right). According to the October 11, 2016
Time Magazine, “The high debt forced Trump to default on his loans, and
ownership of the company was turned over to creditors. The Trump Shuttle ceased
to exist in 1992 when it was merged into a new corporation, Shuttle Inc.”
Trump Vodka (above
middle) and Trump Mortgage did no better, notwithstanding the Donald’s usual
braggadocio. Despite his ownership of 28% of the relevant stock, as his
Atlantic City casinos began to tank, eventually winding up in bankruptcy, the
Donald distanced himself and claimed his only connection was the license to use
his name on those businesses. Trump Magazine, founded in 2007, died a year and
half later.
“In 2005, Trump opened
the non-accredited, for-profit Trump University. [above left] In 2010, four
students sued the university for ‘offering classes that amounted to extended
‘infomercials.’’ Following the suit, the ‘university’ changed its name to ‘The
Trump Entrepreneur Initiative,’ before ending operations one year later. In
2013, the New York Attorney General sued Trump and the ‘university’ for $40
million for allegedly defrauding students.” Time Magazine. Trump claimed again
that this was simply a licensing of his name and some of his materials, but his
endorsements and “slogans” were all over that fake educational endeavor.
Trump’s organization eventually settled with the plaintiffs, purportedly for a
$25 million sum.
So it seems that Trump is
not a particularly good businessman and given his disdain for reading books and
sophisticated academic materials, he does not seem prepared for the
complexities of governance. He certainly did not make a particularly good
impression on his undergraduate faculty (Wharton at the University of
Pennsylvania). As Donald Trump gained media notoriety, his marketing Professor
William T. Kelley, who passed away in 1982, repeated to his friends and
acquaintances that not only did young Trump think he knew it all without studying,
but the Donald “was the dumbest goddamned student I ever had.”
Donald’s attraction to
gimmicky solutions, often those most vulnerable to fraud (like Trump
University), continues even as to his suggestions for healthcare reform. Take
for example his notion of special healthcare “associations,” medical programs
with limited benefits that were considered too bare to qualify under the
Affordable Care Act (Obamacare), often sold (before the ACA) to small
businesses to provide minimal employee coverage.
Touting these programs as
able to provide “great, great healthcare,” the President signed an executive
order, effectively unilaterally amending the ACA to allow such programs to
exist, exempting them from the minimum requirements otherwise imposed by the ACA.
He didn’t mention the tendency of such programs to result in high default rates
and out-and-out fraud. “In the executive order, issued on Oct. 12, Mr. Trump
directed the Labor Department to expand access to the plans by making it easier
for small businesses to band together and insure themselves or buy insurance as
a large group.
“Large group plans and
self-insured plans are subject to fewer federal and state requirements than
individual or small group insurance. They are, for example, not required to provide
‘essential health benefits’ like mental health care and prescription drugs.
“But Mila Kofman, a
former insurance superintendent in Maine who has done extensive research on
association health plans, said they also often falsely claimed to be exempt from
state insurance laws, as a way to explain how they could offer premiums lower
than those charged by licensed insurance companies…
“But these health plans,
created for small businesses, have a darker side: They have a long history of
fraud and abuse that have left employers and employees with hundreds of
millions of dollars in unpaid medical bills… The problems are described in
dozens of court cases and enforcement actions taken over more than a decade by
federal and state officials who regulate the type of plans Mr. Trump is
encouraging, known as association health plans… In many cases, the Labor
Department said, it has targeted ‘unscrupulous promoters who sell the promise
of inexpensive health benefit insurance, but default on their obligations.’ In
several cases, it has found that people managing these health plans diverted
premiums to their personal use.
“The department filed
suit this year against an association health plan for 300 small employers in
Washington State, asserting that its officers had mismanaged the plan’s assets
and charged employers more than $3 million in excessive ‘administrative fees.’
Operators of the health plan violated their fiduciary duty by using its assets
‘in their own interest,’ rather than for the benefit of workers, the government
said.
“Marc I. Machiz, who
investigated insurance fraud as a Labor Department lawyer for more than 20
years, said the executive order was ‘summoning back demons from the deep…
Fraudulent association health plans have left hundreds of thousands of people
with unpaid claims… They operate in a regulatory never-never land between the
Department of Labor and state insurance regulators.’” New York Times, October
21st.
So we are left with the
question of “who is Donald Trump and why is his base so fiercely loyal?” He’s
certainly not a good businessman, as his ample track record of failure and
underperformance illustrates. He’s not big on the details of domestic and
foreign policy, stuff he would have to spend some serious time hitting the
books, which, by his only admission, he just plain does not do. Pretty simple
answer it seems: Narcissistic Donald is a super-salesman, less concerned with
what he is selling that the act of selling. More able to campaign for office
than run the country.
Truth is expendable in
Trump’s own words. In his 1987 book, The Art of the Deal, he wrote: “"A
little hyperbole never hurts… People want to believe that something is the
biggest and the greatest and the most spectacular ... It's an innocent form of
exaggeration - and a very effective form of promotion." So, I get it. The
Donald really is good at that singular quality: hucksterism.
Trump’s base, those
Middle Americans slammed by changing times and decreasing values for blue
collar skills, are likely to be his biggest victims. If he has his way, they
will suffer lost healthcare and government services/protections in order fund
lower taxes for corporations and the wealthy. But like most victims of snake
oil salesmen, they are loath to admit that they were suckered into a dumb deal,
clinging to the belief that his impossible slogans to bring back their once
lucrative past are implementable, and if they are not, it is because of the
Great Washington Swamp conspiring against them… not their beloved
super-salesman.
And if you think that the
Republican Party is going to contain this misdirection, think again. As Arizona
GOP Senator Jeff Flake chooses not to run in 2018 adds one more name of
Republicans choosing to opt out of political office, Donald Trump is slowly
reconfiguring the entire GOP to reflect his angry populism: “Despite the fervor
of President Trump’s Republican opponents, the president’s brand of hard-edge
nationalism — with its gut-level cultural appeals and hard lines on trade and
immigration — is taking root within his adopted party, and those uneasy with
grievance politics are either giving in or giving up the fight… The Grand Old Party risks a longer-term
transformation into the Party of Trump.
“‘There is zero appetite
for the ‘Never Trump’ movement in the Republican Party of today,’ said Andy
Surabian, an adviser to Great America Alliance, the ‘super PAC’ that is aiding
primary races against Republican incumbents. ‘This party is now defined by
President Trump and his movement.’” New York Times, October 25th. The Democrats
face their own split between progressives and traditionalists. What a mess!
But with nuclear war
hovering, nations stepping into to snap up economic and political opportunities
as Donald Trump pulls the United States in a different direction, the consequences
(near and long-term) are devastating, as ex-presidents from both sides of the
aisle are making clear. Republicans are only beginning to admit that Trump is
an embarrassment to the GOP; Democrats are required to do so. Notwithstanding a
flying-high stock market, the chickens will come home to roost… and when they
do…
I’m
Peter Dekom, and this Emperor definitely is stark naked!
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