The NYT has recently told us the following story about Trump and his dealings with his Chicago tower:
- Trump makes a bad investment using money from Deutsche Bank and a hedge fund;
- He can’t pay his obligations;
- The creditors close in;
- Consistent with his usual practice, Trump responds by hurling insults and filing suits against the creditors;
- The creditors back down and either refinance the loans or forgive them;
- Trump offsets the income arising from the creditors’ forbearance with other business losses, and so avoids paying any tax on it; and
- Trump still owns a tremendous amount of money to DB. The loans will come due during his second term, if he has one. The loans are backed by a personal guarantee.
Trump, of course, says this proves he is a brilliant businessman. The record shows that he has a flair for dumping his financial problems on other people, but not for actually making profits, except with “The Apprentice.” My question is, are large creditors usually this spineless? If you or I behave aggressively when banks try to collect from us, will they back down, or is this just a Trump thing?
If it isn’t just a Trump thing, it doesn’t bode well for our financial system. Oh, and imagine DB trying to enforce the personal guarantee if Trump is still in office. Good luck with that!