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One of the consequences of the chaos of the U.S. Capitol is a distancing of banks and other business from former President Trump. He now faces a delicate and difficult situation with his businesses, debt and taxes. Paul Solman reports.
One of the consequences of the chaos from the U.S. Capitol on January 6, a distancing from banks and other businesses from former President Trump.
Paul Solman, for our Making Sense series, looks at the economic hit facing Mr. Trump.
I'm the king of debt. I'm great with debt. Nobody knows debt better than me. I have made a fortune by using debt.
In the early 1990s, Donald Trump also lost a fortune using debt. He could face similar problems today.
Most of his money is tied up in real estate, and real estate that's been hit hard by COVID-19. He has debts north of $1 billion, and a big chunk that debt is coming due soon.
Journalist Tim O'Brien has covered Trump for decades, wrote "TrumpNation" with Trump's cooperation published in 2005.
He really runs the risk of being cash-strapped at a time when his banks and other businesses are turning their backs on him because of the January 6 insurrection.
Famous hotels, famous golf courses, a $2-plus billion empire, by most estimates. But 60 percent of Trump's wealth is held in just five buildings in San Francisco and New York, says O'Brien.
The four buildings in New York are Trump Tower, a retail space next to Trump Tower that used to be known as NikeTown. But Nike moved out.
Then there's 1290 Sixth Avenue, and he owns what once vied for tallest skyscraper in the world, 40 Wall Street, filled with offices.
He's very dependent on all of those spaces in that building being occupied, and occupancy rates are at rock-bottom levels.
At the moment, the real estate, the collateral on his debt, just isn't worth what it used to be. And if it were less than he owes on it…
It would be the same thing as a homeowner who has too much mortgage on their home, and they have to sell the home for less than they paid for it. With him, he's got a whole basket full of properties that are stressed like that.
So the possibility is, to use the homeowner analogy, that he gets foreclosed on?
That could happen. It really depends on the timing of when each loan comes due. It's how strict the debt holders are about making him pay. It's whether or not he can find other properties he could sell quickly.
Or find new lenders, but, says Nancy Wallace:
Donald Trump has burned a lot of bridges in commercial lending.
Professor Wallace chairs the real estate group at Berkeley's Business School.
Given his casino failures, most large commercial lenders wouldn't work with him because of his behavior in those bankruptcies.
Even his go-to lender for decades, Deutsche Bank, has now severed ties, as have three other banks, including Signature, on whose board his daughter Ivanka once sat.
Basically, they closed his accounts. I mean, forget about borrowing. They don't even want his bank accounts.
You mean a bank said, here's your money, we don't even want your deposits?
Because they're afraid of what?
There is huge reputational risk in banking. And anything that's associated with significant lack of transparency is too risky. And we haven't even spoken about the Scottish assets.
Yes, the Scottish assets, several prominent golf courses and hotels.
No outside loans on those properties, says reporter Martyn McLaughlin in Glasgow, but:
Not a single one of Trump's companies here has ever turned a profit. They have yet to pay a penny in corporation tax. And, cumulatively, they have incurred losses of approximately 55 million pounds.
I have looked through some of the business that the hotels are doing. In some cases, it's single-figure weddings over the course of a year.
And thus the question now being asked by authorities in Scotland: Where did the money come from?
There's obviously been a lot of speculation that the money is coming from somewhere like Russia, like Azerbaijan and Georgia, and suspected foreign individuals who may — may be involved or have family who are involved in money-laundering.
And if they determine money laundering was involved, could they take his property?
If the owner of the property can't disclose the financing, there is a mechanism for those properties to be seized.
But if his properties were seized, he'd obviously have fewer assets with which to raise cash. And even if he holds onto to everything, says Tim O'Brien:
Private equity investors, hedge funds, anyone who wants to get into distressed real estate, they just want to wait until he has to sell the property, so they can get it cheaply.
So, you're suggesting that the private equity community or private capital in general basically is smelling blood in the water?
They all can smell when someone else is hurting, and they're more than willing to watch that person bleed out, until they can get something as cheaply as they possibly can.
But he was just able to raise like a couple of hundred million dollars from people who back him. I mean, doesn't he have a tremendous source of financing there?
He can try to use those funds for non-political purposes, but it's illegal.
There's a final financial specter haunting Trump, his taxes, says Wallace.
And given what looks to be a lot of shenanigans in terms of how he declares assets for tax purposes and how he declares assets for borrowing purposes, there could be a serious problem there.
And the issue there is, he declares a building worth a great deal of money, so that he can borrow a lot against it, and then, when he files his taxes, he claims that the building is worth a lot less?
Yes, for the underpayment of taxes.
Possibly a crime, but even if not:
He might have a huge tax bill, to the tune of $100 million.
All this had me deeply skeptical of Trump's financial future, and left me with one last question, which I put to Dan Alexander, author of "White House, Inc."
Why can't he just declare bankruptcy?
Well, the thing is, is that Trump, his overall portfolio, is actually solvent. He's got really valuable assets. He does have some cash that he could use, so he can pay back these loans. The question really is whether he wants to.
We asked the Trump Organization for comment, and have not gotten a response.
But, yesterday, Donald Trump's son Eric told The New York Times that the Trump Organization remained stable, with steady cash flow and relatively low debt. Still, according to the company's own filings, the Trump Organization revenues declined more than 35 percent last year.
Says Dan Alexander:
So, you're either going to see new lenders or you're going to look at a Trump Organization and Trump empire that looks much smaller come about 2024 than it does in 2021.
And the irony of all of this is that, if he had just done what everyone told him to do at the start, which was liquefy everything, take all that money, and stick it into the S&P 500, he would be hundreds of millions of dollars richer today.
Because the stock market is up nearly 80 percent since Donald Trump took office.
For the "PBS NewsHour," Paul Solman.
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Paul Solman has been a business, economics and occasional art correspondent for the PBS NewsHour since 1985.
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