Trump boasts of rapport with Wall St., but the feeling is not quite mutual

5 months ago Comments Off on Trump boasts of rapport with Wall St., but the feeling is not quite mutual

By Donald Trump’s reckoning, his relationship with Wall Street could not be better.

“I am friends with all the major banks,” he said in an interview. “They are dying to do business with me.”

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The presumptive Republican nominee recently tapped Steven T. Mnuchin, a former Goldman Sachs partner and chairman and chief executive of Dune Capital Management, a private investment firm, as his national finance chairman. Carl C. Icahn, the billionaire activist shareholder, was an early supporter. Thomas J. Barrack Jr., founder and executive chairman of the private equity firm Colony Capital, is scheduled to host a Los Angeles fund-raiser later this month, Mr. Mnuchin said.

“I think we will have very broad support,” Mr. Mnuchin said of the financial community.

Still, an examination of financial records and interviews with nearly two dozen executives at financial firms show that Mr. Trump’s relationship with the financial industry is far more nuanced than he suggests.

While some bankers said they had a personal relationship with Mr. Trump, a majority of those interviewed about him said they had never met him, and either had not done business with him or would not do so because of past dealings that did not end well.

This month Mr. Trump submitted a financial disclosure report that was released by the Federal Election Commission. In that document there was no indication that entities associated with Mr. Trump had lending relationships with most of the country’s biggest banks, including Citigroup, JPMorgan Chase, Goldman Sachs and Morgan Stanley.

One of his largest banking relationships is with Ladder Capital, a small New York firm that typically extends mortgages in amounts below what generally interests the big Wall Street banks.

“His roots and connections on Wall Street are fairly shallow,” said Roy C. Smith, a former partner at Goldman Sachs who teaches finance at New York University.

Donald Trump opening the Nasdaq in 2005 after listing Trump Entertainment Resorts.

© Michael Nagle/Getty Images
Donald Trump opening the Nasdaq in 2005 after listing Trump Entertainment Resorts.

This observation may play well with Mr. Trump’s supporters, who have flocked to him in part because he is not part of the establishment. Though Mr. Trump this month recruited Mr. Mnuchin to lead his fund-raising effort, Hillary Clinton, the Democratic front-runner, has made millions of dollars giving paid speeches to corporations, banks and other organizations, including Goldman Sachs, drawing fire from her opponents.

Part of the reason Mr. Trump has fewer recent dealings with Wall Street stems from a change in his business model. The casino empire that resulted in huge losses, more than a billion dollars in debt and hard feelings across Wall Street, is gone. He also expanded into fee-generating marketing agreements, which are not capital intensive and which banks typically do not lend large sums of money against.

Ivanka Trump, executive vice president for development and acquisitions at the Trump Organization, said the company was no longer interested in taking on huge amounts of debt.

“We get a tremendous amount of calls from lenders across all the major banks looking to lend against our assets and pitch their firms for future acquisitions and development opportunities we’re looking at,” she said in an interview. “But we have very little interest in borrowing at this point. So we have almost no leverage across our portfolio.”

Still, Mr. Trump recently said he loved debt, referring to himself on CNN as “the king of debt.” It is not known how much debt Mr. Trump’s company has, or what percentage of its assets is encumbered by debt, because neither Mr. Trump nor his company, which is privately held, will release that information. He says he is worth $11 billion and has $1 billion in cash on hand. “I don’t need money, and now I have over a billion dollars in cash, so I just do my own financing,” he said.

Part of the reason Donald Trump has fewer recent dealings with Wall Street stems from a change in his business model.

© Alex Brandon/Associated Press
Part of the reason Donald Trump has fewer recent dealings with Wall Street stems from a change in his business model.

Currently, 14 entities with ties to Mr. Trump owe banks in excess of $315 million, according to the disclosures released by the Federal Election Commission. The actual amount of debt is not known and is higher — presidential candidates are required to reveal only debt of $50 million or above, without further specificity. For instance, a Ladder Capital loan secured by a lease at 40 Wall Street is for $160 million.

Brian Harris, a founder and chief executive of Ladder Capital, said his firm also lent Mr. Trump $100 million in 2012 on Trump Tower, on Fifth Avenue. Both those loans are listed simply as being higher than $50 million on the documents released by the Federal Election Commission.

In 2014, Deutsche Bank agreed to lend the Trump Organization up to $170 million to finance the gut renovation of the soon-to-be opened Trump International Hotel, a building a few blocks from the White House that was once Washington’s stunning old post office. The loan was not disclosed on the first financial form Mr. Trump submitted in July 2015, but it was on his most recent filing. .

Donald F. McGahn, a lawyer at Jones Day and former chairman of the Federal Election Commission who is representing Mr. Trump, said the construction loan was not initially disclosed because the Trump Organization had not drawn down on it as of the date listed on the 2015 Federal Election Commission filing. As a result, no liability then existed, he said.

According to guidance from the federal office of government ethics, an untapped line of credit does not have to be reported as a liability.

Mr. Trump’s complicated history with Wall Street goes back to the early 1990s, when three of his casinos ran into financial trouble; the Trump Taj Mahal filed for bankruptcy. Creditors often ended up with pennies on the dollar, and the failures soured Mr. Trump’s relationship with a number of banks.

At one point, Mr. Trump was responsible for about $900 million personally before his businesses were restructured. Several bankers on Wall Street say they are simply not willing to take on what they almost uniformly referred to as “Donald risk.”

Another risk with dealing with Mr. Trump is his proclivity to sue. Deutsche Bank got a taste of his litigious side in 2008 when he sued it and a group of other financial institutions to avoid paying the $40 million that he had personally guaranteed on a $640 million construction loan connected to the Trump International Hotel & Tower in Chicago.

Things went awry when Deutsche Bank asserted in late 2008 that part of the construction loan was due and payable.


Mr. Trump asked the lenders for more time to pay because of the financial crisis. He argued that the crisis was essentially an act of God, allowing him to invoke the “force majeure,” or extraordinary event, clause. in his contract with the bank. He also demanded that Deutsche Bank instead pay him $3 billion in damages.

Deutsche Bank countersued Mr. Trump, demanding repayment of the loan. “This action is an attempt by Donald J. Trump — a self-proclaimed master of negotiation and deal making — to avoid living up to the deal he reached with Deutsche Bank in 2005,” the bank said in a legal filing. “This suit is classic Trump.”

The two sides ultimately reached an agreement, and the original construction loan has since been repaid in full. Dune Capital, Mr. Mnuchin’s firm, was part of the lending group led by Deutsche Bank. “We were happy with the outcome, and it had no impact on our relationship,” he said.

In 2012, Deutsche Bank and Mr. Trump started down a new path together on the Trump International Hotel and Tower, which is now finished and stands on the site of the old Chicago Sun-Times building. (It was also a site of protests in March on a night of clashes that resulted in Mr. Trump’s canceling a campaign rally.) It included a new loan valued at $25 million to $50 million, according to his federal disclosure statement.

Mr. Trump does list an additional liability connected to the Chicago tower — this one in excess of $50 million — on his financial disclosure form.

This loan, oddly, is not from a bank but is housed in a limited liability company controlled by Mr. Trump himself.

In the interview with The New York Times, Mr. Trump said he bought this particular loan back from a group of banks several years ago. Instead of retiring it, he decided to keep it outstanding, and he pays interest on it to himself. The L.L.C. is valued on Mr. Trump’s financial statements as practically worthless despite holding a multimillion-dollar loan.

“We don’t assess any value to it because we don’t care,” Mr. Trump said. “I have the mortgage. That is all there is. Very simple. I am the bank.”

Jason D. Greenblatt, chief legal officer for the Trump Organization, would not explain why the loan was not simply paid off after the company bought it.

“I am not sure it’s appropriate for us to discuss our sort of internal financial reasoning behind transactions in the press,” he said. “It’s really personal corporate trade secrets, if you will. Neither newsworthy or frankly anybody’s business.”

As for Mr. Harris of Ladder Capital, he had nothing but positive things to say about Mr. Trump as a borrower.

“I’ve read all the stories you’ve read, but I’ve never had a default,” Mr. Harris said. (Ladder Capital happens to employ Jack Weisselberg, the son of Allen Weisselberg, chief financial officer of the Trump Organization.)

“I’ve never had to call him and say you missed a payment or you have a loan coming due — not at all,” Mr. Harris added. “He borrows money. He gets a schedule to pay us back, and he does it. There’s no additional concerns because he’s Donald Trump.”

If there were any prevailing doubts of his stature on Wall Street, Mr. Trump said the chief executive at Deutsche Bank could easily allay it.

“Why don’t you call the head of Deutsche Bank? Her name is Rosemary Vrablic,” he said in the recent interview. “She is the boss.”

Ms. Vrablic is a private wealth manager at Deutsche Bank in New York. She is not the company’s chief executive; John Cryan holds that role. Both declined to comment on Mr. Trump.

Trump boasts of rapport with Wall St., but the feeling is not quite mutual