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