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Financial Times
Edward Luce
March 20 2024
The Republican candidate’s financial difficulties pose risks for America as well as for himself.
For Donald Trump, it would not be seven times a charm. His first six bankruptcies all took place before he went into politics. Most of these occurred in two phases: in the early 1990s after he had over-extended on a clutch of Atlantic City casinos, then on various properties before and after the 2008 crash. America’s Chapter 11 bankruptcy protection got him out of trouble.
Since then, Trump has largely made money by licensing his brand name. But there is no easy way out from the $454mn that he owes in damages to the New York legal system. Unlike banks, the law does not take haircuts.
There is nothing to stop Trump from being broke and winning the White House. He already had that history of bankruptcy when he won in 2016. But his financial woes create two novel headaches — one for him, and one for America. For Trump, it undermines his reputation for being rich, which he and his base value highly. Revisions to his net worth cut it from the $10bn he claimed in 2016 to $2.6bn on Forbes’ latest estimate. But these are educated guesses. As a private company, the Trump Organization does not disclose its liabilities.
Even if that number proves correct, most of his wealth is locked up in illiquid assets, chiefly real estate such as his landmark towers in New York and the golf clubs. Unfortunately for Trump, it seems no lenders will provide him with the surety bond to cover his damages. He has already been turned down by 30 entities, including Berkshire Hathaway, Allianz, Munich Re, Swiss Re and Tokio Marine HHC. Even if Trump had the collateral they need, the bond companies do not want the reputational risk.
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Some of Trump’s supporters are puzzled that he has not yet been bailed out by one of his wealthy donors. The answer is that he has a history of not paying what he owes. From the world’s biggest banks to America’s smallest contractors, Trump is expert at stiffing creditors. That is not to mention the class-action winners of those who paid exorbitant fees to study at Trump University, the dissolution of the Trump family’s charitable foundation for a “shocking pattern of illegality”, and the fact that roughly $50mn in Trump 2024 campaign funds has gone to pay his legal bills.
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Article:
https://www.ft.com/content/aa383026-ac12-4d39-b6ee-075c2a248fc9
