You don’t know the Deetz’s. My father never walks away from equity Winona Ryder Beetlejuice
And that’s about to become Traitor Tot’s main problem. While Lydia Deetz’s father may never walk away from equity, The Trumpster fire treated equity like an infectious disease, and he’s about to learn a hard lesson the hard way.
Look, you can say that you and your stuff are worth anything you want. I can claim that my 2005 Chrysler Town and Country is a $100,000 antique, but until somebody hands me $100,000, what I am is broke.
Hair Twitler has loudly proclaimed himself The King of Debt for close to 50 years now. And while there’s nothing wrong with that, perfectly legal to accumulate short term debt in return for long term financial gain, there has to be ling term financial gain in the process by the time all that lovely debt comes due for payment. The most common form of short term debt for gain is selling short on the stock market.
But Trump isn’t doing that, on any profitable form. Trump’s version of being The King of Debt is actually nothing more or less than a real estate Ponzi scheme. Here’s how it works.
Let’s just say that His Lowness buys a building for $250 million. Before the ink is even dry on the paperwork, Trump is taking that paperwork to get an equity loan or 2nd mortgage for $200 million, which he either stuffs in his pockets, or invests in another property.
You would think to yourself, So what? If he sells the property, he still makes a cool $50 million. Except he doesn’t, because he didn’t actually pay $250 million for the property. He personally invested $10 million, then hit up investors for the other $40 million to put 20% down on a mortgage. Trump couldn’t sell that property for $300 million, because he’d still one of the banks $100 million! This bullsh*t paper trail is Trump’s billionaire fortune. He pretty much does this on every deal.
But here’s the McGuffin. When you’re talking mortgages and equity loans on this scale, it isn’t like your home mortgage. You don’t make monthly PITI payments. Instead there’s a repayment schedule. Let’s say you borrow $100 million on a 10 year loan. Every two years you’re due to pay the bank $12 million. A bit oversimplified, but you get the picture.
Here’s the scam, because with El Pendejo Presidente there’s always a scam. Trump almost never does any of that sh*t. When the time comes for the payment to be made, Trump goes back to the lender and renegotiates the loan. He likely makes a good faith payment of the last two years accumulated interest, but almost nothing on the principal, and he walks away with a fresh two years using the banks money.
Meanwhile he’s still collecting the rent from his tenants in these buildings, it just isn’t going to the bank. It’s going to pay his salary, his kids salaries, the rest of his employees, and his standard operating expenses and utilities. That’s why he keeps cheating vendors and merchants on every contract he signs. The less he pays them, the more that goes back in to his pocket.
This is why if she gets what she wants, New York Attorney General Letitia James can drive Trump right into bankruptcy and personal pauperdom. Let’s say she gets the $250 million penalty she wants. Trump almost certainly doesn’t have $250 million to pay the tab. Which is why the judge, when he found Trump and his monkey spawn summarily guilty, he placed his physical New York assets into receivership. There is now an independent 3rd party managing those assets, and will oversee their sale to pay fines and creditors if ordered by the court.
Big deal. Trump is still dead stony broke. Let’s say that Trump Tower is worth $500 million. Trump personally likely put in some $20 million, then raised the other $80 million for the down payment from investors, so the bank is holding $400 million in debt. Trust that Trump immediately turned around and went to Deutsche Bank for a $400 million 2nd mortgage, putting nothing down by using a mortgage or his “good name” for collateral. If they’re lucky, he’s paid a total of $50 million in principal over all these years. Even if Trump Tower sells for $600 million, that’s still some $350 million short on the balance that’s due on the paper.
And the receiver will run into the same problem every time he sells a Trump property. remember all that lovely equity that Charles Deetz never walked away from? Trump is exactly the opposite. He never paid off the bare minimum principal payments to create equity, lowering his debt so he could at least pay off the loans with a profitable sale.
It was always just a Ponzi scam, and now the chickens are about to come home to roost. In a Ponzi scam you use new money from new suckers to pay a fraction to the old investors and pocket the rest. But when the fresh sucker money stops coming in, there’s nothing to replace it with, and the whole pyramid collapses.
Frankly, I’m amazed that this process didn’t start almost a year ago when a Manhattan court found former Trump CFO Allan Weisselberg, as well as The Trump Organization guilty of massive systemic fraud. There isn’t a bank or mortgage lender out there that doesn’t have a walkaway clause in the contract in case the bank ever finds out that the customer lied or misrepresented the facts on the loan application or accompanying financial paperwork. I can only deduce that the banks decided to sit Shiva, and wait to see if the situation stabilized, rather than start a salmon run on Trump paper, risking instant bankruptcy, minimizing anything they could hope to claw back.
There you have it. The story as old as time, greed and manipulation. And believe it or not, Trump’s run isn’t all that unusual. Charles Ponzi got away with his original pyramid scheme for years. And if memory serves me right, Bernie Madoff chugged on for more than 20 years before the roof finally caved in. Trump lasted longer for two simple reasons, charisma and persona. But now the waiter is about to clear away the dishes. Time to pay the check.
I thank you for the privilege of your time.
Yes Virginia…there is a Santa Claus 🧑🎄
This is Trumps recession.
In 2007 and 8 it was Bernie Madoff’s recession.
Enlightening article. Now I understand pyramid schemes.
Wow. I’d really like to see this dismal individual go down.
I think there’s a term, “highly leveraged” that financial folks apply to ostensibly rich business people who wind up underwater on their debts. It’s not uncommon for lenders to help keep someone/a business afloat at least for a while in the hopes of getting at least some of their money back. Of course, at the lenders there are the people who make the decision to :over” someone that’s highly leveraged. If not enough money is clawed back there’s hell to pay at the lenders institution. However, even if bribes/kickbacks are involved what lender wants the scandal? So it gets swept under the rug. What’s amazing in Trump’s case is that he got away with it all for so long.
Perfect analogy Denis, thanks for sharing the highly leveraged term, you are 100% correct…
You did the heavy lifting in creating an excellent article. All I did was the equivalent of taking my ice cream over to that spot where I could add some sprinkles to the sundae.
As the saying goes, if I owe $100,000 to the bank and have trouble paying, I can’t sleep at night, but if I owe the bank $100 million and have trouble paying, the bankers can’t sleep at night, but I’m fine.
LMFAO!!! I swear to God, you people are the wind beneath my wings!!!
If I remember correctly, Trump has some loans coming due next year, to add to the mix. I remember the figure of approx. $400+ million being spoken about.