As is now known, former President Trump is currently on trial in New York. The charges are that he fraudulently inflated the value of his assets to secure better lending terms from banks and insurance companies.
What a laugh. And the last one is not a partisan remark. If readers are in doubt, feel free to Google
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Back to the lawsuit against Trump, it’s funny on the face of it simply because Trump’s assets are never obscure. Think about it. He built a global brand called “Trump” by placing all things Trump in his various buildings, goods, services, etc. As for the buildings with his name on them, he didn’t buy and/or build in Peoria or Pine Bluff, rather Trump bought and built in the bigger cities. Which means that wherever he had and has assets there is massive information and “adjustments” galore to check his internal valuations against actual market realities.
Also consider that because it’s Trump, everyone has a say in what they own. In that case, any bank making loans to Trump could get all kinds of rich and very reputable names in real estate on the phone to check Trump’s valuations. Not only do people in his field want to talk about Trump, but those capable of analyzing his valuations are always looking for funding for their own projects. To say that they would provide reasonable rebuttals to Trump’s claims to help the banks they are also courting is a statement of the obvious.
As for Trump’s valuations, that he can value them more than his contemporaries or the banks is another statement of the obvious. Consider that buyers of most anything are buyers because they see potential where others might not. This difference in perception is what makes shopping real markets. If there was unanimity on valuations, then logically there would be no markets. Trump is Trump precisely because he sees (or thinks he sees) what others do not. Will there be mistakes along the way? Yes, by default. It brings to mind the great Howard Marks’ line about the intense anxiety that precedes all great investments, but realistically many bad ones too. Translation, there is a big difference between buying an index fund versus buying a property, a sick company, an out-of-favor stock, or a bullish stock.
Importantly, the fraud allegations against Trump suggest a lack of agency on the part of the banks. This is incorrect. For evidence, readers would be wise to pick up a copy of Robert Smith Dead Bank Walking. Smith was CEO of Security Pacific Bank (in the 1990s the Los Angeles-based financial institution was one of the largest banks in the United States), only for Trump himself to come calling. Trump wanted to secure a loan to revive the old Ambassador Hotel (think Robert Kennedy) and walked into Smith’s office full of bluster, and what Smith described as the kind of charisma associated with former President Clinton. Trump went on to talk about the sheer quality of his assets before asking for a $50 million loan. Security Pacific’s house cap was $10 million, but the most important truth was that Smith wasn’t fooled. Fascinated as he was by Trump, he made it clear to his associates that no loan would be given.
Trump was later given a loan and Security Pacific completed his enrollment. However, and regardless of the good or bad nature of the loan given to Trump, the simple truth is that banks are in business not to lose money. In other words, they generally lend to those who do not need the money. Take it?
As far as Trump is concerned, it really doesn’t matter what he told the bankers about the value of his assets. Banks are banks not because they accept what prospective borrowers tell them, but precisely because they don’t. New York Attorney General Letitia James doesn’t seem to know this, but that’s why she’s Attorney General instead of working in the real world.
Which tells us something. James doesn’t have a chance, but she has a lot of ambition. “Getting” Trump would make her career. The problem is that the basis of her case is laughable.
