The Wall Street Journal has just run a lengthy, front-page article entitled “Trump and His Debts: A Narrow Escape.” The article makes clear that Trump is a crony capitalist par excellence.
It’s a well-known fact that Trump was in deep financial troubles in the 1990s, including with $830 million of debt that violated the First Law of Borrowing: never give personal guarantees! The article makes clear that, when the going gets tough, Trump’s first instinct has always been to turn to the government.
In a dispute with the wealthy Pritzker family over their joint ownership of the Grand Hyatt Hotel in New York City, Trump filed a civil racketeering suit against his partners, somehow mistaking the Chicago-based Pritzkers for that former resident of the Windy City, Al Capone. The case was dismissed.
In the sequential bankruptcies of his casinos in Atlantic City, he used the leverage arising from his state-granted casino licenses to wheedle payments out of the bankrupt companies – totalling $160 million between 1990 and 1996 – and retain partial ownership after they had been taken over by lenders. Meanwhile, the contractors and other creditors had to take a haircut on the amounts owed them.
In a dispute with Citibank over the Plaza Hotel in New York City, where he defaulted on a loan, Trump objected to a sale of the property to foreign investors that would have left him with no management or other role in the hotel. When Citi kept pursuing the sale in order to minimize the loss on its loan, Trump pushed a labor union to oppose the foreign investors and raised concerns about the hotel’s structure with the city’s buildings department.
“I drove [Citibank] nuts. I did a number on them that you wouldn’t believe,” said Trump about his efforts to scuttle the sale by invoking government help.
Trump has spent his entire professional career in real estate development and casino operations. There are no two fields of business more infused with crony capitalism than these two. And Trump makes no bones about it. In fact, as he has sometimes remarked in the Republican debates, he is proud of his ability to do political deals. And his history of promiscuous political donations attests to his willingness to pay for them when necessary.
Real estate development requires government permission at virtually every step. This makes it very difficult to be successful without being an accomplished crony capitalist, particularly in large cities like New York. But Trump has taken his willingness to use the government for his private benefit a step further.
In 1994, Trump entered into an agreement with the city of Bridgeport, Connecticut, to build a $350 “national tourist destination.” The inconvenient fact that he intended to build on occupied land would be overcome through the city’s power to condemn the businesses of the existing occupants. The plan fizzled.
In the mid-1990s, Trump famously tried to use Atlantic City’s power of eminent domain to take the property of an elderly widow who lived near his casino. Trump wanted the land as a parking lot and a waiting area for limousines. When the occupant, who had lived there for over 30 years, refused to sell, Trump turned to the city. He argued, as crony capitalists always do, that her obstinacy prevented him from expanding his business and paying more tax. The attempt was thrown out by the courts.
In fact, Trump is so fond of the power of eminent domain that he is a big fan – “I happen to agree with it 100 percent” – of the Kelo v. City of New London decision of the Supreme Court in 2005. This decision greatly expanded the power of eminent domain, constitutionally granted only for the taking of land for public purposes, to include private purposes so long as the end result is greater tax revenue. The developer gets more land. The government gets more tax. The property rights of the original owner are trampled.
More recently, Trump has sued in Scotland to block a windfarm located 2 miles from the Turnberry golf course he has bought. Trump claimed that the windfarm was an “eyesore,” a term that could be applied to almost anything Trump has built, and he attempted to have it blocked by invoking, among other things, the European Convention on Human Rights. The Convention is a notorious cover for creeping government intervention and is one of the reasons the UK wants to distance itself from the EU. Trump’s legal challenge was thrown out by the courts.
As bad as general real estate development is, casinos are a step worse. All the usual favors have to be called in for the development of the property, but you also need a license to operate the casino. And this is adds another layer of cronyism to an already deeply compromised business.
Trump supporters often cite his wealth and his self-funded campaign as proof of his independence. His supporters rightfully decry the cosy relationship between big government and big business, a crony capitalism that is often detrimental to the rest of the country. Amazingly, they fail to see that Trump, their champion, has been one of the leading practitioners of this dark art. If they think that, once ensconced in the White House, Trump is going to turn against the habits of a lifetime, they are deluding themselves. Trump doesn’t strike me as the kind of humble, introspective guy who would start to question late in his life the rules that helped him climb to the top of a dung heap.
You Heard it Here First
The day after publishing “Land Use and Misuse: Crony Capitalism Goes Local,” BloombergView has come out with a piece by Paula Dwyer entitled “Voters, Your Rent Is Too Darn High.” The gist of the piece is the opportunity that housing policy presents to Republican candidates to appeal to young voters. Sound familiar? Here is one quote:
If Republican candidates want to address the problems of inequality and social mobility, as some claim they do, a housing policy that addresses the affordability problem would seem to open up a wealth of new opportunities to do so.
Although not as steadfastly supply-side as my piece, as we would expect from the author of the appalling “Everything In This Column Is Free Stuff” (which I eviscerated here), even Dwyer mentions that “[c]andidates could discuss impediments like exclusionary zoning, crazy-quilt permitting fees and regulations, and even union demands that drive up construction costs.”
Then there was a recent column by Daniel Henninger in the Wall Street Journal entitled “Revolt of the Politically Incorrect, ” published almost exactly a month after “More On Trump.” Following my observation that the “PC crowd has so stifled discussion that Trump’s willingness to talk trash is seen as a refreshing outbreak of honesty,” Henninger writes:
When Donald Trump’s mostly working-class voters said that “he tells the truth,” this is what they were talking about – not any particular Trump outrage but the years of political correctness they felt they’ve been forced to choke down.
And then, right on cue after my warning that “North Korea has gone suspiciously quiet, which has usually presaged a spectacular act of attention seeking and attempted blackmail,” we had photos of Kim Jong Un signing the order for the latest test explosion of a nuclear weapon. Although claimed to be a thermonuclear blast, it was likely merely another fission or a “boosted-fission” one.[1] In any event, these developments along with NK’s efforts in intercontinental and submarine-launched ballistic missiles, deserve a lot more attention than they are getting.
The PC Revolution Starts to Eat Its Own Children
Bloomberg reports that a shareholder in Apple has proposed a proxy vote for an “accelerated recruitment policy” to increase the racial diversity in the senior ranks and boardroom of the company.
Apple’s board is “a little too vanilla” according to Antonio Maldonado, who submitted the proxy request.
Apple has initially denied the request, claiming it represents “micromanagement” and pointing out that “the company has no power to ensure that its recruits will accept offers.” The SEC has stepped in to disagree with the company, because the agency apparently has nothing better to do, like stopping the next Bernie Madoff. If Apple continues to resist the proxy, then your taxpayer dollars might be put to work on an SEC enforcement action against the company.
Six out of eight Apple board members are white. Apparently, Apple gets no credit for the fact that its CEO Tim Cook, although white, is openly gay. It is sometimes hard to understand the scoring system the PC crowd applies. Perhaps they should publish an equivalency table?
The article points out that Apple has recently lost its global head of diversity to Twitter. I am pleased to see that Twitter, a company that has cumulatively lost over $1.5 billion in the two years it has been publicly quoted, can still afford to poach away senior personnel from the company with the highest market capitalization in the world. At least they are focussed on the right stuff.
The Pill Without A Prescription
Bloomberg reports Oregon has recently passed a law allowing women to get birth control pills directly from a pharmacist without a doctor’s prescription. California is about to follow suit.
It takes a minimum of six years of higher education to become a pharmacist. I am pleased to see that America is finally recognizing that, after all this training, they can do more than read doctors’ deplorable handwriting, count out pills and type up prescription labels. In Europe, pharmacists are actually the first port of call for minor ailments and, not surprisingly, this actually works. But then the doctors in America have always been much more effective at policing union rules than they have been in Europe.
“We Came, We Saw, He Died”
Hillary deserves to be pilloried more on Libya. I have written before about the enormous disaster that she, Samantha Power and President Obama unleased on this country and, incidentally, America’s interests. And here is a video of Clinton when she heard the news about the death of Qaddafi. Is this the reaction of the person that you would like to be our next president?
Roger Barris
Weybridge, United Kingdom
I Wish That I Had Said That…
“Everyone has a plan until they get punched in the mouth,” by Mike Tyson
“Every normal man must be tempted, at times, to spit upon his hands, hoist the black flag, and begin slitting throats,” by H.L. Mencken
“Charlie’s nostrils are so snotty and full of coke that he has started to call them the Hilton sisters,” one of the roasters in the Charlie Sheen roast on Comedy Central
[1] If you are interested in the differences between “fission” (or atomic), “boosted-fission” and “thermonuclear” (or hydrogen) bombs, along with a lot of additional fascinating science, technology, economics, history and politics surrounding nuclear weaponry, then The Making of the Atomic Bomb by Richard Rhodes is a must read. The book very justly won a Pulitzer Prize. It’s twin book, Dark Sun, about Russia’s nuclear program and the American hydrogen bomb is not nearly as good, but still interesting.
I have a completely different interpretation of that Trump story, which is that he’s a very determined guy who pushes on every possible negotiating “pressure point” to accomplish what he’s trying to get done. If you’re going to condemn a real estate developer for having utilized government cooperation to build large projects then you’re basically saying that no real estate developer should ever be allowed to serve as President, because they ALL take advantage of it to one degree or another. (As an aside, Joe Kennedy did a pretty good job of cleaning up Wall Street.) Yesterday I saw a… Read more »
Hi Mark: Great comments. Thanks. I agree that any developer would fail that test. But I think that I was commenting on something slightly different, which is the expectations of Trump’s supporters. One of his strongest appeals is that he is viewed as independent and not subject to the money politics and crony capitalism of Washington. My point is that he has been deeply immersed in this world his entire life and, in fact, thinks of it as a normal part of business. So, regardless of whether he is self-funding his campaign or not, if the expectation of his supporters… Read more »
“One of his strongest appeals is that he is viewed as independent and not subject to the money politics and crony capitalism of Washington…” But this is actually TRUE. Remember, when he was getting his projects done he was PAYING the money, not taking it. He has said several times that he was SHOCKED (or words to that effect) how much influence he was able to buy for a $5000 donation to a Congressional campaign, and if this guy gets to Washington he is NOT going to (need to) be on the receiving end of those $5000 donations! (This is… Read more »
Trump is all of those things you describe and more, but wouldn’t it be great to have someone who has our nation’s interests as the #1 priority and cares about winning on our side for a change? Global politics IS a dirty business with conniving countries and people trying to bring the USA down a few notches, or worse, trying to kill us so why not have someone a little meaner and craftier in our corner to punch them in the nose? It’s not like the last few guys sitting in the Oval Office were paragons of virtue or success.… Read more »
Thanks. All words of encouragement are warmly welcomed.
Roger