Donald Trump ran for president promising to “drain the swamp” of corruption and self-dealing that he argued had taken root in Washington, DC. But not only has he immediately moved to pack his transition team with lobbyists and millionaires, his personal financial situation also poses a series of massive conflicts of interest and lays the groundwork for financial self-dealing on an essentially unprecedented level.
What’s more, Trump’s past behavior gives us a clue as to how he might take advantage of this opportunity. Federal Election Commission disclosures reveal that Trump’s campaign spent enormous quantities of its donors’ money on his businesses. Trump’s charitable foundation appears to have routinely spent money for Trump’s personal benefit in violation of the rules.
But once installed in the White House, Trump won’t need to break the rules to use the powers of his office to enrich himself. The president of the United States is exempt from the rules of conflict of interest in investment that govern other executive branch officials on the grounds that the president’s activities necessarily impact essentially all areas of the economy. And there is no rule whatsoever mandating that the president structure his personal finances to mitigate conflicts of interest. There is a longstanding norm that they do so, but Trump — to his credit — was quite open during the campaign that he had no intention of following this norm. Nor did he follow the norm governing disclosure of his tax returns.
Republican Party elected officials did not voice much discomfort with any of this. But with Democrats entirely locked out of power in Washington, they are now the only ones who can stop him.
How normal presidents handle conflicts of interest
An elaborate set of conflict of interest rules exist to try to prevent executive branch officials from engaging in the perception or reality of personally profiting from their government responsibilities. You are not allowed, for example, to invest in telecommunications stocks while also regulating telecommunications companies. The precise details are complicated, and there are special processes through which waivers can be granted in certain situations, but the basic idea is pretty clear — you need to keep your personal finances separate from your work.
The president is exempt from this rule because his work touches everything.
Previous wealthy presidents have, however, taken it upon themselves to reassure the public that they are not self-dealing by placing their assets in a blind trust. That means they have an investment portfolio — stocks and bonds and such — that is placed under professional management with special terms. The manager is under a fiduciary responsibility to manage investments in the president’s best interests, but the president is not allowed to see what the trustees are investing in.
An alternate approach, well-suited to a president of more modest means like Barack Obama, is to simply hold very banal diversified investments. Obama’s 2015 financial disclosure form, for example, reveals basic bank accounts plus a Vanguard index fund and some US Treasury bonds. This means that Obama benefits when the US stock market goes up in value and when the global investment community is confident in the creditworthiness of the American government.
How Donald Trump plans to not handle conflicts of interest
Trump’s plan, by contrast, is simply to hand over management of the Trump Organization network of businesses to a council composed of his children and some other executives. He has chosen to call this council a “blind trust,” and some media outlets have unaccountably agreed to go along with it. But even in the age of Trump, words have meaning, and asking your kids to manage your affairs for you is not what a blind trust is.
But beyond that, a blind trust arrangement is fundamentally inappropriate for the nature of Trump’s assets. Recent wealthy presidents — the Bushes, John Kennedy, Franklin Roosevelt — have been essentially rich kids who inherited dynastic fortunes that they invested passively. Trump is also a rich kid who inherited a dynastic fortune. And had he invested it passively, he would be even richer today than he is now. But he chose instead to take his money and build a series of companies — mostly companies bearing his name — with it.
The way to deconflict this would be to set up a mechanism to sell the Trump Organization (perhaps to a wealthy Trump supporter to whom the president-elect is already indebted, like Peter Thiel) and then plow the cash proceeds into a new blind trust.
As long as the company is intact and under the control of Trump’s children and direct heirs, the conflict of interest has not been even slightly mitigated. Further exacerbating the problem is the well-known fact that Trump’s three oldest children — and Ivanka’s husband, Jared Kushner — are some of his closest political advisers. The council of kids running the Trump Organization, for example, have also been appointed to the council running the Trump transition project. There will be perfect and intimate coordination between Trump’s policymaking and Trump’s business life.
Trump’s financial disclosures won’t reveal anything
The one thing Trump, like his predecessors in the White House, is required by law to do is disclose his assets on an annual basis. The idea here is that if Obama were to buy a bunch of Google stock and then make a bunch of regulatory decisions that favor Google, the public would at least know about it. Sunshine, many people feel, is the best disinfectant.
This does not at all work in Trump’s case, as you will swiftly see if you read the financial disclosure forms he filed during the campaign.
A huge share of it simply consists of listing the names of LLCs and other partnerships that Trump wholly or partially owns, paired with an addendum clarifying what share of the LLC is Trump’s and estimating its value. Now, presumably DT Dubai II Golf Manager LLC is the name of an entity that owns the Trump-branded golf course in Dubai, while DT Marks Qatar LLC is an ownership vehicle for some kind of name-licensing deal in Qatar.
But names are just names. If Trump wants to establish a holding company that buys construction companies that are about to get infrastructure contracts from the American government, he can call it whatever he wants. Ivanka and Eric can have DT Marks Qatar LLC buy or sell stock in whatever companies they like, tell Dad about it, and have him make policy accordingly, and all Trump’s financial disclosure forms will ever report is that he owns a company called DT Marks Qatar LLC. Any way you look at it, the Trump Organization will be fully informed of the business ramifications of public policy and the Trump White House fully informed of the state of the Trump organization’s business holdings.
The public will be left entirely in the dark. So every policy move Trump makes can be used to enrich himself and his family personally with no legal obligation for anyone outside the family to know about it.
Only congressional Republicans can stop this
The current setup in which Trump owns a series of opaque holding companies operationally controlled by heirs who are also close political advisers is a looming corruption disaster. It allows Trump and his family to use their influence over the policy process to enrich themselves to an essentially unlimited degree with no public disclosure whatsoever.
Republican Party elected officials did not indicate much discomfort over this situation during the 2016 campaign, even while at times expressing varying levels of concern about Trump’s racist remarks and boasts about sexual assault.
But ultimately in America’s system of checks and balances, the responsibility for preventing the fleecing of America lies with Congress. And while the GOP is set to hold a 52-48 majority in the Senate come January, that doesn’t have to be construed as a personal mandate for Trump to fleece the country. Susan Collins, John McCain, Lindsay Graham, Ben Sasse, Rob Portman, Jeff Flake, Lisa Murkowski, Cory Gardner, and Dan Sullivan all ended the campaign saying that one or another of Trump’s indiscretions made them unable to vote for him. Pat Toomey, Mike Lee, and Dean Heller were profoundly ambiguous down to the end.
Marco Rubio, who did vote for Trump, also warned at one point that he is a “con artist” and declined to withdraw the accusation even while endorsing the GOP nominee. Ted Cruz, who also came around to voting for Trump, called him both “utterly amoral” and a “pathological liar.”
However these various senators ended up coming down on the 2016 election, the point is that they all expressed considerable doubts about the idea that Trump should simply be allowed to wield unchecked power. And indeed, whatever it is that Trump’s own core supporters are hoping will happen during his presidency, Trump wielding power so as to personally enrich himself probably isn’t high on the list.
The solution to the problem is both unlikely and simple. A critical margin of the Republican senators who expressed grave doubts about Trump need to stand up for those doubts and insist that he deconflict himself in a serious way. If he refuses to do so, they must refuse to confirm his appointees to key agencies that pose conflicts of interest. Waiting until after he puts a team in place, hoping for the best, and then professing shock and outrage as leaks and investigative journalism begin to unravel massive scandals is bad for the country.
Trump has humbled and humiliated rival GOP leaders many times over the past 18 months. But the fact is that senators have independent electoral mandates, independent political authority, and considerable practical leverage at the start of a new administration. They need to use it.
