For all the stunning revelations we’ve seen about Donald Trump and his global business interests since the election, the larger and more troubling issue is what we don’t know. A magisterial six-byline New York Times investigation found 20 countries around the world where Trump does business, and both the US and foreign governments are already talking about the intermingling of public and private interests.
But the most important line in the piece by far is an observation that’s not directly tied to any of that excellent reporting from around the world: “The true extent of Mr. Trump’s global financial entanglements is unclear, since he has refused to release his tax returns and has not made public a list of his lenders.”
To put it even more plainly: We have absolutely no idea what Trump owns, who his business partners are, who is paying him, or whom he owes money to. Trump’s main line of business in recent years has been licensing the Trump name to various developments, so there is a certain obvious connection between the various buildings in various cities named Trump Tower and the Trump Organization. In general, Trump likes to name things after himself, so as a rule, “if Trump is involved, the thing will be named Trump” has been a pretty good guideline. But obviously Trump is not actually legally required to name everything he’s involved with after himself.
And thanks to his failure to do any kind of meaningful financial transparency, the basic reality is we’re not really sure what he owns and we won’t be sure how his family’s investment portfolio shifts over the years. The truly scary thing, in other words, isn’t the conflicts of interest we can see. It’s all the conflicts — and, conceivably, bribes, insider trading, and other illicit activity — that we can’t see.
Trump’s financial disclosures tell us very little
The president and vice president are required to annually submit financial disclosure forms telling the public what assets they own. Presidential candidates file similar documents.
President Obama’s version of this form paints a reasonably informative picture of his investment situation, showing a man whose bond holdings are probably more risk-averse than makes sense for a guy with a pension but whose approach to the stock market sensibly takes the form of a low-fee index fund:
This is clearly the kind of thing that the authors of the relevant statute were thinking they would see. By looking at the president’s stock portfolio, we can verify that he wasn’t trading on the basis of his administration’s policies. He didn’t short for-profit college stocks before regulating their industry, or buy up shares in solar companies before propagating his Clean Power Plan.
Trump’s financial disclosures, by contrast, are mostly just a long list of the names of various LLCs (limited liability corporations) and LPs (limited partnerships) that he either wholly or partially owns:
Trump has, traditionally, chosen to name these companies in a way that seems to clearly suggest what they are and what they do. Mar-a-Lago Club LLC owns the Mar-a-Lago Club, while Seven Springs LLC owns Trump’s mansion in Mount Kisco, New York.
But there is no legal requirement for LLC names to have anything to do with their underlying assets. Trump could create a company named Donald Trump Loves Creating Jobs for White Working-Class People Living in the Rural Midwest LLC and it could own quinoa farms or Estonian government bonds or shares of Time Warner stock or a network of dry cleaning shops. All Trump has to do on the form is write down the name of the company and offer an estimated range of its value and a vague description of what kind of assets it owns.
The upshot is that while Trump’s disclosure forms give us a decent — albeit fuzzy — snapshot of what he owned before he became president, they offer no real barrier to him obfuscating what’s going on once he’s in office.
The possibilities for corruption are essentially limitless
Shares of stock in for-profit colleges have risen sharply since Trump’s election because investors anticipate that a Trump administration will roll back Obama’s crackdown on shady for-profit universities. Since Trump has already paid out more than $20 million in compensation to students he allegedly defrauded at his eponymous fake university, that suspicion seems reasonable enough.
However, he has not yet formally articulated a new regulatory agenda.
And the for-profit universities that’ve suffered from Obama’s regulations are real accredited universities — what he’s done is reduce the flow of federally subsidized student loans to for-profit universities that produce miserable outcomes for students. Trump University was an entirely different beast as far as regulations are concerned, a non-accredited scam that was never eligible for federal money and just called itself a university even though it wasn’t one.
The point is there’s some real uncertainty about what Trump will do — roll back Obama’s rules or not. And while he’s talking that decision over with his close adviser Jared Kushner, Kushner’s wife, Ivanka Trump, will be managing her dad’s business affairs on his behalf. Trump-controlled companies could invest in for-profit schools in advance of the decision, and due to the opacity of the Trump Organization we’d never know that a conflict of interest exists.
If Cuba is unwilling to make a better deal for the Cuban people, the Cuban/American people and the U.S. as a whole, I will terminate deal.— Donald J. Trump (@realDonaldTrump) November 28, 2016
Which is just to say that as long as we know the Trump Organization is both vast and opaque, conflicts of interest aren’t just present in the 20 countries where we have clear evidence of Trump business investments. They are ubiquitous. When Trump suggests revising the diplomatic “deal” with Cuba, there is no way for us to tell whether the new deal involves financial arrangements between companies controlled by the Cuban government and companies controlled by Trump.
Conflicts of interest entirely permeate Trump as a regulator
Jesse Eisinger of ProPublica notes that Trump’s new adviser on financial regulation, Paul Atkins, will face an immediate conflict-of-interest problem regarding Trump’s creditors:
Under a court order last month, Atkins and his firm are now monitoring Deutsche Bank’s agreement with the Commodities Futures Trading Commission to properly oversee and disclose its derivatives trading. Separately, Deutsche Bank is negotiating with the Department of Justice over the size of its fine to settle mortgage related misdeeds. Donald Trump has outstanding loans from Deutsche Bank. These inter-connections raise a host of conflict of interest issues. Will Patomak monitor Deutsche Bank vigilantly? Will financial regulators, perhaps appointed by Trump on Atkins’ recommendation, be inclined to soften their regulatory stance on Deutsche Bank in exchange for business favors to the Trump empire?
But again, the Deutsche conflict is merely the conflict we know about. After Trump’s multiple bankruptcies, the main Wall Street banks all decided to stop lending Trump money, which is what led to his dependence on the notoriously mismanaged Deutsche Bank. But what major lender wouldn’t be eager to reassess its evaluation of Trump’s creditworthiness in light of his recent ascension to power? Trump would obviously not need to do anything as gauche as actually ask to receive preferential terms for his deals.
Banks will just know that when Trump’s kids come calling looking for real estate loans, the prudent thing to do is offer them a generous interest rate. Ability to secure access to financing on favorable terms is often the difference between profit and loss in the real estate industry, so the Trump Organization’s financial fortunes will hinge on the organization receiving favors from banks. That means every decision Trump’s administration makes with regard to financial regulation is essentially a conflict of interest.
The cure is simple: Trump must sell
There is no really good way out of this mess. The fact of the matter is that a man with a multimillion-dollar fortune that’s tied up in opaque real estate and brand licensing deals shouldn’t have received a major party’s nomination for president. One of the major roles political parties play in maintaining and sustaining democratic institutions is that they are supposed to provide the voters with broadly suitable candidates for office, who can then stand as representatives for various social and ideological groups.
Since the Republican Party failed in that mission, people and interests that see the GOP as their preferred representational vehicle had no choice but to vote for a candidate whose financial situation made him clearly unsuitable for the presidency. Then the quirks of the Electoral College made him president-elect even though his opponent got many more votes.
With all that water under the bridge, the only viable solution is for Trump to sell his companies and then put the financial proceeds into either a real blind trust or diversified index funds. Since Trump’s businesses are so bound up with the Trump name, it might be difficult for Trump to secure full value for his companies on the open market. Then again, the Trump brand’s value may have been enhanced by his electoral victory in ways that are separable from his possible corruption. Regardless, Trump has the good fortune to enjoy the political support of a posse of billionaires who could surely help him out with this.
It’s obviously very unlikely that Trump actually will do any of this. But Senate Republicans could almost certainly make him if they wanted to safeguard the long-term future of the country and their party. It makes no sense to confirm Trump’s appointees to agencies that are bound up with potential conflicts of interest until the Senate is given a clear vision from Trump of how he intends to clear up those conflicts — and the only way to the clear that I can see is full divestment. But until that happens, conflicts of interest don’t just exist in various visible Trump real estate projects — they exist everywhere, all around the world, in essentially all policy decisions, whether foreign or domestic.