Going bankrupt once is unfortunate. Going bankrupt twice looks like carelessness. Driving your companies into bankruptcy six times, however, as Donald Trump has done, makes you a brilliant businessman.
That is according to the US president, anyway. Trump, a self-described “king of debt”, is proud of his multiple business bankruptcies, boasting frequently about how he has “brilliantly” exploited corporate bankruptcy laws in order to wriggle out of his companies’ financial obligations. Time and time again, Trump has managed to make others – employees, investors and banks – pay for his failures. Trump, who has never declared personal bankruptcy, has been able to protect his own assets and move on to the next fiasco.
But is Teflon Don’s luck finally running out? With just days to go until the US election, Trump is facing a potentially crippling combination of financial stressors. His business empire has been hit hard by the pandemic; according to a recent report by the Washington Post, Trump’s golf clubs and hotels are practically empty. They were not doing that well before the pandemic: the New York Times’ investigation into Trump’s taxes last month found his businesses were losing money at a staggering rate. (Seriously, what kind of genius invests heavily in a dying sport such as golf?)
Then there is the fact that Trump is in the middle of a dispute with the Internal Revenue Service (IRS) over a $72.9m tax refund he claimed in 2010; if the IRS rules against him, he may owe more than $100m. On top of all that, Trump has at least $400m in loans with repayments due in the next four years. In fact, that number may be optimistic: Forbes reckons he owes more than $1bn.
Can Trump afford to pay all his loans? Absolutely, he says. In a “town hall” meeting earlier this month, Trump claimed his business loans constitute a “tiny percentage” of his net worth. Of course, anything that comes out of that man’s mouth needs to be taken with several heaps of salt. The fact is, Trump’s finances are a riddle wrapped in a mystery hidden inside an enormous number of enigmatic shell companies and offshore bank accounts. Nobody knows exactly how much money the president has. While we know that he owes significant amounts to Deutsche Bank (at least $320m) and a real estate investment trust called Ladder Capital (at least $113m), it is not clear to whom else he owes money.
Much has been said about how, if Trump wins a second term, his debts represent a huge conflict of interest. However, we all know that Trump is not bothered by ethics. If he gets another four years, one imagines he will find it easy to pay off his loans. But what if he loses? Will banks be so eager to renegotiate the terms of their agreements with him? One reason Trump has been able to fail upwards is the value of his brand. Buildings with his name on them used to sell at a premium; a financial summary Trump issued in 2015 valued his “real estate licensing deal, brand and branded developments” at $3.3bn. In the past few years, however, Trump’s brand has taken a kicking. Indeed, his name has been stripped from a number of buildings because it has become a liability rather than an asset.
If Trump loses the election, there is a possibility he will lose everything. He could face numerous legal problems. There is a not-insignificant chance he may end up in jail. (Joe Biden has promised that, if he becomes president, he will not pardon Trump if he is convicted of any crimes.) If Trump does manage to avoid jail, he might not be able to escape his debts. The jig might finally be up. Sure, no one knows how much money Trump has, but it is clear that this is an election he can’t afford to lose.