Leave no dollars behind

I predict wild success for the Trump administration, at least in its ability to enrich itself. Throughout the campaign it was an open question how rich Trump was. He has, after all, used the bankruptcy rules to his advantage and has failed to pay workers amounts that seem like small change for so-called billionaires. But the question will be open no longer, if all goes as it has been going, Trump will share his new riches with members of his family and administration.

Just days before his inauguration, President-elect Trump announced that he planned to place his business holdings in a trust in order to allay fears that he might exploit the Oval Office for personal gain. The move was not required, as then President-elect Trump had told The New York Times, laws around conflicts of interest don’t apply to him, and he could simply keep running his businesses from the White House.

But what did the trust actually accomplish? Nothing. The trust is no blind trust. It is a revocable trust, of the sort generally used in estate planning and it exposes how closely tied Mr. Trump remains to his empire. While the president claims to be uninvolved in the quotidian operations of his business, his trustees are his eldest son, Donald Jr., and Allen H. Weisselberg, the Trump Organization’s CFO. Trump continues to receive reports on company profits and losses and he can revoke the trustees’ authority at any time.

It seems particularly troubling that The Pentagon is planning to rent space in the Trump Tower. Although it is customary for the military and the secret service to rent space near a president’s home, this is space owned (if indirectly) by the president. And the space is not cheap, running approximately $1.5 million a year. Why not rent next door? Will anyone review the lease for its adherence to fair market value? And who at a federal agency can challenge the president about the terms of the lease?

The list of conflicts of interest, where Trump holds an investment that will be clearly affected by government action, is apparently endless. The Atlantic has provided an excellent compilation of Trump’s most glaring conflicts, but perhaps to cut down on page length, the Atlantic does not include the conflicts of Trump’s appointees and extended family.

Trump’s ethical problems include his family and seem to grab his interest without regard to the size of the investment. He has involved himself in his daughter’s clothing line and not just so he could grab the women inside the garments. When Nordstrom decided to drop Ms. Trump’s clothing line due to poor sales, (sales may have fallen in part due to the web site grabyourwallet.org that lists companies to boycott that sell Trump products or that have supported Trump) Trump tweeted, “My daughter Ivanka has been treated so unfairly by @Nordstrom. She is a great person—always pushing me to do the right thing! Terrible!”

Soon Trump’s press secretary was commenting and then White House senior advisor Conway was advising Americans to buy Ivana’s stuff. This would be trivial if it were not indicative of so much more.

Ivana’s husband’s family stands to gain from the presidential seal as well. The Kushner family is apparently planning to purchase a baseball team. They have structured a deal to buy Marlins for a reported 1.6 billion in a deal that temporarily excludes Jared Kushner, Trump’s son in law and advisor, as well as Charles Kushner, the family patriarch whose past felonies and jail time might sour the deal. The deal requires the approval of the baseball commissioner, but is he supposed to rule against the Trump-in laws?

The conflicts extend to Trump’s so-called ‘billion dollar cabinet.’ Here are two of the worst.

Commerce nominee Wilbur Ross has said that he will sell dozens of holdings. The value of Mr. Ross’s investments could depend on policies set by the Commerce Department, which, among other things, oversees oil-spill regulations and trade negotiations. One of the holdings Mr. Ross intends to retain is the Diamond S shipping group, one of the world’s largest oil shippers. Diamond S is a private, off Shore Company, so its exact ownership is not public, but it is known to be co-owned by a state owned Chinese Investment Company that paid about a billion dollars. Will Ross’ holdings affect Trump’s often proclaimed threats to impose tariffs?

Further, the extent of Ross’ conflicts remains unknown. One of his assets, WLR Mezzanine Associates LLC, is described on Mr. Ross’s financial disclosure form as the general partner of “various underlying funds.” That seems to exclude nothing in particular.

Steven T. Mnuchin, the new Treasury secretary, failed to disclose nearly $100 million of his assets on Senate Finance Committee disclosure documents and forgot to mention his role as a director of an investment fund located in a tax haven.

Mr. Mnuchin, a former Goldman Sachs banker, led wealthy investors who bought the failed IndyMac Bank from the Federal Deposit Insurance Corporation during the U.S. financial crisis and transformed it into OneWest. He and the other investors, including George Soros, John Paulson and Michael Dell, more than doubled their investment by selling OneWest to CIT Group for $3.4 billion in 2015. It seems that Onewest made most of its money through rapid foreclosures subsidized by the FDIC. For details of the transaction, plus an amusing comparison of Trump and Mnuchin. [see]

Last year, Mnuchin showed his affinity for conflicts of interest. He resigned as co-chair of Relativity Media shortly before the Hollywood studio filed for bankruptcy. Creditors accused Mnuchin of having a conflict of interest because Relativity Media—which had received financing from OneWest Bank while he served as the bank’s chairman—repaid $50 million of those loans right before it went bankrupt.

Mnuchin has said that he plans to divest himself of his investments. Almost. He does plan to retain his “unpaid position” as president of Steven T. Mnuchin Inc., a company he uses to manage ‘some’ of his investments.

“And why shouldn’t Mnuchin be trusted? It’s not as if he’s already using his nomination to make bold declarations affecting companies in which he and a prominent fellow Trump backer have a major financial stake.

Mr. Paulson, Mr. Trump and Mr. Mnuchin have one investment interest in common: Fannie Mae and Freddie Mac, the two mortgage finance giants that were bailed out by the federal government during the financial crisis. Mr. Paulson, like some other hedge fund managers, has made a big bet that the federal government will eventually privatize Fannie and Freddie. The day after Mr. Mnuchin was nominated to be the next Treasury secretary, he declared on television that the government should get out of the business of running Fannie and Freddie. What seemed like an off-the-cuff comment sent the shares of the two companies surging.”

My friend, Gilad Atzmon often explains that much of the worst behavior occurs in the open. So far, Trump’s reign has proved his point. This tells us that we will have plenty to watch in the next few years.