Trump got a secret bailout from the US Treasury to ease his bankruptcy woes in 1991

All signs suggest Wall Street insider Donald Trump got a secret bailout from the US Treasury to ease his bankruptcy woes in 1991.

Deadbeat Debtor Trump Too Big to Fail in 1990? Did the Bush 41 Administration Order Special Treatment for Wall Street Insider Donald Trump When the US Treasury Had Taken Control of Citibank, His Financial Angel? Was He Saved from Personal Bankruptcy and Allowed to Retain Valuable Property by Treasury Secretary Nick Brady and Fed Chair Alan Greenspan?

Around Thanksgiving 1990, federal regulators from the U.S. Treasury and the Federal Reserve System seized control of Citibank, because it was insolvent and was threatening to trigger a nationwide and worldwide banking panic. Partly in order to avoid such a panic, the federal takeover of Citibank was done more or less in secret, with no public announcement of what was being done.

In the wake of the serious Wall Street stock market crash of October 1987, real estate values across much of the United States had begun to plummet. By January 1990, the Bank of New England was in serious trouble. During 1990, conditions continued to deteriorate, and by the end of November Citibank was silently put under de facto federal receivership.

The rapidly falling real estate prices which had triggered the banking crisis impacted almost all real estate speculators, and the Trump properties were of course no exceptions. Trump had stubbornly insisted on investing in the Taj Mahal casino operation in Atlantic City, New Jersey, just as real estate prices were declining.

Citibank was Trump’s best friend among all the Wall Street banking concerns. When Trump wanted to buy the former Eastern Airlines shuttle at LaGuardia Airport, he had convinced Citibank to lead the syndication that gave Trump the $365 million he needed for the transaction. Citibank then divided this debt burden among approximately 20 other banks. When, in January 1991, Trump’s business empire finally went bankrupt, control of the Trump Shuttle reverted to Citibank as the main lender.

It is certainly fair to say that the burden of Trump’s collapsing operations, starting in January 1991, but clearly foreshadowed several months earlier, in terms of stock prices and the like, contributed something important to the Citibank bankruptcy. As Trump biographer Michael D’Antonio writes:

“…in dollar terms, Donald Trump’s bonds represented a tiny fraction of the vast pool of junk-bond debt that frightened many investment experts, but he had made himself such a visible figure that reporters in variable through him into their stories about troubled companies…. Donald Trump saw a world inhabited by winners and losers, allies and enemies. When displeased, he would indulge in tirades spiced with expletives. Employees, rivals, critics, and Associates would become, in his words, “stupid,” “dumb,” “losers,” or “wimps.” (D’Antonio, Never Enough: Donald Trump and the Pursuit of Success [New York: Saint Martin’s Press, 2015], p. 197)


Many Wall Street investors first became aware of the serious systemic problems in the Trump business empire in early June, 1990. D’Antonio documents that:

On June 4, 1990, Neil Barsky of the Wall Street Journal published a stunning report on Trump’s debt problems, layoffs at the Taj Mahal and Trump shuttle, and his failed attempts to raise cash through the sale of properties or refinancing…. Barsky noted that much of the trouble stemmed from lenders’ having accepted Trump’s assertion that by adding his name to a casino, hotel, or airline he could raise its inherent value. This was not true for the shuttle, which had lost $85 million under the Trump name, and it wasn’t true of the Taj, which was also losing money.’ (D’Antonio, p. 198)

As Trump struggled to avoid bankruptcy, he also became the butt of ridicule and satire on the late evening shows: “Late Show host David Letterman made Trump the subject of his nightly, satirical Top 10 list, which was titled in “Top 10 Signs That Trump Is in Trouble.” (D’Antonio, p. 199) This was broadcast June 6, 1990:

Top 10 Signs that Trump Is in Trouble

10. Had the cable company disconnect Cinemax.
9. Trump Shuttle now used to haul lumber.
8. Attracting a lower class of bimbo.
7. Recently asked advisors how they thought a “Battling Billionaire” character would go over on the pro wrestling circuit.
6. Has been sucking up to [real estate rival] Merv [Griffin].
5. This morning, he had himself evicted.
4. Last week in 7-Eleven was heard saying, “I’m really thirsty” and yet suspiciously did not order a Big Gulp.
3. Now does tacky embarrassing things on a much smaller scale.
2. Just got a paper route.
1. He now takes my calls.

The most remarkable thing about Trump’s multifaceted bankruptcy was the very large amount of property which was somehow exempted from confiscation to satisfy the demands of the creditors. Trump was being given a sweetheart deal, which allowed him to retain a large number of his favorite playthings:

The Taj Mahal went bankrupt in January 1991. Under an agreement with creditors Trump gave up a substantial portion of the casinos ownership, but he would be allowed to net a bit more than $1 million per year in exchange for leaving his name on the building. Soon he would give up control of the Trump shuttle to his lender, Citibank.” (D’Antonio, p. 200)

Trump celebrated these proceedings as a kind of personal victory, since he had escaped personal bankruptcy and come away with a large haul of his ill-gotten gains and loot. Trump especially relished the outcome as a public-relations triumph:

Others had used the peculiar dynamics of bankruptcy to similar effect, preserving substantial fortunes while escaping the stigma of personal bankruptcy, but few considered it a great accomplishment. Ever the showman, and an optimist, Trump saw in this outcome, a public-relations advantage. ‘If I had filed a personal bankruptcy, I don’t feel that my comeback story would have been nearly as good a story,” Trump said. It would have been always a tarnished story.” Spinning the tail like a gifted advertising man, Trump said that bankers “love me because I’m good and I’m honest….” (D’Antonio, p. 201)

D’Antonio is right in concluding that Trump was almost two decades ahead of his time, and had been a pioneer of the financial brinksmanship available only to wealthy insiders:

In time, the phenomenon that spared Trump would be understood by the general public as ‘too big to fail.” However, many ordinary Americans would forever be puzzled when lenders gave troubled borrowers more money.” (D’Antonio, pp. 201-202)

But if Trump was given a sweetheart, insider bankruptcy for a too big to fail plutocrat, these decisions were unquestionably big enough and important enough to require approval from the US Treasury and the Fed. As Webster Tarpley wrote back in 1999:

The regulators cleared every major decision he [Citibank boss John Reed] made – which implicates them in the firings, in Citibank’s derivatives exposure, which was built up in those years, and in Citibank’s private banking and money laundering services that assisted the graft and embezzlement carried out by the family of then-Mexican President Carlos Salinas de Gortari.

Most important for the business at hand, “the regulators” were implicated in every decision regarding the bankruptcy of businesses belonging to one Donald J. Trump. And these regulators were none other than Federal Reserve Chair Alan Greenspan and US Secretary of the Treasury Nicholas Brady.


Honored Social Butterfly

Trump got a secret bailout from the US Treasury to ease his bankruptcy woes in 1991


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