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Follow The (Bank’s) Money?


I have no facts to back up any of what follows, but I don’t think this is fake news because I am presenting a possible scenario, hoping that someone younger than me, and with more energy, will pick up the thread, as I believe following the money in this case would be fairly direct.

Here is my prediction. (Based upon litigating Commercial Dispute and Bankruptcy cases, as the result of which I became familiar with the modus operandi of developers.)

Developers are always beholden to one or more lenders, with the promise, to themselves and to the lenders, of payment resulting from the completion of the project and the generation of revenue therefrom. Guess what, not every project delivers. The banks know this, as they have been in the business for centuries, at least the big ones have. There are a lot of newer banks springing up to get in this business, but do you ever see any news on the number of start up banks? Why banks? Well, there are very specific laws that govern banks. These laws protect the banks, and Dodd Frank sought to limit some of the assumption of risks by the banks that was a loop hole in the laws that protect the banks. In other words, if you are going to be protected by laws, then you need to not stretch the rules that limit the risk you are allowed to take in support of the protections provided.

Anyway, the banks know that a certain percentage of projects fail, and that is part of their calculation. They also know that by being the lender they have a favorable place in the creditor line when things go wrong. I had to learn, with my client, the contractor, that when things fell apart, the bank would have first grab at any money not yet spent, and they could take it and leave with it. The contractor, and others, might well have a lien against any real property upon which they placed their work, but that value is not the same as revenue from a completed project. What happens then is that a new developer, with new lenders, comes in and pays off the creditors at a much lower amount than earned by them, but they get loose of the vice they are in. In fact, some are paid to finish and if they have been down this path before such that they learned the leverage lesson, they assure that they stand in front of the line for payment out of the “new” funds. Shaping the loan as a construction loan by which the contractors have direct periodic payment rights can serve their purpose. Most have to pay tuition for this lesson by being stung at least once.

I gave you all of that so you can see the path upon which the Trump Card has trod for his career.

He acknowledges that he is a developer. As such, those in the business know that he is always chasing the next revenue in order to cover the debt that is constantly in his portfolio. Here’s the thing, as he walks the path, he goes through lenders who learn about his ability to deliver the promised revenue such that the revenue will profit them. At worst, they have to be sure that even if there is not profit, there is at least break even from the level of security they hold on the property in question.

The Card made his first imprint in NY. It is LIKELY that he borrowed from banks with headquarters in NY, since it is one of the top three bank cities in the world. (I am postulating that NY, London and Shanghai are the top three bank towns, maybe someone who knows could correct any error in such postulation.) As outlined above, the banks would insist upon security of the first in line in exchange for the loans to enable the project. The Card would accept as he is sure that he will do the project, and off they go. Set aside for now the Card’s behavior with his contractors, as that is just a consequence of the development. There is a good record of the failures of Card projects, from litigation. The lending NY banks would eventually get their security, at a cost of time and lawyers, and they may end up having some negative impact. As such, they would establish higher criteria for any future loaning to the Card, if they would do it at all. In general, any bank would likely stop after a 2nd or 3rd failure, unless they just kept raising the rate and accepted the cost. One way or the other, they would work the numbers up to either assure no loss in the worst case, or they would allow for the “loss” at the recognition of a higher interest that would ameliorate the net impact.

The Card, though, even if he could pay a bigger rate for a NY bank, would naturally move to other banks. Perhaps, banks that had not yet experienced a project with the Card and therefor about to pay their own tuition for the lessons he teaches. By the way, he teaches that lesson up and down the chain of privity.

That is why the Card had such an adverse reaction to the false claim that Mueller was looking into the Card’s financial profile vis a vis Deutsche Bank. Here is the path that jumps out to me, for consideration of those who may be interested.

The Card gradually moved from the NY banks, because they were tired of the dance he did with them. He moved to banks in Europe, not just Deutsche, but also banks in Paris and in London. Remember, he was always promoting a new development, he had name recognition, and some of his projects probably worked out close to what was promised. With the number of loses he has claimed, and which were made public, as limited as that public record is, shows that his tax bill is very low because of claimed accumulated losses. This is a common scenario for developers, claiming all these great successes, but paying little in taxes because of losses from other investments all tied to the same “entity” for tax purposes.

Eventually, the Euro banks would get hip to the Card, make the same numerical conclusions as did the NY banks. The Card then moves to banks in other parts of the world. And trust that they are there, anxious to try their hand. Obvious choices are the banks in Shanghai, a port city that has an entire waterfront street with bank buildings sitting side to side for at least a quarter mile, if not longer. This banking arrangement goes back so far that the city of Shanghai has a great “Western” feel to it, even in comparison to Tokyo. So, maybe the Card owes banks in China. Some would believe that it is likely, but I am not aware. Likewise, I am not aware if the Card is in bed with Russian banks. However, if you look at the public “ownership” of interests of Putin and his Oligarchs who were just penalized by the US, the link to banks is there. What if the Card owes them a shit load?

Well, there you have it. A question that can be answered by following the money.

That is what makes the hair on the back of the Card’s neck stand up. That debt would explain a lot of Card behavior and a lot of Russian interference behavior. What if the goal of the play has nothing to do with the limited money invested with the Card, but the belief that destroying the US is a good economic move for Putin and the Oligarchs. (To the extent that the Chinese are consulted, or merely passive, they could accede to the play with their own moves.) Perhaps the history of the world is about to be greatly impacted. Alternatively, the US Constitution may once again prove its beauty in application.

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