Trump scams the people who trust him

It's how he got rich, and he's not going to stop

One of the dualities of Donald Trump is that while his opponents think he’s an authoritarian goon who doesn’t respect the rules, many of his fans also think that he’s an authoritarian goon who doesn’t respect the rules — but in a good way.

On the right, there is a widely held and poorly evidenced belief that Mitt Romney lost because he was too much of a nice guy and that part of what’s good about Trump is that he’s willing to fight dirty. You might not think it’s a good idea to cheat on your pregnant wife with a porn star. But conditional on having done so, playing fast an loose with campaign finance law in order to keep it covered up and win the election is better than behaving ethically and losing — because winning elections is really important. I think all partisans can sympathize, to an extent, with this logic. Nobody wants to root for the Washington Generals, and it’s easy to notice the ways in which the out-group behaves ruthlessly and ignore evidence of ruthlessness on the part of your in-group.

But Trump takes this further than a standard politician, because a huge factor in Trump-era politics is a sense among those on the right that they are besieged, socially and culturally.

Diffuse forces in academia, in the media, in public health, in libraries, in museums, and almost everywhere else are conspiring to advance a liberal agenda, and you need someone who won’t just win an election and pass some laws, but someone who will root the conspiracy out at the source, crushing the left. In that context, the liberal fear of Trump as an aspirational dictator is part of what rightists like and admire about him. They’re not exactly saying he’ll be a good type of dictator. But they are saying they need a fighter, a tough guy, a guy who can battle a rigged system and win — and it’s good that liberals fear him.

Because of this dynamic, I think it’s important to make the point that Trump is a scumbag in ways that don’t just read as affluent privileged liberals cowering in fear. I am afraid that Trump will slash Medicaid, yank FDA approval of mifepristone, reduce regulatory protections for people with pre-existing health conditions, raise the relative price of goods versus services in a way that hurts the middle class and the poor, and otherwise implement bad public policy. But this stuff won’t hurt me personally, and I also have to admit that a GOP nominee who scans as more competent and normal — Doug Burgum, say — would probably be more effective at implementing public policy ideas that I regard as normatively bad.

What makes Trump uniquely dangerous is his disregard for the rule of law. But while it’s certainly possible that Trump will leverage that disregard to advance conservative policy aims, what he has actually consistently done throughout his career is seek personal financial benefit, specifically at the expense of his fans and admirers.

To that end, my personal skeleton key for understanding Trump has always been a scandal that doesn’t get a lot of play because it was basically legal: his brief tenure as the CEO of a publicly traded company.

Meet Trump Hotels & Casino Resorts

For the vast majority of Trump’s career as a businessman, he has been the steward of a network of privately owned companies that are referred to collectively as the Trump Organization.

But in 1995, he launched a publicly traded company, Trump Hotels & Casino Resorts (later known as Trump Entertainment Resorts), that ordinary people could and did buy shares of on the stock market. There are, of course, plenty of publicly traded hotel and resort companies these days. You can buy Hilton or Marriott or MGM shares. But these are fairly boring companies that you expect people to invest in based on boring considerations of price-to-earnings ratios and other financial metrics. Christopher Nassetta, the CEO of Hilton Worldwide, is not a household name, and nobody really cares about him unless they specifically work in some kind of hotel-adjacent field.

Trump in 1995 was not like that; he was a celebrity and showman.

Trump Hotels & Casino Resorts, meanwhile, had pretty modest actual underlying assets — the Trump Plaza Hotel and also a casino project in Gary, Indiana that was under construction. The key actual asset of the company was not the real estate portfolio but its showman. The stock traded under the symbol DJT, and the promise was that by investing in Trump’s company, you were going to become business partners with one of the great dealmakers of all time.

What wound up happening is that this company only lasted for about nine years before going under. But it would be wrong to see it as a failure, because Trump turns out to have actually been very clever about structuring deals.

He didn’t structure deals that made the company profitable and valuable, he structured deals so as to allow Donald J. Trump to tunnel money out of the pockets of DJT shareholders and into his personal accounts. That’s how he managed to go from “formerly rich guy who bankrupted himself running unsuccessful Atlantic City casinos” to “formerly bankrupt guy who is now rich again even though his casinos are still unsuccessful.” It was a tour de force of barely-legal financial scams, and a reminder that it’s a lot easier to fuck over your friends with unethical behavior than to fuck over your enemies. After all, who would buy stock in a construction project in Gary, Indiana whose main asset was Trump himself? Not rich snobs who looked down on this louche outer boroughs guy. Trump fans.

The money tunnel

The stock market boomed in the 1990s, a decade that also featured significant “democratization” of access to stock trading. A lot of middle class people got into misguided hobbyist investing, and there was a broad range of ethically questionable professional behavior, ranging from the outright criminality depicted in “The Wolf of Wall Street” and “Boiler Room” to the more banal marketing of the incorrect notion that you could get rich trading individual stocks and paying commissions. As long as the market was trending generally upwards, though, even investment decisions that didn’t make a lot of sense were generally profitable, and people who stayed out of the market felt like suckers.

Also, Trump was bankrupt in the mid-1990s.

He started out his career as a rich guy the old-fashioned way — inheriting money from his dad. But Fred Trump’s business was boring. It was a lot of random apartment buildings in not-particularly-prime locations around New York City. What Trump wanted was to have a cool business, with flashy projects in Manhattan, and to bring some of the glitz and glam of Las Vegas to New Jersey. He did this primarily by borrowing against assets he’d inherited or been gifted, but with his flair for PR, it made Trump famous. Unfortunately for him, the macroeconomic situation circa 1990 was very unfriendly to people with lots of highly leveraged commercial real estate assets, so he suffered a series of bankruptcies.

The publicly traded company he launched was a clever way to leverage stock mania to get out from the debt problem. Once it existed, the company did things like:

• Overpay for a different hotel that Trump owned.

• Personally pay Trump over $800,000 in commission on that transaction.

• Pay Trump millions per year in salary, even as the value of the stock declined.

• Purchase millions of dollars in services from other companies that Trump owned.

And when the public company bought real estate that Trump had previously owned privately, the attached mortgage debts shifted from being personally guaranteed by Trump to being guaranteed by the shareholders.

Between 1995 and 2005, the company’s shares lost over 95 percent of their value. The company folded, and its remaining assets were scooped up by Carl Icahn. But Trump personally not only made it out of this jam okay, he was legitimately quite rich.

The story Trump likes to tell about himself is that he’s a self-made man who got nothing but a single generous loan from his dad. Of course, that’s false. But the counter-narrative that he’s just a rich kid who inherited a fortune is also sort of wrong. He did get a lot of money from his dad, but he’d basically lost all of it by the mid-1990s. What he owned was some not-particularly-profitable hotels encumbered by onerous debts. If you gave that to the typical person, they could probably have managed to sell it for something, but not necessarily all that much. The properties were, by that point, genuinely not worth much.

But Trump made legitimately large amounts of money while successfully deleveraging from those debts, overwhelmingly by stealing money from the investors in his company.

By the end the company was bankrupt, but he earned tens of millions bankrupting it. The same year of the bankruptcy, “The Apprentice” debuted on NBC and proved to be a huge success. Starring in a hit television show is a good way to get rich, whether or not you have business savvy. But starring in a hit television show, the premise of which is that you’re a master businessman, is also great for your external reputation. So even though all these shenanigans were covered at the time, more people watch network television (especially 20 years ago) than read financial reporting in The Wall Street Journal. So a lot of people were left with the impression that Trump got out of trouble through savvy business practice. This is true in the sense that he conned his investors out of a lot of money, but I think if you’d pitched that idea on the show, it wouldn’t have been warmly received. Americans like and respect people who build successful businesses, and that kind of blatant theft is not normally what we have in mind.

The snake and the stakes

You can find a lot of Matt Yglesias articles, tweets, and blogs from over the years urging Democrats to be more moderate and pragmatic and try harder to actually beat Trump.

But the way I would sum up recent American politics is that despite the very vocal levels of alarm from liberal America, at an elite level, progressives behave as if they’re glad Trump is running the GOP show. They know he is clownish, unpopular, and undisciplined, and they think he is easier to beat than a replacement-level Republican. They believe this gives them the opportunity to push the envelope a bit harder on policy aspirations than if they had to run against a Nikki Haley or a Mike Pence.

And I think there is something to that. The legacy of Trump’s term is a corporate tax cut, Roe overturned, and January 6. If it had been a Marco Rubio administration, you’d have had a corporate tax cut, Roe overturned, and some form of Affordable Care Act repeal because he’d have done a better job of working with senate Republicans and would not have made John McCain so mad. Now, of course, January 6 was really bad! But it was bad mostly in its dark potential. In terms of specific consequences, January 6 and the larger “stop the steal” movement did not impede the orderly transition of power. But that doesn’t mean it was without consequence.

• Stop the steal was a boon to the Democratic senate campaigns in Georgia that delivered Chuck Schumer his majority.

• Election denialism powered a number of really weak GOP senate nominees, likely costing them 2022 races in Georgia and Pennsylvania.

• Because Republican elites couldn’t admit to their own voters that Trump lost in 2020, he was spared the normal cycle of backlash and “here’s how he fucked up” discourse that befalls defeated presidential candidates.

On net, in other words, Trump’s election denialism pushed American public policy to the left and made Republicans worse off, while benefitting Trump personally.

He loves to recite “The Snake” at rallies and use it as an allegory about the perils of welcoming immigrants, but he is the snake who various people believe will use his cunning to advance their interests, but who primarily ends up betraying the people who trust him.

That’s why if you ask a random back-bench GOP state legislator about Trump, he’ll sing his praises. But if you ask a member of Trump’s cabinet, you’re likely to find someone who’ll denounce him. It’s why even though GOP China hawks like to claim Trump as one of their own, he’s already flip-flopped on TikTok for cash, says he won’t help Taiwan defend itself, and spent his whole presidency soaking up money from foreign governments.

The long-tail risk of his conduct is that something genuinely disastrous happens for the whole country. But the most likely scenario is that he continues to be what he’s been for 30 years: a grifter who rips off the people who trust him, while being relatively ineffective at pursuing his ostensible goals.