A former Deutsche Bank executive testified this week that the German financial behemoth only agreed to make blood-curdling loans to Donald Trump because of the mistaken perception that Trump’s personal fortune was larger than he claimed it was. The bank apparently stupidly relied on financial statements provided by Trump to support the claim that he was far wealthier than he really was.
The Deutsche Bank executive, Nicholas Haigh, testified in Manhattan as part of New York Attorney General Letitia James’ $250 million civil fraud lawsuit against Trump. Reviewing the bank’s internal documents in court with Haigh, James’ attorneys demonstrated that the bankers didn’t really believe all of Trump’s claims about his wealth. They estimated that Trump was significantly less wealthy than he claimed, but they were still convinced that he had more money than he actually did.
Okay, those are the facts. Now the question is, how is it possible that people with undeserved reputations for high net worth continue to get away with this? One answer is that, despite the horrid lessons of the crash of 2007-2008, we still fail to properly punish banks for such violations and we still fail to build in penalties for runaway profit-taking on the part of the banks.
Deutsche Bank wasn’t just tricked, they were willingly tricked. With transactions such as this, the larger the loans, the greater their fees. Individual bank executives can get very rich very fast from fees they collect for making huge loans, so the temptation to “believe” the applicant despite the evidence is great.
Once the loan is made, if the loan goes bad the bank doesn’t come back to the executive who collected the fees in the first place and demand their money back. Instead they go after the property of the loan recipient. If the property of the loan recipient is insufficient to cover the loss then the banks take a loss. If the loss is big enough, so big as to endanger the continuation of the bank’s existence, the bank will turn to its government for a “bail-out.”
That is what happened in 2008 when dozens of banks nearly failed, and a few did along with loan-originator Lehman Brothers, as the result of making billions of dollars in loans for overvalued properties. When tens of thousands of customers couldn’t pay their mortgages, customers who should have never received their loans in the first place, the banks needed rescuing. They turned to their respective governments and received those massive bail-outs.
Instead of putting the offending bank executives in jail, many executives were unjustly rewarded with huge bonuses paid by the bail-outs! So who ultimately picked up the cost for all of this? Ordinary money-saving citizens like you and me who didn’t benefit from loans or the absurd fees paid for the loans.
Today banks such as Deutsche Bank are paying customers ridiculously low interest rates for their money. The banks are making money charging fees for “products,” such as junk insurance, products that their customers don’t want and don’t need but were talked into buying anyway by greedy bank managers.
This is the sick culture that people like Donald Trump have exploited to their considerable benefit for years. In collusion with the greedy banks he took millions of dollars in loans he didn’t qualify for. If the loan worked out, people like Trump profited. If the loan went south the rest of us were left holding the bag.
Welcome to the world of legal bank robbery. If you go in the front door with a gun and steal a few measly hundreds or thousands you’ll go to jail for a long, long time. But if you go in the back door and steal millions, historically speaking, nothing will happen to you. In fact you’ll very often wind up profiting anyway and people will think you’re “smart.”
This is Donald Trump’s sleazy, disgusting world. He’s about to find out that all those years of theft and exploiting the system are about to catch up with him. And, as ever, ladies and gentlemen, brothers and sisters, comrades and friends, stay safe.
Robert Harrington is an American expat living in Britain. He is a portrait painter.