The Last Time The United States Declared Bankruptcy
For the past week, the news making the headlines in the world economy is whether the United States will default as a result of the debt ceiling not being raised. I surveyed a number of my friends on this topic to see how many think that the United States will default on debt obligations this month. All of them believed that the debt ceiling will be raised and a default will be avoided.
When asked to explain their outlook, the common theme in their explanations is that to raise the debt ceiling is the simple thing to do to avoid the disastrous outcome of a default. After all, the United States has raised the debt ceiling 74 times since 1962. What is one more?
It seems that everyone wants the debt ceiling raised because no one has fully comprehended the magnitude of a United States default should it happen. Warren Buffet said that a default would be catastrophic and others said that it would dwarf the collapse of Lehman Brothers in 2008. When the 158-year old bank filed for bankruptcy, it owed $517 billion. The debt owed by the United States government is at least 23 times that of Lehman Brothers.
The prospect of a default is certainly unthinkable. However, the United States has defaulted on its obligations before. It happened in 1971 when then president, Richard Nixon, closed the gold convertibility window and severed the link of the US dollar to gold. This act as described in Ron Pauls book, The Case For Gold, was tantamount to declaring international bankruptcy.
Stocks Bonds Funds And Similar Holdings
Trump’s personal financial market investment portfolio is concentrated in the financial and commodities markets. The investment portfolio generates income and cash flow from a variety of mechanisms as dividends, capital gains, and compounded carried interest. He invested a minimum of $70 million in stocks.Though real estate is still his most preferred asset class, Trump became an active financial market investor in 2011 following disappointment from the depressed American real estate market and various investments in the Federal Reserve’s interest yields on CDs were next to nothing. Trump stated that he was not enthusiastic to be a stock market investor, but that prime real estate at good prices was hard to find at that time and that stocks and equity securities were cheap and generating good cash flow from dividends. He profited from 40 of the 45 stocks he purchased which he sold in 2014, making it almost a 90% success rate in capital appreciation in addition to millions in earned dividends. The biggest gainers in his stock portfolio were Bank of America Corporation, The Boeing Company and Facebook, Inc earning a windfall profit of $6.7 million, $3.96 million and $3.85 million, respectively.
On a government form submitted in 2015, Trump reported holding an amount of physical gold, valued at between $100,001 to $250,000.
Examining Donald Trumps Chapter 11 Bankruptcies
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Donald J Trump Foundation
The Donald J. Trump Foundation was a U.S.-based private foundation established in 1988 for the initial purpose of giving away proceeds from the book Trump: The Art of the Deal by Trump and Tony Schwartz. The foundation’s funds mostly came from donors other than Trump, whose last personal contribution to the charity was in 2008. The top donors to the foundation from 2004 to 2014 were Vince and Linda McMahon of World Wrestling Entertainment, who donated $5 million to the foundation after Trump appeared at WrestleMania in 2007.
Per the foundation’s tax returns, its benefactors included healthcare and sports-related charities, as well as conservative groups. In 2009, for example, the foundation gave $926,750 to about 40 groups, with the biggest donations going to the Arnold Palmer Medical Center Foundation , the New York Presbyterian Hospital , the Police Athletic League , and the Clinton Foundation .
A 2018 suit by the New York State attorney general alleged that Trump had illegally used foundation funds to buy self-portraits, pay off his businesses’ legal obligations, and boost his presidential campaign. The judge ruled against the Donald J. Trump Foundation and ordered Trump to pay $2 million in damages. Trump agreed to give that money and the foundation’s remaining $1.8 million to 8 charities ranging from Army Emergency Relief to the United Negro College Fund to the US Holocaust Memorial Museum and to dissolve the foundation.
How To File For Bankruptcy
Filing for bankruptcy is a legal process that either reduces, restructures or eliminates your debts. Whether you get that opportunity is up to the bankruptcy court. You can file for bankruptcy on your own, or you can find a bankruptcy lawyer, which most experts regard as the prudent avenue to pursue.
Bankruptcy costs include attorney fees and filing fees. If you file on your own, you will still be responsible for filing fees. If you cant afford to hire an attorney, you may have options for free legal services. If you need help finding a lawyer or locating free legal services, check with the American Bar Association for resources and information.
Before you file, you must educate yourself on what happens when you file for bankruptcy. Its not simply a matter of telling a judge Im broke! and throwing yourself at the mercy of the court. There is a process a sometimes confusing, sometimes complicated process that individuals and businesses must follow.
The steps are:
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No Bankruptcy Is Not Synonymous With Success
Conversely, the absence of bankruptcy declarations is not an indicator of success, as many businesses fail without going through bankruptcy proceedings. A failed business may simply cease operations with the owners and investors absorbing the losses a troubled business on the brink of going under may seek to merge with another company that has the resources to keep it afloat and out of bankruptcy or a dying business may be bought up by another, stronger company, seeking to breathe new life into it or simply to acquire its assets.
And since many business conglomerates comprise multiple companies each of which may offer many different product lines a given company or product may fail spectacularly and rack up losses in the hundreds of millions of dollars without necessarily sending their corporate parents reeling into bankruptcy.
Finally, all bankruptcies are not created equal. A small startup partnership that doesnt quite take off soon enough and seeks bankruptcy protection is quite a different kettle of fish than the corporate entity that is mismanaged so badly and/or for so long that it racks up billions of dollars in debt before going Chapter 11.
Bankruptcy Is Not Synonymous With Failure
Although a corporate bankruptcy filing often indicates that a business is in a perilous financial condition, it doesnt necessarily sound the death knell for that business. The provisions of Chapter 11 of the U.S. Bankruptcy Code allow businesses to find ways to reduce their debt and restructure their operations without having to be shut down and liquidated to satisfy debts instead of closing their doors, businesses can stay open, pay their employees, and take in revenue while developing a budget and a repayment plan for creditors .
Many of the United States largest and most prominent businesses have filed for Chapter 11 bankruptcy protection one or more times, including General Motors, Charter Communications, Delta Air Lines, Kmart, Macys, and the Texas Rangers baseball team.
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We Have A Company Thats Really Got Great Potential 2005
Though he has acknowledged mistakes in piling crippling debt on Trump Hotels and Casino Resorts, Donald Trump has steadfastly maintained that his resorts were the best-run and highest-performing casinos in Atlantic City.
The casinos have done very well from a business standpoint, he told Playboy magazine in 2004. People agree that theyre well run, they look good and customers love them.
In reality, the revenue at Mr. Trumps casinos had consistently lagged behind their competitors for a decade before larger forces ravaged the industry. Beginning in 1997, his share of the Atlantic City gambling market began to slip from its peak of 30 percent.
Revenues at other Atlantic City casinos rose 18 percent from 1997 through 2002 Mr. Trumps fell by 1 percent.
Competition grew more intense in 2003, when the Borgata Hotel Casino and Spa opened. The $1.1 billion, 40-story resort redefined the concept of an Atlantic City luxury casino. Revenues at Trump casinos dropped another 6 percent in a little more than a year.
Had Mr. Trumps revenues grown at the rate of other Atlantic City casinos, his company could have made its interest payments and possibly registered a profit. But with sagging revenues and high costs, his casinos had too little money for renovations and improvements, which are vital for hotels to attract guests. The public company never logged a profitable year.
I think the biggest thing is, it understates his compensation, Mr. Cox said.
Were Watching Trumps 7th Bankruptcy Unfold
As a businessman, Donald Trump ran 6 businesses that declared bankruptcy because they couldnt pay their bills. As the president running for a second term, Trump is repeating some of the mistakes he made as a businessman and risking the downfall of yet another venture: his own political operation.
In the 1980s, Trump was a swashbuckling real-estate investor who bet big on the rise of Atlantic City after New Jersey legalized gambling there. He acquired three casinos that by 1991 couldnt pay their debts. The Taj Mahal declared bankruptcy in 1991, the Trump Plaza and the Trump Castle in 1992. Lenders restructured the debt rather than liquidate and Trump put his casino holdings into a new company that went bankrupt in 2004. The company that emerged from that restructuring declared bankruptcy in 2009. Trumps 6th bankruptcy was the Plaza Hotel, which he bought in 1988. It went bankrupt by 1992.
Trumps surprise victory in 2016 paralleled the arrival of the brash upstart in Atlantic City more than 30 years earlier. But in the fourth year of his presidency, the Trump operation is once again reeling. Voters give him poor marks for handling the coronavirus crisis, underscored by an outbreak at the White House that infected Trump himself. Democrat Joe Biden is beating Trump is most swing states and an Election Day blowout is possible. Trump has suggested he wont leave office if he loses, threatening a constitutional crisis and his own political legacy.
Used Law To Protect Interests
Critics have cited the Trump corporate bankruptcies as examples of his recklessness and inability to manage, but the real estate developer, casino operator, and former reality-television star says his use of federal law to protect his interests illustrates his sharp business acumen.
Trump said in August 2015:
“I have used the laws of this country just like the greatest people that you read about every day in business have used the laws of this country, the chapter laws, to do a great job for my company, my employees, myself and my family.
How Donald Trump Bankrupted His Atlantic City Casinos But Still Earned Millions
ATLANTIC CITY The Trump Plaza Casino and Hotel is now closed, its windows clouded over by sea salt. Only a faint outline of the gold letters spelling out T-R-U-M-P remains visible on the exterior of what was once this citys premier casino.
Not far away, the long-failing Trump Marina Hotel Casino was sold at a major loss five years ago and is now known as the Golden Nugget.
At the nearly deserted eastern end of the boardwalk, the Trump Taj Mahal, now under new ownership, is all that remains of the casino empire Donald J. Trump assembled here more than a quarter-century ago. Years of neglect show: The carpets are frayed and dust-coated chandeliers dangle above the few customers there to play the penny slot machines.
On the presidential campaign trail, Mr. Trump, the presumptive Republican nominee, often boasts of his success in Atlantic City, of how he outwitted the Wall Street firms that financed his casinos and rode the value of his name to riches. A central argument of his candidacy is that he would bring the same business prowess to the Oval Office, doing for America what he did for his companies.
Atlantic City fueled a lot of growth for me, Mr. Trump said in an interview in May, summing up his 25-year history here. The money I took out of there was incredible.
Many others were glad to see him go.
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Trump Shuttle Fails To Take Off
Perhaps Trumps greatest talent as a businessman is branding. He has built his personal brand as a tremendous success by publishing multiple books, including The Art of the Deal in 1987, that claim to reveal his business acumen. He has also made licensing deals using his name so that Trump appears around the world on properties he doesnt own.
However, the Trump name has hardly been a guarantee of success. Multiple products and business ventures that have had his branding have collapsed or been abandoned without him declaring bankruptcy.
One of Trumps most high-profile misfires was the Trump Shuttle airline. He paid US$365 million to buy the flailing Air-Shuttle in 1988 from the now-defunct Eastern Air Lines. Despite annual revenues of US$30-35 million a year, by 1990, the airline had over US$120 million in losses. The market for shuttle airlines in the United States was oversaturated and the company had spent too much on renovations.
In 1991, Trump was looking to unload the airline. However, a deal with Citibank and Northwest Airlines fell through when the latter pulled out. In the end, Citibank took ownership of Trump Shuttle and its debts, relieving Trump of financial responsibility.
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Personal Vs Corporate Bankruptcy
One point of clarification: Trump has never filed personal bankruptcy, only corporate bankruptcy related to some of his business interests. I have never gone bankrupt, Trump has said.
Here is a look at the six Trump corporate bankruptcies. The details are a matter of public record and have been widely published by the news media and even discussed by Trump himself.
Deutsche Bank Bombshell President Donald Trump Is Broke Again And Cant Pay His Debts
Its another Deutsche Bank bombshell about President Trump. The German bank announced Trumps company, the Trump Organization cant make their April debt payments. Thus, the company has asked Deutsche Bank for delayed loan payments.
It seems as if Donald Trump is underwater. The revenue he is generating from his properties just barely covers the interest payments on his massive debts.
It appears the Trump Organization has been surviving month to month and eek to week. This would indicate Trumps finances arent as robust as he likes to brag. It also indicates his debts are far larger than the total value of his assets. This would give him a substantial negative net worth.
Six of Donald Trumps seven highest revenue-generating properties are currently shut down due to the COVID-19 crisis.
Trump has gone to great lengths to grift remarkably small amounts of cash since he assumed the presidency. This has always suggested that he was struggling to keep up with his loan payments because he had little or no cash on hand.
Bloomberg News reported on Thursday that Trump Organization representatives reached out to the Deutsche Banks private banking unit in New York late last month.
The New York Times is reporting the negotiations are ongoing.
The Trump Organization had been trying to sell the lease for the Trump International Hotel. However, the bidding has been stopped. The federal government owns the building.
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‘keep The Donald Afloat’
” could have simply taken everything he had right then, but they wanted his cooperation,” said Lynn LoPucki, a bankruptcy expert and professor at UCLA Law School. “There’s that old saying, ‘If you owe your banks a little, you’re at their mercy. If you owe the banks a lot, the banks are at your mercy. They saw the best way for him to repay the money was to keep the Donald afloat.”
The Donald struck a deal with the banks to hand over half his ownership, and half of the equity, in the casino in exchange for a lower interest rate and more time to pay off his debt. He sold off his beloved Trump Princess yacht and the Trump Shuttle airplane to make his payments, and his creditors put him on a budget, putting a cap on his personal spending.
“The first one was a really big hit for him. They had him personally, and he ended up taking substantial losses in that bankruptcy. He also had the humiliation of having some bankers deciding how much money he could spend — the numbers are just astonishing — the amount of his monthly budget,” LoPucki said.
John Pottow, a bankruptcy expert and law professor at the University of Michigan, said banks would often agree to lose millions in reorganizations like Trump’s to prevent the massive losses they would incur if they foreclosed on the property.
“Banks will take considerable haircuts,” Pottow said. “It’s sort of like you have a sick patient so you cut off a couple toes to stop the gangrene. Now he’s missing a few toes, but he’s still alive.”