President Trump is ready to save millions of dollars annually with interest on outstanding loans for his hotels and resorts if the Federal Reserve lowers interest rates as he requests, according to public records and financial experts.
In the five years before he became president, Trump borrowed over $ 360 million through four loans from Deutsche Bank for his Washington, D.C., hotel. and Chicago, as well as its 643-room Doral Golf Resort in South Florida.
Payments for all four properties vary depending on changes in interest rates, according to Trump's official financial disclosures. That means it has already benefited from a cut in interest rates caused in part by a fall in the Federal Reserve, announced in July, the first in more than a decade – and its payments could fall by millions of dollars a year if the central bank lends Trump wants and further lowers short-term rates, experts said.
"This will reduce his borrowing costs quite a bit if he gets what he wants," says Philip Brown, professor of finance at Kellogg's Northwestern University's Kellogg School. Brown said Trump's savings could be even greater if Deutsche Bank allows the company to pay off loans faster without the penalty that banks sometimes allow.
The White House and the Trump Organization did not respond to requests for comment.
While Trump's adult sons, Donald Trump, Jr. and Eric Trump, run the family business, the president insisted on retaining ownership of the company after his election, disproving past presidential practices. This decision, ethics experts warned, would lead to a potential conflict of interest between his personal interests and public policy goals.
The Trump administration has argued that lower interest rates will encourage more consumers to buy homes and cars and businesses to invest in new factories. Reducing interest rates also typically lowers the value of the dollar, making American products cheaper for overseas buyers, a goal the president has.
But most economists and business leaders say Trump's trade war is the biggest threat to the economy, not interest, which is already at historically low levels.
After taking office, Trump aggressively sought to lower interest rates and rejected the predominantly hands-off approach other presidents have taken to the Fed, repeatedly blasting President Jerome H. Powell – whom Trump appointed
. Powell did not announce the rate cut and instead expressed concern about Trump's trade war with China, the president immediately attacked him on Twitter, writing: usually the Fed is NOTHING! "And comparing Powell to Chinese President Xi Jingping.
"My only question is who is our biggest enemy, Jay Powell or President Xi? " Trump has published .
Trump and his advisers discussed a private rotation among Federal Reserve managers that would diminish Powell's influence, The Washington Post reported last week.
Asked by reporters on Friday night if he wanted Powell to resign, the president replied, "If he did, I would not stop him."
The central bank's reference rate is one of the factors determining the interest payable. on variable rate loans such as the President has on it Properties. Mortgage rates have also been reduced due to the trade war with China and concerns about global growth.
Experts said it is difficult to determine exactly how much Trump will save if he receives a reduction in the short-term interest rates he insists from 2.25 percent to 1.25 percent – a move that is usually reserved for economic emergencies .
But the president will be greatly influenced by interest rates cuts, they agreed.
In early 2012, Deutsche Bank provided Trump's company with approximately $ 364 million in loans through working through the bank's private wealth, rather than through traditional lending units, according to public loan documents.
A $ 125 million loan for the purchase and renovation of the Doral Golf Resort in Florida, a $ 170 million loan for the renovation of the Old Washington Post Office at Trump Hotel and a $ 69 million refinancing loan of the existing Trump Hotel in Chicago.
Trump's financial disclosures and archives show that all four loans remain unpaid. According to requests, his company paid at least $ 19 million from a loan in Chicago, although the documents do not show the amount of outstanding balances for any of the properties.
Trump could save at least $ 600,000 and as much as $ 1.1 million a year on the larger of the two Doral loans, if the Fed made a percentage point reduction depending on the loan agreement, according to Clifford Rossi, a professor at the business school at the University of Maryland.
Even the fourth point, a cut that most Wall Street investors now predict will happen in mid-September, could save Trump up to $ 275,000 a year from this single loan from Doral.
"If you are a consumer borrower with a car loan or credit card, a quarter point reduction is a significant savings," Rossi said. Trump "has more loans and a bigger dollar, so he will certainly get a bigger reduction in the amount due than most Americans out there."
An analysis by Bloomberg News found that with every fourth point reduction, Trump could to save $ 850,000 in annual interest payments, which would mean more than $ 3 million in annual savings if the Fed cut interest rates by a full percentage point, as Trump requested.
Throughout his years as a real estate developer, Trump became famous for his aggressive efforts to save money, even when it meant breaking up relationships or breaking professional standards.
Trump has been sued dozens of times for non-payment of bills, i.e. through construction contractors, bartenders, and even their own attorneys. He uses money from a charity to pay legal settlements for his business at a profit. He once sued his own lender, Deutsche Bank, to get out of a big mortgage.
Before entering politics, Trump often advocated lower interest rates, which are key to a business that relies on large amounts of debt.
"Interest rates are very critical of the real estate industry and [Trump has] spent his entire career there, so he has strong opinions about where interest rates should be," says James Bullard, president of the Federal Reserve Bank of Saint Louis. "Every real estate person I've ever met in my life has always wanted lower rates in all circumstances, so I think it's part of nature [Trump’s]."
In the 1980s, Trump became one of the most aggressive borrowers in the country, using cheap loans to finance the casino empire in Atlantic City, which eventually failed and forced four of its companies to go bankrupt.
As a result of this collapse, Trump was largely frozen by the big banks. He used cash to finance much of his company's more recent real estate expansion, and then turned to Deutsche Bank's increasingly risky take on some large loans, starting in 2012, as previously published The Post.
Congressional Democrats have summoned Deutsche bank records, but Trump sued to stop the bank from reacting and the matter remained in court.
Past presidents have avoided publicly criticizing the Fed for maintaining board isolation from politics. Trump has decided otherwise from a first step, and as global economic fears have been created in recent weeks, he escalates his already routine attacks on Powell, tweeting at various times in July that "the Federal Reserve has no idea. ! "And" They raised rates too early, too often, and tightened, while others did just the opposite. "
Four former Fed chairs, collectively appointed and re-appointed by six presidents, then published the Wall Street Journal with a call option. The Fed would be allowed to act" free from short-term political pressure, and in particular without threatening eliminating or downgrading Fed leaders for political reasons. "
Trump added pressure on Friday after Powell spoke at a central bank meeting in Jackson Hole, Wyo., the president said the US economy was in a" favorable place ", but that auction Trump's war against China created a "complicated, tumultuous situation."
Trump responded with a Twitter tirade, accusing China of burdening problems and urging US companies to avoid doing business there.
Brown, a Northwestern professor, said that Trump's constant pressure on the Fed's chair and his colleagues to correct the market was wary of the shaky bond market and declining consumer confidence. ira tariffs, as the president wishes, can hurt the US economy.
"I don't think the Fed has to comply with Trump's trade war and the risk is the Fed's potential inflation and reputation in the future," he said.