Trump, page 7
After weathering Trump’s libel threats, letters to his publisher, phone-call blasts berating him as “a disgrace,” and attempts to get sources like Marvin Roffman to claim he had misquoted them, the thirty-two-year-old, painfully careful Barsky had managed, in the end, to publicly expose for the first time the true vulnerability of the Trump fortune. As Barsky explained it, in a story drawn from the accounts of “several bankers” anonymously cooperating exclusively with him, Donald’s future choices had narrowed to bankruptcy or an “orderly liquidation of his assets under the watchful eye of his creditors.” Barsky’s story was the bankers’ public warning that Donald’s huge personal liability left him no choice but to turn over to them the authority to divide up and sell off much of his noncasino empire. Barsky reported that the banks had demanded that Donald hire a new CEO and CFO to run the Trump Organization, and while Donald eventually blocked the effort to replace him, a new top financial officer would soon be hired who would report directly to the banks.
At 5:30 P.M. on the tenth and last day of the grace period, the Castle bondholder trustee received his check from the banks. The payment was the first manifestation of a tentative agreement Donald and his banks had finally reached. The agreement suspended the annual $85 million in interest payments on a billion in Trump bank debt and deferred any action on Donald’s personal guarantees for up to five years. The banks also agreed to extend a new $65 million loan to him—to be used to cover the $20 million shortfall on the Castle and to meet the operating expenses of an otherwise destitute organization. The reason the bailout had come so perilously down to the wire was that the major banks had had a hard time selling the agreement to the more than sixty other banks that had syndicated pieces of the Trump deals, particularly the French, German, and Japanese banks, whose initial reaction was to leave it to the American banks to bail out their national icon. Finally, all but one German bank came aboard, and that one agreed not to file suit in an attempt to overturn the new deal.
In return for this largess, Donald pledged as security virtually everything he owned, including the few properties with equity, like his remaining commercial and residential holdings at Trump Tower and his stake in Fred Trump’s family businesses. Only his three personal residences and the dream site on the West Side were salvaged. The agreement permitted the banks to compel the sale of any Trump asset after three years, and it put in place a sliding scale giving them from 50 percent to 90 percent of the profits on any sale. It also barred Trump from guaranteeing any further secured or unsecured debt, a bank demand that suggested that the bankers felt Donald had to be protected from shooting himself again. His real concession, though, was more metaphysical than financial: He agreed not to be Donald.
While the banks would no longer allow him to run his empire or make his deals, they decided to let him go on living as if he was still on top. The agreement restricted him, in a manner of speaking, to a monthly stipend of $450,000 for personal expenses, not including upkeep on his boat, jet, and helicopter, as well as the interest costs on his personal credit lines. The absurdity of his personal allotment—more than the salary of the chairman of the principal bank backing the deal, Citibank, and tallying $14,516 a day—baffled even real billionaires. “I have no idea how to spend $450,000 a month,” said an anonymous one to the Times. “It’s just phenomenal.” As absurd as the expense allowance was, it was a new restraint on Donald, limiting his capacity to use his organization as a sinkhole, and stopping him from using it, as he had for years, to buy whatever he wanted. Since the allowance would in fact be reduced every year over the course of the multiyear agreement it was also a message about Donald’s long-term personal condition. The excess that had once been part of his appeal had suddenly become a subject of widespread ridicule, particularly now that his mound of debt had made it clear that he had been paying for this lifestyle with the borrowed bank deposits of ordinary people.
But Donald was not defenseless in the face of this crisis. In his days on the top, he had often shared with interviewers his views of life, and while his imagination routinely ran away with him in these celebrity sessions, his oft-repeated philosophy had the ring of ingrained true belief to it. He told one reporter in the midst of the bank brouhaha: “I take things very much as they come. I deal with the cards that are dealt me. And I think I do it well. I’m very much a fatalist. I always have been but I’m more so now.” In an interview a year before Donald’s downfall, onetime Trump confidant Tony Schwartz said: “There’s a part of Donald in the rare moments when he’s not moving at about 140 miles an hour—and I have heard him articulate it in those moments—that he assumes on some level that this is a big bubble, and it’s going to burst at some point. He is very fatalistic. He will say ... as fast as you skyrocketed up is how fast you can plummet. He has told me he’s looked at what happens to people who’ve been at the center of attention one day when their deals are working, or they’ve just accomplished something of moment. One of the people he looks at as a perfect example is Jimmy Carter. Here’s a guy who was President and the day Ronald Reagan took over consigned him to a level of anonymity that you otherwise might associate with a traveling salesman.”
Even though he blew his own horn until he was winded, when pressed about how he’d accomplished so much so quickly, as one member of a Donahue audience had, Donald conceded: “I don’t know. It just all sort of happened.” Of course, if his success was merely a consequence of fate, that same fate was also a ready explanation for failure.
To this fatalism was added a theory of genetic determinism, a set of principles that were as close as Donald ever got to grappling with the complexity of life. He had begun years earlier talking about the shaping power of heredity. “You’re either born with it or you’re not,” he said. “Ability can be honed, perfected or neglected. But the day Jack Nicklaus came into this world, he had more innate ability to play golf than anybody else.” Donald loved to tell the tale of a friend with an IQ of 190 whose nerves were shot worrying about a puny home mortgage. “Yet here I am,” he concluded, “buying the shuttle, the Plaza, and I don’t lose an ounce of sleep over any of it. That’s lucky genes.”
The irony was that this strange man who feverishly tried to control everything around him believed in a fundamental way that his own ultimate fate had been decided in his parents’ bedroom. This faith never paralyzed him as he made his way to the top, but it comforted him on his way down.
Perhaps because of this credo, Donald never had any patience with the past or interest in the future. “He is the most present human being I ever met,” said one intimate. “He lives entirely in the moment. He doesn’t define himself through relationships or through some spiritual interests or concerns. He defines himself and redefines himself from day to day by what happens in his life.” At the same time, those who have been close to him say he is “the most public person” they’ve known, inextricably intertwining the business and personal parts of his life so that “they almost can’t be pulled apart.”
Each of these elements of his character helped him face the simultaneous convulsions of divorce and financial demise with courage. His fatalism allowed him to hold himself blameless; his determinism convinced him he’d be a winner again; his fixation on the moment enabled him to accept his new status without nostalgia or foreboding. On the public stage where he’d played out every act of his life he was too much of a showman to be embarrassed by a single disastrous performance. The cumulative effect of this life view—so deep-seated it appeared to be instinctual—was the confidence that all of this would come and go.
“What are your goals?” he was once asked in a television interview when he was at the peak of his success. “Goals?” he repeated, apparently taken aback by this foreign concept, unable to imagine a sense of purpose grander than a scorecard. “You keep winning and you win and you win, and you win,” he said in the midst of the crisis, reflecting on his better days. “You keep hitting and hitting and hitting. And then somehow it doesn’t mean as much as it used to.” Donald liked to recall his favorite Twilight Zone episode, which featured a venal man who died in an accident, was offered any wish he wanted, and declared: “I want to win, win, win. Everything I want, I want to get. I want to get the most beautiful women. I want to get the beautiful this and that. I want to never lose again.” Then, as Donald recounted the story, the man was shown playing pool, winning every time. “Everything he did, he won,” said Donald, until the godlike figure who’d granted his wish came back to the man. “And the man said, ‘If this is Heaven, let me go to Hell.’ And the person said, ‘You are in Hell.’” Donald was intrigued by the notion that his own skyrocketing success, like his now departed wife, had come to bore him. He anticipated what he called his “resurrection” in conversations with associates, but sensed that “maybe new victories won’t be the same as the first couple.”
From the moment he signed off on the broad terms of the bank plan in late June, Donald knew it would be years before he could make another headline-grabbing acquisition—and perhaps he would never do so again. He knew he would lose large chunks of his once prized holdings and that the only deal making he would do in the coming years would be to try to protect what he could from the bondholders and banks—certainly not the makings of a glamorous new memoir. He had threatened the bank consortium to take himself out of play—to put himself in bankruptcy and tie up their assets in court for years—but at some point in the negotiations, they realized it was bluster. Bankruptcy closed the curtain. Anything short of it left him with room for maneuvering: His imagination could still soar, the play could still go on.
The bankers had, in fact, considered an extraordinary and tentative counteroffer—a buyout that would give him a lump sum of between $50 million and $100 million in exchange for all his equity and assets. The take-out price would have been enough for him to bide his time and start anew, but Trump saw it as a retreat. He still had the West Side to rebuild, a project that could again make him larger than life. The casinos could turn around in an up market. What would Trump Tower be without Trump? The Plaza would either remain his ultimate trophy, or be sold at a ransom price, rescuing him.
He would hang on. The world could gloat about which of his perilous fascinations had damaged him more—the $1.3 billion in casino junk bonds that he could not now repay or what some labeled “the junk blond” who had helped destroy the public image he’d so meticulously invented. He had already been exposed by the crisis as a modern Wizard of Οz—a booming voice box hiding behind a drawn curtain. He would not be burdened now by hindsight or self-doubt; he knew how to sidestep the bodies at his door. In addition to trusting no one else, was he now supposed to mistrust himself?
He did not expect happiness. Before the crash, he’d told his only real confidants, the incessant interviewers: “I don’t consider myself happy or sad, I actually consider myself content. I love what I’ve achieved. I don’t think of myself as being happy or sad. I don’t have time enough to think about it. I must go on to other things.” His life, he believed, had prepared him for just this moment.
With all the rooms he controlled, stretched across the Eastern Seaboard, he had frequently claimed that a studio was enough for him. And now, up in his Trump Tower exile apartment, he in effect lived in one. Armed with a channel changer, he had discovered that an empty apartment and season of gut-checking challenges was enough to keep him stirring restlessly until 4:00 A.M. most nights, when he finally got his three or four hours’ sleep. He could be heard boasting to associates that the extra hours of loneliness gave him an edge over his sleeping competitors. That, finally, was his magic: He could find an upside anywhere.
*One reason for Hyde’s hostility might have been that the tapes at Howard’s trial established that he had loaned another Castle supervisor $18,000 after the supervisor admitted to Howard that he’d taken kickbacks on the casino’s contracts. The supervisor, who claimed he’d shared the bribes with Howard, used the money to pay his criminal attorney.
*When Ivana finally told her own version of these events on ABC’s 20/20 almost a year later, she claimed that she’d accidentally overheard her husband on the phone talking about Marla while they were in Aspen and that she’d then seen someone identified to her as a friend of Marla’s in a restaurant line and told the friend to tell Marla that she loved her husband very much, not realizing that Marla was standing right behind the friend. By Ivana’s account, Marla then “charged right up behind me,” announcing her own love for Donald in front of the children.
2
Roots of the Empire
Here hungry men, raw from the shops and fields, idylls and romances in their minds, builded them an empire, crying glory in the mud . . . earnest, patient, determined, unschooled in even the primer of refinement, hungry for something the significance of which, when they had it, they could not even guess.
THEODORE DREISER, THE TITAN
Fred Trump was in trouble. But then, in March of 1934—almost six decades before his son’s financial free-fall in a similarly swooning economy—who wasn’t?
Trouble was a new experience for the twenty-nine-year-old, six-foot, blond and blue-eyed builder who claimed to have already finished 300 homes, starting in the working-class Woodhaven section of Queens seven years earlier and moving on to the elegance of that borough’s upper-crust Jamaica Estates. But even self-promoter Trump conceded he hadn’t built a home in two years, and it was more likely closer to three. What he didn’t mention was that the Depression had reduced him to running a supermarket in Queens, forced out of the housing business he’d entered with such confidence only a few years earlier.
On March 9 Trump submitted a letter bid to buy out of bankruptcy the prime asset of a legendary mortgage servicing company that had long dominated the Brooklyn and Queens housing markets, the suddenly infamous House of Lehrenkrauss. A network of Lehrenkrauss family companies had issued $26 million in mortgages over a period of fifty years for 40,000 homes, mostly to German Americans. But the companies had collapsed in late 1933, awash in fraud. The day before Fred Trump submitted his bid for the servicing piece of this once grand empire, sixty-seven-year-old patriarch Julius Lehrenkrauss stood somberly in court, dressed in a black sack coat, striped trousers, and wing collar, and listened to a state judge sentence him to a five-year prison term in Sing Sing on a larceny conviction. At the sentencing, Lehrenkrauss’s attorney declared that Lehrenkrauss “pleaded no self-pity, and is willing to take his punishment like a man,” announcing in a thunderous voice: “This day marks the termination of three generations of a proud family gone to destruction.”
Like a number of other speculators Trump offered money up front to acquire the Lehrenkrauss list of serviceable mortgages. In addition to his $1,750 purchase price, Trump also offered to pay the bankrupt estate $500 for every $250,000 in mortgages he was actually able to service once he obtained the lists. The bankruptcy court estimated that whoever won the bid might be able to gain control of $6 million to $9 million in viable mortgages, drawing fees for collecting and distributing the monthly payments. Fred saw the lists as his way back into real estate.
In a succession of letters to the court, Trump tried to portray himself as the candidate best able to salvage Lehrenkrauss’s shattered business, even though his only prior mortgage experience was the servicing of piecemeal mortgages he and his mother had sometimes granted to purchasers of the homes he’d built. The letters were a series of exaggerations, including the claim that he’d been in the building business for ten years, when public records established that he’d only been an active builder from 1927 to 1932.
These boasts were the public debut of hyperbole as a Trump trademark, beginning a seven-decade, father/son business career that would even distort the family’s origins in the process. Trump mythology—promulgated first in Fred Trump interviews in the forties and fifties, and later embellished by Donald—would depict Fred as a struggling carpenter’s helper who miraculously lifted himself by his teenaged bootstraps into a leading role in Queens home building. In fact, Fred’s father, also named Fred, who had emigrated from Germany at the age of fifteen in 1885, already had substantial real estate holdings before he died of pneumonia in May of 1918, only forty-nine years old.
The senior Trump held fourteen mortgages at the time of his death, valued at over $20,000; owned outright six pieces of property, including several buildable lots; had deposits totaling over $3,500 in three different bank accounts; and owned fifty shares of preferred stock valued at $3,662. With life insurance policies and loans due him, the total value of Trump’s estate exceeded $36,000, a small fortune at the time. While Trump legend would describe him as the operator of “a moderately successful restaurant,” his death certificate accurately listed his occupation as “the real estate business.”
This was hardly the only misconception in the biography of Donald’s father, Fred, sewn together over time by the family: He would be described in Donald’s bestseller, The Art of the Deal, as born in New Jersey to Swedish parents, when in fact he was born in the Bronx to German parents (his mother, Elizabeth, was born in Germany in 1880). The Trumps would likewise claim that he had built his first house in 1922 or 1923, right after graduating from high school, when he actually built it in 1927—a fast enough jump-start for most titans, but insufficiently miraculous for Trump.
Trump’s letters to the Lehrenkrauss bankruptcy court also debuted another family trademark that would later serve his son well. “During my building operations I spent thousands of dollars on advertising,” Fred wrote. “The name Trump in connection with real estate is very well known throughout Queens County.” Trump’s letters to the court were written on F. C. Trump Construction Corporation stationery, with the logo “Permanence, Comfort” wrapped around a thumb-sized drawing of a chaletlike home.
