Trump has been demanding rate cuts from the Fed ever since he took office. Lately he’s been even more vehement, denouncing Fed chairman Jerome Powell for not dropping rates even more and comparing him to China’s Xi as the “enemy.”
It’s no secret that Trump is pushing lower rates because he’s terrified of an economic downturn ruining his re-election chances (even Russian hacking can’t save him if the margin is big enough), and he thinks (or claims) that lower rates will stimulate the economy — even though there’s not much lower they can go. But now the Washington Post has found another reason, one we’ve all suspected all along — Trump personally benefits from lower interest rates:
In the five years before he became president, Trump borrowed more than $360 million via four loans from Deutsche Bank for his hotels in Washington, D.C., and Chicago, as well his 643-room Doral golf resort in South Florida.
The payments on all four properties vary with interest rate changes, according to Trump’s official financial disclosures. That means he has already benefited from falling interest rates that were spurred in part by a cut the Federal Reserve announced in July, the first in more than a decade — and his payments could drop by millions of dollars more annually if the central bank grants Trump’s wish and further lowers short-term rates, experts said.
The story details some of the money Trump would save:
Trump could save at least $600,000 and as much as $1.1 million annually on just 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 University of Maryland’s business school.
Even a quarter-point reduction, which most Wall Street investors now predict will occur in mid-September, could save Trump as much as $275,000 annually on that single Doral loan.
The reporting builds on a Bloomberg News story from August 2nd that also looked into Trump’s finances:
President Donald Trump is likely to save nearly $1 million in annual borrowing costs after Federal Reserve Chairman Jerome Powell cut interest rates this week.
The quarter percentage-point reduction in the Fed’s benchmark short-term interest rate, which reverses a December hike of the same amount, brings Trump’s total estimated annual cost from the U.S. central bank’s rate moves to about $16.3 million, according to a Bloomberg News analysis of the president’s most recent financial disclosure form and local property records.
Until this week, Trump’s floating-rate debt cost him about $17.1 million in annual interest payments.
The biggest information here, IMO, is that Trump’s loans (technically, his company’s loans) are not fixed, but are pegged to the prime rate, set by the Fed. It’s what we always suspected, but now we have yet more solid evidence he is setting government policy to benefit himself even when it hurts the country.
I’ve been Dan K for a long time here, but I went away while I was in the Peace Corps (Kenya) and then while I was working as a Foreign Service Officer. But that’s all behind me now.