When his aspirations to be a film producer were not realized, the young Trump looked to his wealthy businessman father, Fred Trump [photo], to help him out. Armed with a degree in economics from the Wharton School of Business, he took advantage of his father's political connections in New York City, particularly with former Democratic Mayor, Abe Beame. Despite the leg-up, his first business deals were failures. The Swifton Village apartment complex in Cincinnati was sold for a small book profit, but in constant dollars, constituted a loss. His first produced play was a bomb on Broadway, closing after 96 performances. His dad helped out again, naming him beneficiary of a trust that gave him an annual income of $1.3 million for five years. While he cut a large profile in Manhattan as a scion of wealth, his father arranged financing for Donald Trump's first successful real estate development, the Grand Hyatt New York. The $70 million construction loan and line of credit for his son was a business favor to Fred Trump, who had brought much business to Chase Manhattan. The son of a truly successful father was a spendthrift who reported negative income for 1978 and 1979*. Fred Trump had to extend another line of credit of $7.5 million to his son in 1980. It was about then Donald picked another potentially lucrative industry, casinos.
The common understanding is that no one wins betting against the house, but that is exactly what millions of Americans do every year. In every casino game, including craps, the odds favor the casino differing only in the size of the built-in advantage. Casinos are lucrative businesses, not charities. After securing a parcel of land in Atlantic City, New Jersey on an inside tip, Trump was able to convince Harrah's Entertainment his casino plans would fly, so they spent $9.3 million promoting Trump's name in the casino industry to investors. But when the casino opened in 1984 it was named Harrah's at Trump Plaza. The ever-egotistical Trump was not satisfied with his diminished billing and bought a direct competitor, the Hilton Atlantic City Hotel, renaming it Trump Castle. Harrah's was aghast at the conflicting acquisition and soon sold its joint venture interest to Trump.
Seeming illogical business decisions by the budding gambling magnate continued. He financed his next project, the Taj Mahal, with junk bonds at an amazing 14% interest, that pushed the over-budget monstrosity to an astronomical cost. The casino would had to have generated $1.3 million a day, more than any other casino, ever. Not unexpectedly, the Taj Mahal collapsed beneath a mountain of debt. Profits at his other Atlantic City businesses plummeted $58 million in the first year, and pushed his debt for the three casinos to $1.2 billion. Things got decidedly worse when his top three casino managers were all killed in a helicopter crash in 1989. Trump had to take over day to day management of his Atlantic City operations while he blamed his deceased managers, not their untenable debt load, for the casinos' poor performance.
His next business disaster was the Eastern Air Line shuttle service. In typical style he trashed his competitor, Pan Am, insinuating at a lush opening event on Boston's Logan Airport they flew unsafe aircraft . He spent $1 million on each $4 million plane in the fleet updating them with luxury fixtures like mahogany veneer. He misjudged the market exceedingly--executives were only interested in reliability and low cost, not luxury. His shuttle never made a profit.
Fred Trump had to arrange underhanded loans to his son's failing casino operations because Donald was on the verge of default. The surreptitious, unreported loans of millions allowed Donald to make his huge interest payments. He later settled his regulatory violations with the New Jersey gaming commission for a $65,000 fine, but the irregular aid was too late. All three casinos ended up in bankruptcy court, his first of four bankruptcies. The total debt involved was about $3.4 billion. Trump was forced to resign as chief executive of the reorganized Trump Hotels & Casino Resorts in 2004.
Trump's failures, large and small, continued into the new century. And now for his next orgy of self-promotion, Trump is selling himself around the country in hopes of occupying its most exclusive piece of real estate, the White House. He may not be able to run a country, but that address would certainly sell a lot of snake oil. See Trump Mortgage, Trump University, Trump Vodka, Trump Steaks, Trump Tower Tampa, Trump Hollywood etc. And see the Newsweek article for more sordid details of Trump, Inc.
|credit: Sheneman, Star-Ledger|