For Trump this publicity was an end in itself. “If I get my name in the paper, if people pay attention,” he once told his lawyer Jerry Schrager, “that’s what matters. To me, that means it’s a success.” It also helped bring tenants to his buildings and gamblers to his casinos.
But the novel aspect of Trump’s love for publicity seems to have been the effect it had on his creditors. Once upon a time, he had used charm, political connections, and hard work to secure financing for his projects; by the end of the 1980s, his fame was bringing him even better deals from bankers. When he moved to purchase the Plaza Hotel, a group of investors led by Citibank offered him a loan of $425 million, almost $20 million more than the price of the hotel, (which, Trump admitted, was itself an overpayment—he bought the hotel for prestige, not for profit). Blanche Sprague, a Trump executive, later reminisced that Trump “was like an international superstar…Donald would walk in and shake a few hands and smile, and then boom, there was the money.” Around this time, Trump abandoned the investment bank Bear Stearns, which had financed his first two casino purchases, because Merrill Lynch offered to leverage his properties at ever-higher levels through sales of more than half a billion dollars in junk bonds. As Bear Stearns’ head Ace Greenberg later said, “the world was offering him deals we could not and would not compete with.” Those who had known and worked with Trump for years could not quite believe the favorable terms from newcomers that his celebrity bought him. As Trump biographer Gwenda Blair writes, Trump convinced “major banks and other financial institutions that his name made any asset worth more and that they could therefore ignore their usual lending guidelines and demands for collateral.”
If this use of charismatic finance helped Trump on his way up, it also softened the landing on his way back down. As Blair reports, in the early 1990s, when Trump began to miss large interest payments on his debt ($43 million on Trump Castle bonds, $30 million to Manufacturers Hanover, etc.), he undertook a first round of negotiations that ended with an immediate additional loan of $20 million and another $65 million over five years, lowered interest rates, and a suspension of interest payments on almost half his debt to the banks. The agreement included a budget for his personal expenses, but it was extremely generous—$450,000 a month. He did not lose any of his properties. Non-celebrities did not win those kinds of terms. Over the next couple of years, restructuring continued—including the first two of his four famed bankruptcies—and in each case, his fame played a role in helping him back from the brink.
Trump’s most unusual, perhaps ingenious financial maneuver also happened during these years, another tale Blair recounts. His father Fred sent a lawyer to Trump Castle to buy more than $3 million in poker chips and hold onto them. State law required that in the case of a casino default, chip holders would be repaid first, so this was essentially a loan to Trump that was insured against insolvency. Technically this was illegal—a license from the Casino Control Commission of New Jersey was required to loan money to an Atlantic City casino, and Fred Trump had no such license—but Fred had received a verbal approval from the Commission beforehand, and in the end he only paid a fine of $65,000 and was certified after the fact by the Commission as a lending source. Though the poker chip maneuver did not itself rely on Donald Trump’s fame, its resolution may have. He recovered from his financial troubles in the early 1990s, and within a few years was again raking in stunning amounts of money from investors—a $125 million mortgage from Deutsche Bank for 40 Wall Street, $58.5 million from the Korean conglomerate Daewoo to build Trump World Tower near the United Nations. He pulled through similar problems in the next decade, his name again hardly scathed.
Does Donald Trump see this strategy of charismatic finance as his invention? Perhaps not—for Trump, it seems that fame has always been the first priority, not a means to win better terms from investors (or earn more profits from those investments). He must be aware that his celebrity has helped him with creditors, and this, more than any luxurious detail or over-the-top marquee, is his greatest legacy as a capitalist.