Cashing in.

Photographer: Luke Sharrett/Bloomberg

How Trump Rides on Waves of Other People's Money

Timothy L. O'Brien is the executive editor of Bloomberg Gadfly and Bloomberg View. He has been an editor and writer for the New York Times, the Wall Street Journal, HuffPost and Talk magazine. His books include "TrumpNation: The Art of Being The Donald."
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During a campaign stop in North Carolina last week, Donald Trump described the logic behind his plans for billing other countries for U.S. military support should he become president:

It's called OPM. I do it all the time in business. It's called other people's money. There's nothing like doing things with other people's money because it takes the risk -- you get a good chunk out of it and it takes the risk.

By "takes the risk," Trump means that using other people's funds reduces his risk of losing any of his own money on deals. Trump has spent a lifetime using other people's money – and losing piles of it along the way.

Trump's MO around OPM in his early days was defined largely by his father, Fred, basically because Fred had a lot of M. While Trump frequently downplays the role his father played at the start of his business career, his dad was always there for him, wallet and Rolodex open.

"It has not been easy for me," Trump said at a town hall meeting in New Hampshire almost a year ago. "And you know I started off in Brooklyn, my father gave me a small loan of a million dollars.” In a subsequent interview, Trump described his father's financial support as amounting to nothing more than a "very, very small loan."

None of this is true, of course.

When Trump first sized up Manhattan real estate in the mid-1970s, his father cosigned bank loans for tens of millions of dollars. These loans made it possible for young Trump to make signature deals like the one that turned a faded New York hotel into the glittery Grand Hyatt.

When Trump set his sights on the Atlantic City casino market, his father loaned him about $7.5 million. When Trump started floundering there about a decade later, Fred sent a lawyer into a Trump casino to buy $3.5 million in chips so Trump could use the money to make a bond payment and fend off corporate bankruptcy. When the bankruptcies arrived anyway and left him stumbling, Trump asked his siblings for a $30 million cut of their father's estate in 1993 so he could pay for his own living expenses.

"I had zero borrowings from the estate," Trump told me when I asked him about the $30 million loan request for a book I was writing, TrumpNation. "I give you my word."

Trump unsuccessfully sued me for libel for the book, and during a deposition in the case he acknowledged that, in fact, he had borrowed at least $9 million from his dad's estate.

In 2003, four years after Fred died, Trump and his three siblings sold most of their father's real estate holdings for about $600 million, which they reportedly split equally among themselves. So all of this stuff adds up to a lot more than a mere $1 million loan from Dad. And it might be the case that Fred's financial largess toward his son explains the younger Trump's laissez faire attitude toward debt and OPM.

Trump's deal spree of the 1980s and early 1990s also extended well beyond Fred and his relatively modest contribution to Trump's OPM annals. Big banks, including the forerunners of  Citigroup and JP Morgan, had joined forces with other credulous lenders, allowing Trump to amass $3.4 billion in debt, of which he had personally guaranteed about $900 million. This was debt on a grand scale, incurred using lots and lots of OPM and handled in a way in which nobody, including Trump, was thinking very carefully about whether or not he could pay it back.

Trump later discovered that he could also tap bondholders and stockholders to raise money for his casinos -- all sorts of OPM right there. Trump's gambling business was never profitable during the entire time he ran it as a public company.

When Trump's casinos eventually shriveled, investors, pensioners, workers and Atlantic City itself "took the risk" from Trump and suffered. For his part, Trump said during the Republican primary debates earlier this year that he used the bankruptcy code to make "a great deal" for himself in Atlantic City.

OPM also has been a colorful part of the Donald J. Trump Foundation. Charities, of necessity and by design, revolve around OPM. Two other features are handy ways of identifying a charity associated with a famous person: 1) The charity's namesake usually is a generous giver to his or her own organization, and 2) The charity spends its funds on the needy or some other worthy cause (as opposed to, say, on Tim Tebow's football helmet or on a life-size portrait of yourself).

Based on a wonderful series of eye-opening stories by the Washington Post's David Fahrenthold, we now know that the Trump Foundation has been spending money in ways that look irresponsible, unethical or possibly illegal. (We've known for years, thanks to the work of Bill Bastone and his colleagues at The Smoking Gun, that Trump himself, prior to the 2016 campaign, has never been a big donor to the Trump Foundation.)

OPM also courses through the financial arteries of that skeletal, fly-by-night operation known as the Trump campaign. A glimpse of how the campaign is spending voter contributions (the OPM in this particular political equation) to hoist Trump toward the Oval Office can be had whenever campaign finance forms are filed. Politico offered a roundup last week.

Politico found that the Trump campaign has paid more than $8.2 million to Trump-affiliated business, primarily for rent in Trump-controlled properties and for use of the Trump jet. That represents about 7 percent of the campaign's total spending of $119 million, which Politico described as "an unprecedented amount of self-dealing in federal politics."

If Trump makes it to the White House, he'll get to play on a bigger field than he has so far in his business, charitable and political careers. He'll also come into close contact with the greatest stash of OPM of all time: federal tax receipts.

However much Trump plans to continue touting his philosophy of OPM between now and Election Day, it will be worth remembering that he hasn't proven to be a very reliable steward of OPM over the years. That's something to consider if you're a taxpayer thinking of becoming the next person to open your wallet to Trump.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Timothy L. O'Brien at tobrien46@bloomberg.net

To contact the editor responsible for this story:
Jonathan Landman at jlandman4@bloomberg.net