How the Financial Game is Rigged for Donald Trump

Robert Reich has a post on his website explaining how the rules of finance, taxation and bankruptcy rig the game in favor of the super-rich and against the average person. He uses Donald Trump’s frequent bankruptcies as an example of how it all works.

Thirty years ago, on its opening day in 1984, Donald Trump stood in a dark topcoat on the casino floor at Atlantic City’s Trump Plaza, celebrating his new investment as the finest building in Atlantic City and possibly the nation.

Last week, the Trump Plaza folded and the Trump Taj Mahal filed for bankruptcy, leaving some 1,000 employees without jobs.

Trump, meanwhile, was on twitter claiming he had “nothing to do with Atlantic City,” and praising himself for his “great timing” in getting out of the investment.

In America, people with lots of money can easily avoid the consequences of bad bets and big losses by cashing out at the first sign of trouble.

The laws protect them through limited liability and bankruptcy.

But workers who move to a place like Atlantic City for a job, invest in a home there, and build their skills, have no such protection. Jobs vanish, skills are suddenly irrelevant, and home values plummet.

He’s right. All Trump did was sell the right to use his name to the casino, which means if it goes under he has no obligations at all. He gets paid a huge up front fee and a percentage of the profits but takes none of the risk. His multiple bankruptcies in businesses that he does control aren’t failures, they’re planned events to shed himself of debt. And it’s hardly unique to him. Other companies do the same thing routinely before taking a golden parachute out, leaving everyone else holding the bag:

Bankruptcy was designed so people could start over. But these days, the only ones starting over are big corporations, wealthy moguls, and Wall Street.

Corporations are even using bankruptcy to break contracts with their employees. When American Airlines went into bankruptcy three years ago, it voided its labor agreements and froze its employee pension plan.

After it emerged from bankruptcy last year and merged with U.S. Airways, America’s creditors were fully repaid, its shareholders came out richer than they went in, and its CEO got a severance package valued at $19.9 million.

But American’s former employees got shafted.

And then there’s student loans:

Student loan debt has more than doubled since 2006, from $509 billion to $1.3 trillion. It now accounts for 40 percent of all personal debt – more than credit card debts and auto loans.

But the bankruptcy law doesn’t cover student debts. The student loan industry made sure of that.

If former students can’t meet their payments, lenders can garnish their paychecks. (Some borrowers, still behind by the time they retire, have even found chunks taken out of their Social Security checks.)

The only way borrowers can reduce their student debt burdens is to prove in a separate lawsuit that repayment would impose an “undue hardship” on them and their dependents.

This is a stricter standard than bankruptcy courts apply to gamblers trying to reduce their gambling debts.

Americans love the Just World mythology. The world is fundamentally fair, they think, and that means talent, ambition and hard work makes someone rich and laziness and sloth make someone poor. Even if they’re poor themselves, they tend to think this is how things work. But it doesn’t. The real golden rule: Those who have the gold get to rule, which means they get to rig the game in their favor so that heads they win, tails you lose.

Donald Trump made his money through inheritance, government contracts (no-bid, of course), eminent domain (stealing other people’s property), sweatshops, undocumented workers and rigged markets. But he sells himself as the self-made man, a shining example of the fundamental fairness of capitalist meritocracy. And the people he exploits cheer wildly as he boasts and poses.

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  • StevoR

    How the Financial Game is Rigged for Donald Trump

    Badly.

    Badly rigged that is. For the Trump’s and against the rest of us.

    Time that changed. Overdue indeed.

  • colnago80

    Student loan debt has more than doubled since 2006, from $509 billion to $1.3 trillion. It now accounts for 40 percent of all personal debt – more than credit card debts and auto loans.

    We might ask ourselves how did this happen? The answer is the withdrawal from support of public colleges and universities by the states and the concomitant increases in tuition charges. As I have related before, when I was a freshman at UC Berkeley, the tuition charge was $50/semester, regardless of the number of credit units taken. Today, it is hard to distinguish between Stanford and UC Berkeley relative to tuition charges. To all intents and purposes, UC Berkeley has been privatized, starting with the governorship of Ronnie the rat. This is also what is happening at other state university systems. Wisconsin Governor and college dropout Scott Walker is going Ronnie the rat one better.

    Overall, the US still has the best college/university system in the world (in most surveys, 6 of the top 10 institutions of higher learning in the world are located in the US, half of them in California. The only problem is that the middle class can no longer afford to attend those institutions.

  • http://www.ranum.com Marcus Ranum

    You know who else uses bankruptcy as a defensive weapon!? The Roman Catholic Church. Trump’s in good company.

  • http://www.ranum.com Marcus Ranum

    Another point: the student loan bubble has caused a rather nasty side-effect. Now, student loans must be secured by someone else who guarantees them. So that even if the student goes bankrupt their parents (or a friend with real estate, *ahem*) has to co-sign it. In other words, the loan has to be collateralized to the point where bankruptcy merely shifts the risk.

    Trump doesn’t need to do that. He’s able to – sometimes – pre-deflect risk onto the taxpayers in an area, in the form of local government grants and guarantees. So it’s “heads, I win – tails, the taxpayers lose” with Trump getting all the profits and none of the downside. Sweet deal if you can get it.

  • http://en.uncyclopedia.co/wiki/User:Modusoperandi Modusoperandi

    colnago80 “The only problem is that the middle class can no longer afford to attend those institutions.”

    Exactly. The System is working.

     

    Marcus Ranum “You know who else uses bankruptcy as a defensive weapon!? The Roman Catholic Church.”

    They have to defend themselves against all those sexy, buggered children somehow!

  • sugarfrosted

    @2 I unsure if rising tuition is better or worse than Walker’s tuition freeze squeeze in Wisconsin.

  • busterggi

    Isn’t it interesting that just one personal bankrupcy ruins a person’s financial record forever (don’t believe that 7 year forgotten crap) but corporate bankrucy is SOP? Corporations aren’t people, people don’t get treated that well.

  • http://en.uncyclopedia.co/wiki/User:Modusoperandi Modusoperandi

    busterggi “Corporations aren’t people, people don’t get treated that well.”

    I’m sick of hearing this anti-Capitalism b.s. from you people.

    Look, if God intended for you to be treated as “well” as Corporate Citizens supposedly get treated, He would’ve created you Incorporated.

    And it’s not Capitalism’s fault that your lazy shiftless parents didn’t bother to register you as a Limited Liability Citizen under a Trust within their holding corporation.

    Nothing is going to change until you Moochers get up off your butts and invest some of the money you inherited from your parents in some DC lobbyists, as the Founding Fathers intended!

  • Childermass

    “Isn’t it interesting that just one personal bankrupcy ruins a person’s financial record forever (don’t believe that 7 year forgotten crap) but corporate bankrucy is SOP? Corporations aren’t people, people don’t get treated that well.”

    Truth be known, if I was an investor I would hope that I would not forget about Trump’s habit of declaring bankruptcy for corporations he controls either. Any investor is supposed to do research before they bet what they can’t afford to lose. And if they are doing for an institution then they simply are not doing their job if they don’t do the research. Either way something to going way wrong when people invest with the guy. It not like its not known. I joked a few times a couple decades ago that I was worth more than Donald Trump.

  • sugarfrosted

    @Modusoperandi. That’s what you think. I’m now “totally not student debt, shut up LLC.” They’ll never suspect a thing.

  • sugarfrosted

    @Modusoperandi. That’s what you think. I’m now “totally not student debt, shut up LLC.” They’ll never suspect a thing.

  • Al Dente

    Donald Trump has filed for corporate bankruptcy four times, in 1991, 1992, 2004 and 2009. All of these bankruptcies were connected to over-leveraged casino and hotel properties in Atlantic City, all of which are now operated under the banner of Trump Entertainment Resorts. He has never filed for personal bankruptcy, an important distinction when considering his ability to emerge relatively unscathed, at least financially.

  • Al Dente

    Donald Trump has filed for corporate bankruptcy four times, in 1991, 1992, 2004 and 2009. All of these bankruptcies were connected to over-leveraged casino and hotel properties in Atlantic City, all of which are now operated under the banner of Trump Entertainment Resorts. He has never filed for personal bankruptcy, an important distinction when considering his ability to emerge relatively unscathed, at least financially.