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Born to Be a Crony Capitalist: Here’s How Donald Trump Really Got Rich

Peter Rugh Oct 8

Wayne Barrett recalls a night in 1991 spent gazing up at 106 Central Park South. Ten years earlier, the 36-story building, a former hotel designed in the art deco style of the 1930s, was purchased by Donald Trump, renovated and converted into luxury condos. As a reporter for the Village Voice the veteran investigative journalist had spent most of his career tracking Trump, covering his shady financial dealings through the 1970s and ’80s and watching as the golden-haired playboy rose to become one of New York’s wealthiest and most recognizable developers.

Barrett remembers that looking at the apartment complex, only one light went on during the entire night. “Nobody was living there,” he recently told The Indypendent. “To the degree that Donald has built housing at all it’s mostly for corporate tenants. The kind that buy apartments and when one of their executives visits from Japan they stay there a couple nights a week.” 

Such a revelation would be of little interest to people living outside of the New York area, except that Trump has licensed his name to building projects around the globe, several of which have gone bankrupt. More important, he is the leading Republican candidate for president and his position at the top of the GOP field is based in large part on the image he has cultivated for himself, through books and media appearances, as that of a self-made man and expert negotiator who has overseen developments unparalleled in scale. 

When Univision reporter Jorge Ramos asked Trump in August how he was going to build a 1,900-mile wall along the border with Mexico, a central aspect of the candidate’s immigration, or rather, anti-immigration plan, Trump replied: “I’m a builder. That’s easy. … What’s more complicated is building a building that’s 95 stories tall.” Writing in his recently re-issued political manifesto, Time to Get Tough: Make America Great Again!, Trump proclaimed that on the world stage America needs “hard-driving, vicious cutthroat financial killers” such as himself, “the kind of people who leave blood all over the boardroom table and fight to the bitter end to gain maximum advantage” over evil predators like China and OPEC. Gone will be “these cream puff ‘diplomats’ Obama sends around the globe to play patty cake with foreign governments.”

Trump has smoothly pivoted off the reality TV stage — where once a week for the past nine years a primetime audience of millions was treated to the spectacle of him firing people on NBC’s “The Apprentice” and its later reincarnation, “Celebrity Apprentice” — and onto soap boxes in Iowa, Alabama and New Hampshire. But the myth of the sorcerer’s apprentice is probably more analogous to Trump’s story than that of expert king of industry. The financial empire upon which he has staked his reputation is largely built on hot air. The Republican Party which taps into white racial angst to build political support, the media that have bought into and promoted his hollow self-image and, less well-known, succeeding local and federal government administrations, have all advertently or inadvertently lent a hand in casting the Trump spell currently gripping the nation. If voters are not careful, they will be swindled like so many of Trump’s investors. 

Trump vs. Tenants

With the 1981 purchase of 106 Central Park South, Trump secured not only the hotel but an adjacent apartment complex at 100 Central Park South. The two buildings were part of what was known at the time as Barbizon Plaza but were soon added to the long list of properties to which the tycoon lent his name. They were rechristened “Trump Parc.” 

“In order to derive the most value from the site,” Trump wrote in his 1987 memoir The Art of the Deal, he initially planned “to knock down both buildings and construct in their place one huge, beautiful, modern luxury condominium tower.” 

But the tenants living in rent-controlled apartments at 100 Central Park South weren’t eager to vacate. They took the Trump Organization to court, complaining of harassment. Trump in turn smeared them in the press as wealthy moochers too cheap to pay market rates for their homes. He also made an offer to then-Mayor Ed Koch to house homeless people in the building’s vacant apartments, not out of a good Samaritan instinct, but in the hope that the rent-controlled tenants would flee. Koch rejected Trump’s proposition. 

By 1998 Trump struck a deal with the building’s remaining inhabitants that allowed them to either purchase their apartments at a markdown or to keep renting without further pressure to leave. Meanwhile, 106 Central Park South offers a glimpse of the kind of housing Trump would have built next door had he had the chance: the type of property that has become all too common in New York over the last two decades, luxury developments that sit largely vacant accruing value for their super-wealthy owners.

In Wayne Barrett’s estimation, Trump’s father, Fred, was a much more successful builder than his son. “He built 20,000 units of real housing for real people,” he said. “Good housing. Single-family units, multi-family units that stretched all over Brooklyn and Queens. Most of it is still lived in and enjoyed today. He did remarkable work. People loved it and your average working-class family could buy it or rent it.” Yet, Barrett added, both father and son were “state capitalists or crony capitalists of the worst order.” 

Government Handouts

That’s because the pair amassed their fortunes thanks in large part to government assistance, a narrative that conflicts sharply with the image of the self-made man Donald Trump has promoted in his numerous books, on his reality television shows and now on the campaign trail. Even Friedrich Drumpf, Trump’s grandfather, relied on a government handout. In his case, the U.S. Army cleared routes through Alaska into Canadian Yukon Territory by displacing Inuit tribes ahead of the Klondike gold rush. It was deep in those expropriated Arctic regions where Friedrich operated a saloon, brothel and dining hall, the beginnings of the Trump fortune. 

Through the New Deal administration of President Franklin Roosevelt, Fred Trump received mortgage guarantees from the Federal Housing Administration (FHA) that allowed him to build thousands of homes in Brooklyn, becoming the borough’s biggest builder. During World War II, Fred constructed FHA-backed housing near major East Coast shipyards in Chester, Pennsylvania, and in Norfolk and Newport News, Virginia. He later refused to testify at the hearings held by Republican Homer Earl Capehart, chair of the Senate’s Banking and Currency Committee, during which Trump and a host of other developers were accused of pilfering millions of dollars from the war effort. 

After the war, Fred Trump returned to building in the outer boroughs, erecting large developments in Brooklyn and Queens with city, state and federal assistance. Trump Village in Coney Island stands as his largest accomplishment and one of the few to which he lent his name. The 61-acre, mostly uninhabited area on which Trump Village was built was originally slated to become a cooperative complex erected by the labor union-backed United Housing Federation (UHF). 

But drawing on his close political connections with the Brooklyn Democratic Party machine and the administration of Mayor Robert Wagner, to whom Trump was a top donor, he denounced the UHF plan as an affront to the free-enterprise system and an attempt to use tax abatements in order provide housing to a “privileged few.” Fred wrangled 40 of those acres for himself. He then took advantage of the same tax abatements he criticized the UHF for receiving.

All told, Jerome Tuccill notes in Trump: The Saga of America’s Most Powerful Real Estate Baron, New York State put up 90 percent of the funding to erect Trump Village. An eventual review by the State Investigations Commission after it was complete revealed that Fred exaggerated the costs of construction by renting equipment at inflated prices from a company he owned and by distorting the purchasing price of the property. The commission estimated Fred skimmed $1,850,000 off the state in the deal, equivalent to more than $14 million today when adjusted for inflation. Investigators sent their findings to the Brooklyn district attorney’s office, but charges were never filed.

Like Father, Like Son

Donald took over the family business in 1974 at the age of 28, and one of his first orders of business was settling a Department of Justice (DOJ) suit accusing the Trumps of violating the 1969 Fair Housing Act by systematically refusing to rent to African-Americans. Much of the evidence was collected through an Urban League investigation, which found prospective tenants at Trump-owned properties were screened on the basis of race. In court testimony Donald feigned colorblindness, though under cross-examination he conceded that he managed properties that were inhabited entirely by whites. Through court filings and in press releases he alleged that by suing him the DOJ was attempting to force him to rent to welfare recipients. In 1975, Trump settled with the DOJ, agreeing to place ads for Trump apartments in minority-run newspapers. 

Charges of racism against Trump surfaced again on the campaign trail this year. Announcing his intention to run for president, Trump complained that lax border enforcement was allowing “rapists” and “murderers” to enter the United States — hence his scheme to erect a massive wall, as well as deport 11 million undocumented individuals and their families. Trump has continued to demonize welfare recipients too, lamenting to Sean Hannity of Fox News that those who receive government assistance “lack an incentive to work.” “They make more money by sitting there doing nothing than they make if they have a job,” he claimed. 

But like his father before him, Donald has made millions off the government by essentially doing nothing. 

When the Trump Golf Links in Ferry Point, Bronx, opened in April, the city’s Independent Budget Office estimated that $230 million in public subsidies had been poured into the project. It’s unclear exactly what taxpayers get out of the investment, except that Trump will manage the site. He was supposed to build a children’s park nearby, though as of July, when the New York Times investigated, it did not have bathrooms or much playground equipment beyond a slide. Since 2004, Trump Tower in Midtown has been receiving tax breaks on its commercial real estate that will eventually total $163.8 million by the time they expire next year, the conservative National Review reported in August. 

The developer’s dependence on government generosity goes back to his earliest Manhattan ventures in the 1970s. By leveraging his father’s political connections, this time with Mayor Abraham Beame, Trump secured building rights on rail yards owned by the bankrupt Penn Central Transportation Company along Midtown’s western shore from 59th to 72nd Street and to the Hotel Commodore above Grand Central Terminal on 42nd Street. Trump eventually built Trump City (since renamed Riverside South by new owners) on the west side with millions in public subsidies and received a 40-year tax abatement worth $400 million to transform the Commodore into a Grand Hyatt.

Beyond the Hype

Trump attributes such gifts to his brilliant negotiating style. Yet, despite all the self-generated hype surrounding Trump’s acumen as a businessman, the National Journal recently suggested that he would be even richer today had he done less. If Trump had put the $200 million Forbes estimated he was worth in 1982 into a mutual fund of S&P 500 stocks, “it would have grown to more than $8 billion today,” the Journal reported. Trump’s recent statements that he is worth $10 billion are widely viewed as exaggerations in the financial press. Forbes estimates he is worth $4.1 billion; Bloomberg, $2.9 billion. In recent years Trump ventures have undergone a number of bankruptcies. His primary sources of income appear, based on campaign filings, to be speaking engagements, “Celebrity Apprentice” (though NBC finally fired him this summer after his remarks disparaging Mexican immigrants) and licensing his name to developments nationally and abroad. 

In a 2011 deposition over a failed condominium project bearing his name in Florida, lawyers representing clients forced to forfeit their down payments when the project went bust asked Trump if he ever exaggerated the value of his properties. “Not beyond reason,” Trump stated. 

Likewise, Trump’s financial empire is built on his exaggerated image as a success, not on actual success. What he has accomplished is largely thanks to his father’s government-gifted wealth and contemporary taxpayer largess. He has further demonstrated a willingness to attack people of color and the poor (for example, the infamous full-page ads he took out in several New York City dailies 1989 calling for the reinstatement of the death penalty following the erroneous arrest of five black youths in the Central Park jogger rape case) in order to gain a leg up, cultivating a base of supporters among whites who feel threatened by the shifting racial composition of America.

I asked Wayne Barrett if he thinks Trump would be doing as well as if he were better vetted. He was doubtful. “A lot of support for him is not fact-based at all, so I don’t know what facts would change [Trump supporters’] minds,” he said. 

Perhaps the most revealing portrait of the man emerges in an interview Trump gave filmmaker Errol Morris in 1998. 

“[A]t the end of all that accumulation you see what happens and it’s not necessarily all positive,” Trump tells the documentarian in a scene available on YouTube. In it, Trump reviews the classic film Citizen Kane. “In real life I believe that wealth does in fact isolate you from other people.” The genius of Citizen Kane, Trump said, is that it brings a “rather sad, lonely figure back into his childhood.” 

According to a recent biography by Michael D’Antonio, Never Enough: Donald Trump and the Pursuit of Success, which is based on extensive interviews with the candidate, his family and his associates, Fred Trump raised his son “to be a killer” and repeatedly whispered in his ear, “You are a king.” Trump told D’Antonio that he considers himself “basically the same” person now as he was when he was in the first grade.

While most political professionals think it’s unlikely Trump will be moving into the White House in January 2017, few expected the loud-mouthed reality TV star to get as far as he has. Should he somehow prevail, under King, I mean president, Donald, the American people will likely desire a re-vote as much as Charles Foster Kane longed for his Rosebud.