The Journal. - Trump Needs $450 Million He Doesn’t Have
Episode Date: March 22, 2024Donald Trump’s finances are under stress. He faces a $454 million judgment against him in a civil-fraud case. Meanwhile, his campaign fundraising is trailing President Biden’s. WSJ’s Peter Grant... unpacks the developments and a potential windfall for Trump. Further Reading: -Trump Is in a Race Against Time to Protect His Fortune -Trump Makes a New Fortune With Truth Social Listing Further Listening: -Biden vs. Trump: The Rematch Nobody Wants Learn more about your ad choices. Visit megaphone.fm/adchoices
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Last month, the New York Attorney General, Letitia James, won a major civil fraud case against former President Donald Trump.
And the judge overseeing the case ordered Trump to pay a pretty big penalty.
And we have breaking news out of New York City. The judgment in Donald Trump's civil fraud trial has been signed.
The civil trial ruling that will cost Donald Trump and his family and his company hundreds of millions of dollars.
$450 million in penalties and interest for illegally inflating the value of his assets.
And barring him from doing business in New York for three years.
Does Trump have that money available to pay?
Does he have $450 million in cash?
No, he doesn't.
That's our colleague Peter Grant.
He has said that he has over $400 million in cash,
but he's also operating a business.
He can't take all of his cash and put it up.
So the answer is no,
he doesn't have that much money readily available.
Trump is appealing the decision, but he only has until Monday to come up with the money.
He only has a couple days, but if he passes that deadline, that means that Letitia James could
start trying to seize his property.
And Trump will fight that process every step of the way.
Welcome to The Journal, our show about money, business, and power.
I'm Ryan Knudsen. It's Friday, March 22nd.
March 22nd.
Coming up on the show,
Donald Trump needs to come up with hundreds of millions of dollars.
Can he?
Embrace the summer vibes with Summersby Hard Cider.
Bursting with lovely aromas of apple, this light-bodied, fruity cider offers a crisp, clean finish The civil fraud case that Donald Trump lost was all about the value of his real estate.
Now, according to the New York Attorney General, when he borrowed money from the banks,
he fraudulently stated what his properties were worth, and as a result result was able to borrow much more using those properties as collateral.
Fraudulent how?
Fraudulent because think of buying a house.
If you're buying a house and you're applying to the bank for a mortgage, the bank wants to know what that house is worth to determine how much they can lend against it. If the house is worth $500,000 and you claim
that the house is worth $750,000, you're going to be able to get a much larger loan on that house.
That's essentially what Trump is accused of doing multiple times with multiple lenders.
So Trump would tell the banks that he had assets, he had property that was worth way more than it actually was in order to fraudulently get larger loans than he should have been able to.
Exactly.
Isn't also part of this case that he was simultaneously undervaluing his properties when reporting his assets to the government and therefore paying less taxes?
Well, that's exactly right.
I mean, when Trump pays taxes, there's ample evidence that Trump will undervalue the assets for the purposes of paying less in taxes.
That same property that he will undervalue for tax purposes, he'll overvalue when it comes to borrowing against it. His argument, his counter
argument in this case is, look, the banks that I supposedly defrauded, they haven't objected.
Trump has also maintained that this is common for borrowers to overstate values in this sense. So,
it's the kind of thing that everybody does. The fact is that basically what Trump is saying is, hey, yes, I'm driving in a 55 mile per hour
zone and speeding, but everybody is doing that. Looking at it another way, other people might be
doing 70 miles per hour, but he's doing 120. The judge in the case agreed with the attorney general and ordered Trump to pay that massive amount of $454 million.
Trump has appealed the decision
and says he doesn't have enough cash to pay.
Even though he's worth a lot, his assets aren't very liquid.
We estimate that Trump is worth over $3 billion,
but much of that is tied up in real estate
that he would have to sell or borrow against
in order to raise the money he needs.
He owns a lot, especially in the U.S.,
and he owns golf courses all around the world,
as well as pieces of some resorts and hotels.
If he doesn't have enough cash to pay out of his own pocket,
there are a few other ways he could come up with the money. One would be by going to a bond company. Bond companies promise
to pay someone's penalty in the event they don't win their appeal. But bonding companies only agree
to do this if they can get something in return. The bonding company is there to make money. And so if they're guaranteeing payment,
they need to know that they're not going to be on the hook. So for you to get the bond,
you have to sometimes put up your real estate as collateral or put up cash as collateral.
That sounds easy then. Great. He's got lots of properties.
Well, it's tricky to put up real estate as collateral in New York State. And so
some bonding companies won't accept that. And because then if they are to take it over,
then they have to deal with selling it. So the Trump side claims that it has talked
to numerous bonding companies and they've all said that we can't do this.
Trump says he's talked to 30 bonding companies and none have been willing to work with him.
Meanwhile, he's asking the appeals court to waive the requirement that he post the full bond.
His lawyers say the court is asking for too much money,
and that paying it would irreparably harm his business.
There are other things Trump could do to get the money. He could take out a loan on
his real estate, but interest rates are really high right now. He could also try to sell some
of his properties, but there are downsides to that too. I mean, on one hand, you could argue that
this is a bad time for Trump to sell, that the commercial real estate market is weak and buyers will recognize
that he's weak and try to take advantage of him. On the other hand, a lot of his critics will say
that buyers are trying to ingratiate themselves with the man who might be occupying the White
House one year from now. So any kind of sales process would go through that kind of criticism and scrutiny.
Trump posted on Truth Social this week, quote,
I would be forced to mortgage or sell great assets, perhaps at fire sale prices.
And if and when I win the appeal, they would be gone.
There's actually one other way Trump could solve his money problems.
And it has nothing to do with real estate.
It involves Truth Social, the Twitter-like website he launched in 2022.
Truth Social is currently owned by Trump and other investors.
But the company's shareholders approved a deal today
that will take it public through a merger.
The company it's been planning to merge with already trades on the stock market.
There's been a lot more interest in the stock ever since he became the presumed Republican nominee.
And you can see in the investor chat rooms that this appetite has driven up the value.
And it seems like some of his supporters are using this almost as a way to give him support.
They're buying this stock in order to support
the former president. Well, it's doing two things. Yes, his supporters like the idea of supporting
the former president, but they also see this as a way of making money. If the value of this company
continues to rise, they're not only supporting the former president, they're also making a profit.
they're not only supporting the former president, they're also making a profit.
Shares of the company that's acquiring Truth Social are up over 200% over the past year,
as of yesterday's market close. But while Truth Social generates a lot of buzz,
its business isn't great. The company brought in only $3.4 million in revenue and posted a net loss in the first nine months of last year. Still, because
the stock has shot up so much, it has the potential to make Trump a lot of money. He could start
trading on the stock market as early as Monday. We estimate it could be more than $3 billion that
his stake in the social media company would be worth after this merger took place. That would give him profits, a lot of profits on paper.
So that $3 billion would be stock, that'd be shares in Truth Social.
So in order to get that money, you'd have to sell the stock or sell that ownership stake.
Exactly, exactly.
And that would be problematic because there are some restrictions on when you can start selling stock after a deal like this.
So my guess is that wouldn't be available as an immediate source of cash for months.
There's also a similar problem with borrowing against it.
There are restrictions on stock that's newly public and newly traded.
on that stock that's newly public and newly traded.
There is a chance that Trump could get a waiver from the company,
giving him access to the money sooner.
But it's not a sure thing.
Can he ask his donors to help him pay for these legal fees and this fine?
The answer is yes on the legal fees.
But when you start talking about hundreds of millions of dollars, I mean, the answer is yes on the legal fees. But when you start talking about hundreds of millions of dollars,
I mean, the answer is yes in a way.
He has numerous wealthy friends that he could ask,
but I think he'd have to disclose that.
How Trump's money problems extended the campaign trail?
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So Trump is in this bad financial situation when it comes to his legal fees.
What does it mean for his campaign finances?
Well, there are two different worlds, really.
One is the business-slash-legal-judicial world,
and the other is the political world.
And in the political world, he is trailing Biden in fundraising.
While Trump is having to pay big legal fees,
his campaign fundraising is also lagging behind.
A new fundraising report showed that Biden's campaign
and its allied groups have raised $155 million,
while Trump's has only raised about half, just $75 million.
That's about half of what Biden has raised.
So he's behind.
Also, Trump is having problems so far tapping a number of sources.
For example, he has not embraced the supporters of Nikki Haley.
One would think that after he became the presumptive nominee, he would reach out to
them. He hasn't done that yet. So that's a source of fundraising that he hasn't really tapped yet.
Also, in his last campaign, Trump relied very heavily on small donors.
Those donors are somewhat tapped out.
Some people close to Trump say that he's been making personal calls to wealthy donors to drum up donations.
And recently, Trump's campaign formed a fundraising committee together with the Republican National Committee and numerous state GOP committees.
together with the Republican National Committee and numerous state GOP committees.
And that group is inviting wealthy patrons to a dinner in Palm Beach, Florida,
with suggested contributions topping out around $800,000 per person.
Does Biden's lead in fundraising give us any hints as to how the election could play out?
Not really.
A lead in fundraising like Biden has does not necessarily translate to a lead in the polls. Also, keep in mind that Trump gets a lot of free publicity. So he probably
doesn't need to raise as much as Biden to still be a very, very viable candidate. We have to keep
in mind that Hillary Clinton far outspent him, and he still won that election.
Do you have any sense of why Biden seems to have such a significant lead?
I think Biden has had the incumbency working in his favor, as sitting president always is going
to be able to raise money, more money than an
opponent, because leading into the election, he's been probably quietly fundraising all this time.
While Trump continues to campaign, he's still getting a lot of coverage in the news about the
civil fraud case and the $454 million he has to come up with. And Peter says that for Trump,
he wants to make sure his supporters see him
as coming out on top.
I think a lot of this needs to be looked at
through the political lens
because Trump's primary focus,
far more than his business,
is on winning this election.
And anything that looks like he's capitulating or losing
is something that would run very counter to his image.
He doesn't want that.
What he wants to do is show the world that he's either fighting or winning against the New York attorney general.
And if he's able to succeed, then at his rallies, he can talk about how he outfoxed the woke liberals of New York State.
If Trump is not able to win on appeal, and ultimately he does have to pay this fine, what might that do to his image?
I don't think it would be great for his image, but when you think about Trump's image, people love him or they hate him.
And the fact that he loses a case to Letitia James in New York, I think, is not going to hurt him too much with his base.
And it's going to make people who don't like him dislike him more.
But ultimately, I think his image
as a Teflon Don will continue.
That's all for today.
Friday, March 22nd.
Additional reporting in this episode by John McCormick and Corinne Ramey.
And before you go, next week, our special series, The Trial of Crypto's Golden Boy, is back.
Sam Bankman-Fried returns to court for his sentencing.
And Rachel and Caitlin will be there.
They'll catch you up on everything that's been happening.
What Bankman-Fried has been up to while awaiting sentencing.
It involves packets of fish.
And the arguments his lawyers are making to get him a shorter sentence.
A new episode will be in our feed Tuesday morning.
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