Yesterday Bloomberg News revealed the real reason that Donald Trump wants to fire Jerome Powell, the chairman of the Federal Reserve. It’s not that the Fed’s interest rate increases are hurting the U.S. economy or causing stock market declines. It’s that they are costing Donald Trump money in his personal business.
In other words, this is just one more example where Donald Trump tries to use government policy to help him personally instead of doing what’s best for the country. And nobody thinks it is a smart move for the President of the United States to interfere with the decision making processes of the Federal Reserve.
According to Bloomberg:
“Every time the Fed raises rates, Trump’s payments on some $340 million in variable-rate loans go up. Since his January 2017 inauguration, the Fed’s steady rate hikes may have added a cumulative $5.1 million a year to his debt service costs, according to a Bloomberg News analysis of the president’s financial disclosures and property records.”
Every time the Fed raises rates, Trump’s payments on some $340 million in variable-rate loans go up https://t.co/j8pHHlADCB
— Bloomberg Politics (@bpolitics) December 22, 2018
If Federal Reserve officials raise interest rates by another quarter percentage point the cost to Trump will increase to $6 million per year. Now we know why Trump is freaking out and posting threatening and insulting tweets about Powell and the Fed.
Trump is known for being very “frugal” (i.e., cheap) so even though he brags about his billions in personal wealth, he would likely be extremely upset about an additional $5 – 6 million in interest costs that come out of his own pocket.
Stories have been told about how cheap he is. He is known to stiff subcontractors who worked on his properties. He is known to hire undocumented immigrants on his construction projects and then refuse to pay them, while threatening to deport them if they complain. He once cashed a 13-cent check. According to a lawsuit by the New York attorney general, he has used money from his personal charity to settle business disputes.
So it has to be driving him crazy that as president he can’t control what the Fed does with interest rates. He thinks that every U.S. government employee should do what he wants, and help his personal businesses.
Bloomberg reported that Trump’s increasing interest payments result from variable-rate loans he took out from Deutsche Bank years ago. The money was used to develop a golf course outside Miami and hotels in Washington and Chicago. When he got the $340 million in loans the Fed’s rates were near zero, and Trump paid a small margin above that. So it was very cheap money.
As interest rates rise, the money won’t be so cheap anymore, and Trump will join millions of other borrowers who will pay the price of rising interest costs. If this continues to happen we can expect Donald Trump to continue to try to change the Fed’s policies for his personal benefit, no matter how much instability and chaos he creates in the global financial markets.
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