Federal Reserve Chairman Jerome Powell addresses the Federal Reserve Board’s 15th annual College Fed Challenge Finals in Washington on Nov. 29. (AP Photo/Cliff Owen, File)

Federal Reserve Chairman Jerome Powell addresses the Federal Reserve Board’s 15th annual College Fed Challenge Finals in Washington on Nov. 29. (AP Photo/Cliff Owen, File)

Trump may be losing $5 million a year from Fed rate hikes

The president has repeatedly attacked the Federal Reserve Chairman’s interest-rate increases.

By Shahien Nasiripour / Bloomberg News

NEW YORK — President Donald Trump has repeatedly attacked Federal Reserve Chairman Jerome Powell’s interest-rate increases as a drag on U.S. economic growth. They’re also cutting into his own fortune.

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.

If Federal Reserve officials raise interest rates by another quarter percentage point when they meet Dec. 18-19, as investors expect, make that $6 million per year.

That might not seem like much to a billionaire. But the president is renowned for his preoccupation with preserving his wealth. He once cashed a 13-cent check and, according to a lawsuit by the New York attorney general, has used money from his personal charity to settle business disputes. Trump has denied misusing charity funds.

Trump’s interest payments are tied to variable-rate mortgages he took out from Deutsche Bank between 2012 and 2015 to develop a golf course outside Miami and hotels in Washington and Chicago. At the time, the Fed’s rates were near zero, and Trump paid a small margin above that.

The Fed has lifted its benchmark short-term rate six times since Trump’s inauguration, actions that have pushed up the rate banks charge their best customers to 5.25 percent from 3.75 percent. For loans indexed to the prime rate, the moves would have pushed Trump’s annual interest payments to about $16.3 million from $11.2 million over the same time period — about $850,000 for each quarter-point increase.

Press representatives for the Trump Organization and White House didn’t respond to requests for comment.

Trump has been increasingly strident in criticizing Powell since July, arguing the central bank’s policies are threatening an economic boom that he sees as a validation of his push to cut taxes and slash regulations.

By October, shortly after the Fed’s most recent rate increase, he said the central bank was “going loco” and identified it as his “biggest threat.” Last month, Trump told the Washington Post he was “not even a little bit happy with my selection of Jay,” whom Trump chose to be Fed chairman. This week, he urged Powell against the expected December increase, telling Reuters the central bank “would be foolish” to proceed.

Trump’s statements have been widely criticized for breaking with decades of tradition for presidents to avoid public comment on the Fed’s actions in order to respect the central bank’s independence. Former Fed vice chairs Alice Rivlin and Alan Blinder described Trump’s comments as highly unusual.

Before he was president, Trump regularly denounced the Fed for keeping rates low for too long. “Record inflation,” for example, was always around the corner. But his apparent change of heart amplifies worries that his decision to maintain his debt-laden business empire while in office may influence his performance as president.

Trump’s interest payments are pegged to either the prime rate or one of seven tenors of the London interbank offered rate, commonly known as Libor. Those rates are heavily influenced by the federal funds rate set by the U.S. central bank. The prime rate, and the one- and three-month Libor have all increased by about 1.5 to 2 percentage points since January 2017, nearly matching the 1.5 percentage point increase in the federal funds rate set by the Fed.

The loan documents don’t specify whether Trump and Deutsche Bank have elected to use Libor or the prime rate when calculating Trump’s interest payments. Bloomberg’s analysis is based on how much Trump borrowed, rather than how much he presently owes. Trump has to make balloon payments when the loans come due in 2023 and 2024, according to property records and his financial disclosure.

Trump’s privately held company doesn’t disclose its performance, but there are signs business has slipped since he took office. An ambitious plan to launch new hotels in dozens of cities faltered, and Trump-branded buildings in Manhattan, Toronto and Panama City have dropped the president’s name.

Trump’s net worth has fallen some 7 percent over the past two years to $2.8 billion, according to figures compiled by the Bloomberg Billionaires Index. He has at least $57.2 million in cash, according to his most recent financial disclosure.

Talk to us

More in Herald Business Journal

With the Olympic mountains in the background, Boeing's 777X lifts off from Paine Field on its first flight, to Boeing Field in Seattle, on Saturday, Jan. 25, 2020 in Everett, Wash. (Andy Bronson / The Herald)
More 737 Max fallout: Boeing delays 777X delivery until 2023

The company also reported a record loss of $11.94 billion in 2020, much of that due to the 777X delay.

An Alaska Airline plane lands at Paine Field Saturday on January 23, 2021. (Kevin Clark/The Herald)
Paine Field makes short list of airports that could grow

Arlington’s airport is also in the running, says a state group planning for future air travel demand.

FILE- In this Sept. 30, 202, file photo, a Boeing 737 Max jet, piloted by Federal Aviation Administration (FAA) chief Steve Dickson, prepares to land at Boeing Field following a test flight in Seattle.  (AP Photo/Elaine Thompson, File)
European aviation agency clears Boeing 737 Max to fly again

The EASA will continue to monitor the plane’s operations closely as the aircraft resumes service.

(Getty Images)
You voted: The best bakery in Snohomish County

Even during a pandemic, people still have their favorites.

submitted by Peg Tennant
Oak Harbor Farmers Market closes after more than 20 years

A new group is already planning for a new market this spring at Windjammer Park.

Weatherstripping is installed Thursday afternoon at Pallet in Everett on January 21, 2020. (Kevin Clark/The Herald)
Everett-based Pallet offers a novel way to shelter homeless

The manufacturer’s small, temporary homes have helped hundreds of people get off the streets around Puget Sound.

A Boeing 777X airplane flies over Moscow, Idaho. during a test flight Tuesday, June 23, 2020. The new model of airplane had its first flight on Jan. 25, 2020, from Paine Field in Everett, Wash. The 777X will be the world's largest and most efficient twin-engine jet, according to Boeing. (Geoff Crimmins/The Moscow-Pullman Daily News via AP)
Tax break proposed for manufacturers, but it needs a sponsor

Port of Everett CEO Lisa Lefeber hopes to boost manufacturing across the state with a new incentive.

The strip-mall site (bottom) where Trent Development hopes to build 350 studio, one-bedroom and two-bedroom apartments, on Wednesday, Jan. 20, 2020 in Lynnwood, Wa. (Olivia Vanni / The Herald)
Hundreds more apartments planned around Lynnwood light rail

In a new proposal, a developer envisions 350 units, two buildings of at least seven stories, a one-acre courtyard and a dog spa.

FILE - In this Jan. 24, 2019 file photo Washington Gov. Jay Inslee, left, looks on as Suzi LeVine, right, the state's Employment Security Department Commissioner, talks to reporters at the Capitol in Olympia, Wash. The state of Washington is calling in the National Guard to help process unemployment benefit claims as officials grapple with a backlog caused in part by a fraud ring that stole more than half a billion dollars in aid, officials said Thursday, June 11, 2020. LeVine said that Gov. Jay Inslee approved the deployment of troops who will start assisting her team next week as it tries to reduce the unemployment claim backlog.(AP Photo/Ted S. Warren,File)
Head of state employment agency to join Biden administration

Suzi LeVine’s departure is effective Feb. 1. A deputy, Cami Feek, will serve as acting commissioner.

Our readers have voted on a few of their favorite things in Snohomish County. (Getty Images)
The best in Snohomish County, chosen by you

Even during a pandemic, people still have their favorites.

FILE- In this Sept. 30, 202, file photo, a Boeing 737 Max jet, piloted by Federal Aviation Administration (FAA) chief Steve Dickson, prepares to land at Boeing Field following a test flight in Seattle.  (AP Photo/Elaine Thompson, File)
European aviation agency: 737 Max to be cleared next week

The review of the aircraft “began with the MCAS but went far beyond.”

Roei Ganzarski, CEO of magniX, poses with a production electric engine, the magni500, at the  company's new office on Seaway Boulevard on Monday, Jan. 18, 2020 in Everett, Washington.  (Andy Bronson / The Herald)
Electric aircraft developer magniX moves HQ to Everett

The company builds electric motors, and it’s teaming with Arlington’s Eviation to launch a fully electric plane.