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

Dan Bates / The Herald
When Seattle Genetics founder, Clay Siegall lost his father while in college, he switched from studying for an MD to studying for a PhD., and a goal to treat cancer patients.  His efforts are paying off in lives.
Bothell biotech CEO resigns after domestic-violence allegation

Clay Siegall co-founded Seagen, which develops therapies for cancer patients. He’s accused of attacking his wife.

FILE - A sign at a Starbucks location in Havertown, Pa., is seen April 26, 2022. Starbucks says it will pay travel expenses for U.S. employees to access abortion or gender-confirmation procedures if those services aren't available within 100 miles of a worker’s home. The Seattle coffee chain says, Monday, May 16, 2022, the benefit will also be available to dependents of employees enrolled in its health care coverage. (AP Photo/Matt Rourke, file)
Starbucks will cover travel for workers seeking abortions

Amazon and Tesla also will provide the benefit. Walmart and Facebook have stayed silent.

A barista pours steamed milk into a red paper cup while making an espresso drink at a Starbucks coffee shop in the Pike Place Market, Tuesday, Nov. 10, 2015, in Seattle. It's as red as Santa's suit, a poinsettia blossom or a loud Christmas sweater. Yet Starbucks' minimalist new holiday coffee cup has set off complaints that the chain is making war on Christmas. (AP Photo/Elaine Thompson)
Interfaith group asks Starbucks to drop vegan milk surcharge

They say the practice amounts to a tax on people who have embraced plant-based lifestyles.

FILE - In this Monday, March 1, 2021 file photo, The first Alaska Airlines passenger flight on a Boeing 737-9 Max airplane takes off on a flight to San Diego from Seattle-Tacoma International Airport in Seattle. A Boeing pilot involved in testing the 737 Max jetliner was indicted Thursday, Oct. 14,2021 by a federal grand jury on charges of deceiving safety regulators who were evaluating the plane, which was later involved in two deadly crashes. (AP Photo/Ted S. Warren, File)
Alaska Airlines to keep canceling flights at high level for weeks

Flight cancellations since April will continue. The chaos has been damaging for Seattle’s hometown airline.

FILE - An airplane flies past the Boeing logo on the company's headquarters in Chicago, on Thursday, Dec. 20, 2001. Boeing Co., a leading defense contractor and one of the world's two dominant manufacturers of airline planes, is expected to move its headquarters from Chicago to the Washington, D.C., area, according to two people familiar with the matter. The decision could be announced as soon as later Thursday, May 5, 2022, according to one of the people. (AP Photo/Ted S. Warren, File)
Boeing expected to move headquarters from Chicago to DC area

The move would put Boeing executives close to their key customer, the Pentagon, and the FAA.

This 3D rendering shows Sila's 6000-foot facility in Moses Lake, to be used to manufacture lithium-ion anode battery materials. (Business Wire)
New factory in Moses Lake will bring hundreds of new jobs

The plant will manufacture lithium-ion anode battery materials for cars and cellphones.

Dr. David Kirtley at the new Helion headquarters, Antares, in Everett, Washington on Wednesday, Jan. 19, 2022  (Olivia Vanni / The Herald)
Helion Energy: New Everett company has the sun in its eyes

The firm is the winner of a new award by Economic Alliance Snohomish County, called Opportunity Lives Here.

Marysville Mayor Jon Nehring is this year's winner of the Henry M. Jackson Award given by Economic Alliance Snohomish County. Photographed in Marysville, Washington on April 25, 2022. (Kevin Clark / The Herald)
Jon Nehring: Longtime Marysville mayor who’s nurtured growth

He’s helped steer the city’s transformation and is winner of the Jackson Award by Economic Alliance Snohomish County.

Monti Ackerman, recipient of the John Fluke Award, is pictured Thursday, April 28, 2022, outside his office in Everett, Washington. (Ryan Berry / The Herald)
Monti Ackerman: A passionate volunteer and calculator whiz

The Fortive executive is the winner of this year’s Fluke Award by Economic Alliance Snohomish County.

Rep. Mike Sells, D-38, is the recipient of this year's Henry M. Jackson award. The award recognizes a visionary leader who through partnership, tenacity and a strong commitment to community has created lasting opportunities to improve quality of life and positively impact the regional economy. Photographed in Everett, Washington on April 29, 2022.  (Kevin Clark / The Herald)
Rep. Mike Sells: He fought for WSU Everett and worker rights

The retiring legislator is the recipient of the Floyd Award from Economic Alliance Snohomish County.

People sit outside the recently opened Amazon Go facility Wednesday, April 27, 2022, in Mill Creek, Washington. (Ryan Berry / The Herald)
Cashier-less Amazon Go buzzing in Mill Creek grand opening

Locals came to check out the high-tech store, with $3 avocado toast and cameras watching customers’ every move.

Joel Bervell (Courtesy photo)
TikTok med student @joelbervell named top Emerging Leader

Joel Bervell, who highlights disparities in medicine, took top honors at an event for 12 rising stars in Snohomish County.