michael barbaro

From The New York Times, I’m Michael Barbaro. This is “The Daily.” Today: At a time when most Wall Street firms had stopped doing business with Donald Trump, a single bank lent him more than $2 billion. Natalie Kitroeff talks to our colleague David Enrich about a two-decade-long relationship that could unlock the president’s financial secrets. It’s Thursday, May 23.

natalie kitroeff

So what’s the story of Deutsche Bank?

david enrich

Oh, man. I can go back 150 years. Is that what we want to do?

natalie kitroeff

Please, yes.

david enrich

O.K.

[music]

david enrich

So, founded in 1870, it was a bank that was supposed to help German companies expand all over the world. And it banked exclusively for German companies. It was primarily a financer of infrastructure projects, so it did a lot of railroad work, things like that. And this is all going well and according to plan until the rise of Hitler and the Nazis in the 1930s. And at this point, Deutsche Bank’s role goes from being a force for industrialization and good stuff to being a force for evil. The bank’s logo disappears, and it’s replaced by a swastika.

natalie kitroeff

Yikes.

david enrich

It very quickly becomes an important part of the Nazi military machine. Deutsche Bank financed the construction of Auschwitz. It financed the company that was making chemicals and gas for Auschwitz’s gas chambers. And as Germany laid waste to Europe and conquered all these countries, Deutsche Bank would come in and take over those countries’ banks and conduct what’s called Aryanization — basically, removing Jews and other non-Aryans from these companies and replacing them. So it’s part and parcel of the Nazi military machine. And after the war ends, the bank’s C.E.O. is tried and convicted of being a war criminal. The bank is regarded by the Western powers as having been a participant in war crimes and being a criminal entity.

natalie kitroeff

So what happens to Deutsche Bank after the war?

david enrich

After the war it becomes a leading force for the reconstruction, redevelopment, and reunification of Europe. And the bank and its leaders, they essentially become a force for good in the world and help rebuild the Western world that has been shattered by World War II. And this lasts for a couple of decades. And then there’s this succession of C.E.O.s who try to figure out which direction to take the bank. And the choice they take is to go headlong along this path of chasing Wall Street riches. And that means they all of a sudden need to go from basically zero to 60 in the United States. And that leads them to decide to start getting into all these new businesses in the U.S. They want to get bigger in stock and bond trading. They want to get bigger in mergers and acquisitions. And they want to get bigger in commercial real estate, especially in New York City.

natalie kitroeff

So how are they received on Wall Street? Does anybody know them?

david enrich

No, no one can even pronounce their name. There’s a wonderful anecdote about how, one day, a sign appeared in the lobby of the offices. And it was a phonetic pronunciation of how to say the bank’s name. And it turned out the reason that sign was necessary is that a lot of employees had been mispronouncing their employer’s name as “Douche Bank.”

natalie kitroeff

Yikes. That’s problematic. So what’s the strategy? If nobody can even pronounce your name, what’s the strategy you pursue on Wall Street?

david enrich

You take more risks than anyone else. It’s that simple. There’s a whole category of potential clients out there that can’t be banked by normal financial institutions because they’re considered too risky, they’ve defaulted on past loans, the projects they’re pursuing are crazy. And this is a whole group of people that’s out there that is very eager to find a big bank that’s willing to do business with them. And Deutsche Bank decides to fill that void.

[music]

david enrich

And so it’s summer of 1998. The phone rings at Deutsche Bank. And there’s a broker in the line who says, would you be willing to make a loan to Donald Trump? And the guy in the commercial real estate business at Deutsche Bank says, we would be willing to make a loan to just about anybody right now. Have him come on in.

natalie kitroeff

What’s Trump’s reputation on Wall Street at this point?

david enrich

Deadbeat. He keeps defaulting on loans. He keeps sticking lenders with hundreds of millions of dollars of losses. He is viewed as the embodiment of a bad credit risk. This is long before he becomes a reality TV star. So this is in 1998. He, at this point, is a not-very-successful casino magnate and aspiring big-ticket real estate developer. And so Trump comes on in by himself — no entourage or anything — and presents a proposal. He is looking to finance the gut renovation of this art deco tower, 40 Wall Street. Before the ink has even dried on that loan, they agree to do another loan to do the ground-up construction of a residential tower right across from the U.N. in midtown Manhattan. And it’s just off to the races from there.

natalie kitroeff

So what does Deutsche Bank get out of this relationship with Donald Trump?

david enrich

It gets two things. It gets money, and it gets publicity. So the money is simple. The bank charges high interest rates on these loans. It also collects fees for the privilege of doing business with it. The other thing is a little more intangible, but I think equally important, which is that the bank starts to use Donald Trump as a prop to lure other clients. For example, the bank has an annual pro-am golf tournament up in Boston every fall. And Trump becomes one of the celebrity participants. And he works the crowds before and after he golfs, signing their $100 bills. And one year, they do a promotional video. And they sit Trump down in the clubhouse at the golf tournament with the cameras rolling and say, Donald, why do you like doing business with Deutsche Bank? And he says with a big smile on his face, because they’re so fast and easy.

natalie kitroeff

So for now, everything’s kind of hunky-dory. Things are going well.

david enrich

Everyone’s happy.

natalie kitroeff

What happens next?

david enrich

So the early 2000s, Trump comes back to Deutsche Bank for another financial project. And this one is different. He’s not looking to build a building or anything like that. What he’s looking for is money for his Atlantic City casinos. And his casino company is deep in debt. And so he gets Deutsche Bank to agree to help the casino company sell a bunch of bonds. And so the way that works is, there’s something called a roadshow. And Trump and Deutsche Bank go off to meet a bunch of institutional investors. And Trump is supposed to give his financial pitch for why these investors should entrust their money with his casino company. And the roadshow seems to be going really well. There’s big crowds. People bring cameras to the events. And at the end of this, Trump goes to his banker at Deutsche and says, that went great. How much money did we raise? And the poor banker needs to break the news to Trump that, yes, they did attract large crowds, and, yes, people seemed happy to see them, but, no, people were not willing to provide him with their money.

natalie kitroeff

Wow. So here’s Donald Trump trying to sell bonds, which basically means he’s asking for loans, and no one is biting.

david enrich

No one would touch him. So the roadshow was a dud. And so Donald Trump comes in and assembles the group that’s responsible for going out and finding buyers for these bonds. And he says listen, fellas, I know this is not the easiest project you’ve ever done. But if you can get this done for me, you will all be my guests at Mar-a-Lago for the weekend. And lo and behold, that does the trick. The sales guys manage to actually sell nearly $500 million of bonds, which is a very large number. It’s hard to sell that much risky debt. So the sales process ends, and the banker calls back Trump and says, great news. We did it. We sold, I think, $480 million of these bonds for you. And Trump is very, very happy — big smile on his face — and says, that’s great. Thank you so much. And the banker says, don’t forget about what you promised our guys. And Trump says, what’s that? And the banker is not sure if he’s serious and says, you said you’d take them all down to Mar-a-Lago, remember? And Trump says, oh, no, no one’s going to remember that, trying to weasel out of it. And the banker says, look, that’s all these guys have been talking about for the past week or two. Trump eventually agrees, and he sends up his private Boeing jet to New York and flies them all down Mar-a-Lago and spends a weekend together. And it’s great. He’s wining and dining them, telling great stories. And the relationship seems to have reached this new level.

natalie kitroeff

Can I just pause and note, with some surprise, that all it took to get these guys to sell $480 million of risky debt was a trip to Mar-a-Lago?

david enrich

On his private plane. Bankers are humans. The allure of Donald is great. The idea of rubbing shoulders and spending alone time with a guy who is a celebrity, that’s real.

natalie kitroeff

So at this point, Deutsche Bank is winning, Donald Trump is winning.

david enrich

Everyone is happy. And it takes a few months, but Donald Trump, early in the new year, defaults on the bonds. And this is a huge embarrassment for Deutsche Bank. It costs them money, first of all. But it also means that the clients are left sitting on big losses.

natalie kitroeff

So this has got to be a relationship-ender.

david enrich

It seems like it, but it wasn’t. Within months of the default, Trump is back talking to the commercial real estate guys at Deutsche Bank. He wants to build a massive skyscraper in downtown Chicago, and asks them to provide him with more than $500 million to finance that. And Deutsche Bank, even though their colleagues in the same building — in the same floor of the same building on Wall Street — had just defaulted on these loans, they agree to make this massive loan to Trump to finance the construction of the Chicago skyscraper.

natalie kitroeff

Are they talking to each other? This sounds crazy.

david enrich

I talked to one of the guys who was involved with the Mar-a-Lago junk bonds, as I like to call them. And I asked him that very question. And he said, no, we didn’t bother to tell them. That was just not the D.B. way. And that basically is shorthand for meaning, the culture of the bank is one where we pursue short-term profits at any price. Why on earth would you go screw up a different division’s business with Trump by spoiling the party? And so he kept it to himself. But Donald Trump, this time, is personally on the hook for some of this money. So as part of this loan, in order to reduce the riskiness of it, from Deutsche Bank’s perspective, he agrees to personally guarantee $40 million of this loan.

natalie kitroeff

So what happens with this loan?

archived recording (keith mallini) Good afternoon, and welcome to The Terrace at Trump. I’m Keith Mallini, the restaurant director here at the Trump International Hotel and Tower Chicago. And this is The Terrace.

[music]

david enrich

Well, the building starts rising along the Chicago River.

archived recording (keith mallini) It’s an amazing place. We’ve got an amazing space here. We have the Wrigley clock tower in the background. On Wednesdays and Saturday nights, there’s fireworks right over there, right over the Sheraton.

david enrich

It gets finished. And the loan is due in the spring of 2008. This is the start of the financial crisis. And so Trump is having trouble finding buyers for his luxury condominiums.

archived recording (donald trump) Well, the advice is to just hold tight, see what happens, keep as much cash as you can, even if it’s not very much. Just keep as much cash, and you’re going to be able to make great deals. Because there are unbelievable opportunities out there right now.

david enrich

And Trump probably could repay the loan, but that would be very inconvenient for him at that time, given the scarcity of cash in the financial system. And so Trump tells his lawyers, look, can we find a way to wriggle out of this? And so his lawyers start poring over the fine print of these financial contracts with Deutsche Bank. And one of them comes across a provision in the contract that’s called a force majeure provision, which is an act of God. So it basically means, if there’s an unanticipatable act of God — like a natural disaster, for example — that theoretically would allow Trump to void or delay the contract. And it just so happened that a few days before the lawyers started going through these contracts with a fine-tooth comb —

archived recording Dr. Greenspan, we want to start with you.

david enrich

— Alan Greenspan, who’s the former Fed chairman —

archived recording (alan greenspan) We are in the midst of a once-in-a-century credit tsunami.

david enrich

— had described the ongoing financial crisis as a credit tsunami. And the lawyers look at each other, and they say, what is a tsunami if not a natural disaster? The lawyer recounted to me how Trump was just ecstatic. He was so pleased. And so a few days before the loan is due, Trump sues Deutsche Bank. And he declares the financial crisis to be a contract-voiding act of God. And then, just to put a cherry on top, he accuses Deutsche Bank of having caused the financial crisis. And just to put another cherry on top, he then accuses Deutsche Bank of having engaged in predatory lending against him by trying to collect on the loan and demands $3 billion from them in damages. And I can see your eyebrows arching. Because the chutzpah involved in suing the bank for a loan you owe and accusing it of causing the financial crisis and of engaging in predatory lending against you, that is bonkers.

natalie kitroeff

I mean, I’m impressed. I’m impressed. I have to say, I’m a little bit impressed.

david enrich

Yeah. So I talked to the lawyers on the Deutsche Bank side who were involved in this. And this is comical to them. It’s a completely bogus legal claim that Trump is making. And it slowly dawned on them, though, that Trump owes them hundreds of millions of dollars, and they actually need to deal with this lawsuit. So Deutsche Bank then sues Trump, demanding immediate repayment of the $40 million that he had personally guaranteed. And this litigation drags on for the better part of two years.

michael barbaro

We’ll be right back.

natalie kitroeff

At every turn of this story, I keep wanting to ask, so this has got to be the end of the relationship. It’s sort of like when you hear your friend talking about a terrible boyfriend. And you keep hearing the things that he’s done, and you’re saying to yourself, well, that’s it.

david enrich

This is an abusive relationship at this point. And Trump is torturing the bank. And up to a senior level of the bank, they’re like, we are done with this guy. So the litigation eventually settles in 2010. And the settlement states that Trump has now two years, until 2012, to repay the $40 million that he had personally guaranteed on the Chicago loan. And that means Trump now has a problem. He has two years to come up with tens of millions of dollars to repay Deutsche Bank. And he hopes to continue expanding his real estate and his resort empire. He’s now really into golf courses at this time. And the solution to this problem comes from an unexpected source — his new son-in-law, Jared Kushner. And Kushner, who’s the C.E.O. of his own small real estate company, Kushner Companies, has a relationship with a woman at Deutsche Bank named Rosemary Vrablic. And Vrablic is what’s called a private banker. Her job is to provide loans and wealth management to very wealthy families and individuals. And so Kushner arranges for his father-in-law to meet with her. And at the meeting with Vrablic, Trump basically describes his financial predicament. And Vrablic, in this room, hatches this idea that Deutsche Bank can provide Trump with a series of loans that will do a number of things. The first is a loan that will allow Trump to repay the money that he currently owes this other arm of Deutsche Bank.

natalie kitroeff

There’s no way. I mean, there’s just no way. We’re talking about one arm of the bank paying off a loan given to Trump by another arm of the same bank.

david enrich

Yes, that is a very unusual situation. But the C.E.O. at the time is a guy named Joe Ackermann. And Ackermann, one of his visions for the bank in this post-crisis world is that he wants the bank to be into businesses like private banking that are less risky and less aggressive than the traditional Wall Street model. And so he’s a big fan of the private bank. And he essentially overrides the concerns that the investment banking people had and blesses this new relationship with Donald Trump.

natalie kitroeff

So I’m dying to know what happens next.

david enrich

What happens next is, this is, for the third time, the beginning of a long, beautiful relationship between Deutsche Bank and Donald Trump. There is the loan to repay Deutsche Bank for the Chicago loan. There is then a very large loan to finance the renovation of the Old Post Office Building in Washington. And then finally, in the spring of 2016, there’s one more loan request that comes through. And this one is to finance work on Trump’s golf resort in Turnberry, Scotland. And this comes in through Rosemary Vrablic again, and it goes up through the food chain. And this time, it hits problems.

archived recording (donald trump) Our country needs a truly great leader. And we need a truly great leader now.

david enrich

Donald Trump is running for president.

archived recording (donald trump) We need a leader that wrote “The Art of the Deal.”

david enrich

At this point, this is around March of 2016. He is the leading candidate for the Republican nomination. And he’s a polarizing figure.

archived recording (donald trump) We need somebody that literally will take this country and make it great again.

david enrich

And this, for a lot of the executives at the bank, was the first time that they realized the full extent of the relationship and the financial exposure that they had to Trump, now the presidential candidate. And the notion of Deutsche Bank being the chief financial enabler of this guy was very scary for executives in New York and Frankfurt. And they said, no way. This stops here. And the plug was essentially pulled on the financing that Deutsche Bank was providing to Trump.

natalie kitroeff

What do you think they were scared of?

david enrich

There were a number of fears. The most obvious fear was just a public relations debacle.

archived recording Donald Trump owes at least $250 million to banks. Deutsche Bank is reportedly the only big bank that continues to make significant loans to him.

david enrich

There are already headlines that were starting to come out about Deutsche Bank’s pivotal role in allowing Trump to build his business and kind of help him survive financially.

archived recording In the first days of his campaign, Donald Trump has insisted that his record as a businessman gives him the experience he needs to run the country. But is that record as good as he says?

david enrich

And for someone who is not popular in most of the world — and you’re a global bank — that is not an attractive set of facts. The other bigger concern, though, is Deutsche Bank executives started to realize that if Trump became president, they had a very tricky problem on their hands. And it was this. Because the private bank had structured these loans in a way that Donald Trump personally guaranteed the bulk of them, that meant that if Trump became president and defaulted on his loans — which, empirically, that’s actually the likelihood — and if he did that in office as president of the United States, that meant that Deutsche Bank would be faced with a very unattractive choice. On the one hand, they could do what they were contractually entitled to, which is seize the president’s assets. They could take his private plane. They could take Mar-a-Lago. They could empty the cash in his bank accounts. But that’s picking a very public and ugly fight with the most powerful man in the world. But the other option is actually, in a lot of ways, uglier, which is to not enforce the terms of the contract, and to basically let it slide if Trump stops paying back his loans. That’s essentially cutting an enormously lucrative break to the president, whose administration, by the way, wields enormous power over the bank, because Deutsche Bank has a huge U.S. operation and is regulated by the Trump administration. So both of those choices are very bad. And Deutsche Bank executive start to realize that they might be in this terrible situation.

natalie kitroeff

So obviously, he becomes president. What happens?

david enrich

Deutsche Bank executives who I’ve talked to have recalled to me waking up on November 9, 2016, realized that Trump had been elected president, and just immediately were overwhelmed by nausea. They realized that they had a huge, huge problem on their hands. So the good news for Deutsche Bank is that, at this point, both ends of Pennsylvania Avenue are controlled by Republicans. The Republicans are not going to investigate Deutsche Bank and its ties to Trump, because they support the president. And so for two years, Deutsche Bank executives are kind of breathing a sigh of relief a little bit, that their nightmare scenario is not likely to become reality. And then, in November 2018, Democrats take the House.

archived recording 1 Democrats here are really stepping up their fight for the president’s personal and business financial records. archived recording 2 Frustrated House Democrats have issued a subpoena for those six years of President Trump’s tax returns. archived recording 3 Issuing subpoenas to several financial institutions and the president’s longtime lender, Deutsche Bank. archived recording 4 It’s the latest escalation in a standoff between the president and Congress. And again, this time, the administration is refusing congressional demands.

david enrich

So as soon as Democrats regained the house, Deutsche Bank started proactively cooperating with investigators on Capitol Hill. So in April, two congressional committees issued subpoenas to Deutsche Bank demanding a whole variety of very detailed financial information. A week or two before Deutsche Bank was prepared to hand that over, Trump and his family filed a lawsuit against Deutsche Bank seeking to prevent it from complying with that subpoena.

natalie kitroeff

So what does Deutsche Bank represent to Democrats?

david enrich

It’s the Rosetta Stone for Democrats. It’s the key to unlocking Donald Trump’s personal and business finances. I mean, the tax returns in particular are something that Trump has broken with decades of precedent and refused to publicly release his tax returns. But this actually goes way beyond the tax returns. And it has the potential to answer some of the real unsolved mysteries of the Trump family finances. And where has he been getting his money? He’s had a lot of cash. Where does it come from? There’s a million unanswered questions. And the answers to a lot of them are hiding inside an electronic vault at Deutsche Bank.

natalie kitroeff

I can’t help but note that, after decades of Trump taking advantage of Deutsche Banks’s willingness to bet on him, to take risks by working with him, and after decades of him messing with them, kind of, now, he’s in this position where this bank that he’s had this torrid, tortured, as you say, relationship with has the key to his finances that he is so desperate to keep out of the public eye. I mean, the tables seem to have turned in this way. This time, Deutsche Bank is a big risk to Trump.

david enrich

That’s true. The risk actually still goes both ways. This is the culmination of a decades-long, symbiotic, very risky relationship. Deutsche Bank has the potential to spill the president’s innermost financial secrets. But President Trump and his administration have enormous sway over the future course of this bank. Because the administration regulates the bank. And the administration’s Department of Justice has at least one open criminal investigation into the bank for laundering money overseas. So it’s kind of like mutually assured destruction, except for the fact that now, since Congress has subpoenaed Deutsche Bank for the records, assuming a federal judge does not get in the way of the bank complying, Deutsche Bank is going to be handing over some extremely explosive materials for the whole world to see.

[music]

david enrich

These are all secrets that Trump has spent the past several years trying to keep hidden from public view. And there’s a very real chance that, right now, they could all come tumbling out.

natalie kitroeff

David, thank you.

david enrich

It’s my pleasure.

michael barbaro

On Wednesday afternoon, a federal judge rejected President Trump’s request to block Deutsche Bank from complying with congressional subpoenas for his financial records. The judge dismissed the president’s argument that the subpoenas have no legitimate purpose and were being used to harass him, concluding that his argument would not prevail at trial. Here’s what else you need to know today.

archived recording (donald trump) So I came here to do a meeting on infrastructure with Democrats, not really thinking they wanted to do infrastructure or anything else other than investigate.

michael barbaro

President Trump on Wednesday stormed out of a scheduled meeting with Democratic leaders about infrastructure and declared that he was no longer willing to work with them until they end the congressional investigations into his conduct.

archived recording (donald trump) And I just saw that Nancy Pelosi, just before our meeting, made a statement that we believe that the president of the United States is engaged in a cover-up. Well, it turns out I’m the most — and I think most of you would agree to this. I’m the most transparent president probably in the history of this country.

michael barbaro

After cutting short the meeting at the White House, the president marched into the Rose Garden to recount his confrontation with the Democrats, which included House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer.

archived recording (donald trump) So I just wanted to let you know that I walked into the room and I told Senator Schumer, Speaker Pelosi, I want to do infrastructure. I want to do it more than you want to do it. I’d be really good at that. That’s what I do. But you know what? You can’t do it under these circumstances. So get these phony investigations over with.

michael barbaro

Afterward, both Schumer and Pelosi accused the president of staging his walkout, calling it a political performance that allowed him to avoid the difficult work of creating an infrastructure plan.

archived recording (chuck schumer) It’s clear that this was not a spontaneous move on the president’s part. It was planned. And of course, then he went to the Rose Garden with prepared signs that had been printed up long before our meeting. We want the president to do infrastructure. We want our Congress to perform its constitutional responsibilities and create jobs, create income, create wealth for the average American. We can do both. It’s clear the president doesn’t want to do any of that.

michael barbaro