What does a TRUMP presidency look like?

[Admiral Yi]

I reread that last sentence six times and I have no fucking clue what it means.

[viper37]

If liars are able to access 10 times the capital due to their lying, surely that has harmed the lender, no?  But that is not an element under the NY law.

It harms the lender if the loan isn't paid back.  In this case, it was.  Eventually, it won't be.
All justice is partly arbitrary because it's never 100% of the criminals who are caught.

[Sheilbh]

I reread that last sentence six times and I have no fucking clue what it means.

Sorry - so there's a really low bar - no intent/recklessness, no reliance, no harm etc. That reminds me of other laws aimed at businesses which are strict liability where the breach itself is enough to be pursued by the regulator or criminally.

It's particularly common in environmental law because intent or negligence is sort of irrelevant, the purpose of the law to an extent is to get businesses to take proactive steps to not leak chemical waste into the water table (for example). Similarly there's no need to show harm (although there is in civil damages claim) because the breach itself is the problem - but also practically you're shutting the door after the horse has bolted and it would take an awful lot to disentangle the causes because there's so many other factors (other environmental factors in the area etc).

It feels like the NY approach is almost like a strict liability approach (as in environmental regulations) where the untruth is treated like a pollutant in the market.

[The Minsky Moment]

@Joan

Thanks for the very helpful context.  I change my verdict from weak case to unjust prosecution.

Based on your description everyone who writes an incorrect number on a document is guilty in NY of fraud.  And the NY AG is not prosecuting all of them.  Which feeds Donald's narrative that he is being singled out for political reasons.

As you've indicated technically it's not a prosecution it's a civil suit.

Is it unjust?  The clients I have had that have been investigated or named as defendants by the NYAG have often thought so.  And yet there is usually little sympathy from the press.  This is not a novel development in the state, the law is over a century old.  There is a reason the AG job is often a stepping stone to the governorship.  Using the power of the Martin Act in a "Wall Street sweep" has been a standard move since I started reading the papers.  Donald Trump is hardly a unique or special target in that respect. I.e he is not being targeted for partisan reasons, he is beng targeted because he is big game in the jungle.

All that said, Trump has been around long enough to know this.  Every real estate player in the city pumps valuation.  But there is safe way of doing it: get a friendly appraisal firm to give a home cooked valuation.  It's a wink-nod practice that leaves no paper trail and provides reasonable cover.  The RE firm can accurately and truthfully report the conclusion of the appraisal, even if know the numbers are full of hot air.

Trump is vulnerable because of two reasons.  First, he was either so greedy or so desperate that the normal means of pumping valuations were not enough for him and he resorted to just making shit up.  Second, for reasons relating to other legal problems, key insiders turned over evidence to the government and his accounting firm turned over docs.  That gave the AG the ammo needed.

[The Minsky Moment]

That even if it's impossible to prove direct harm, honest businesses are not disadvantaged by endemic fraud.

I'm scratching my head trying to figure out how it can simultaneously be impossible to prove direct harm but businesses are disadvantaged.

Commercial real state suffers from recurring principal agent problems because loan officers are compensated based on their loan books and client lists.  A loan officer has an incentive to take on risky business for the bank if the risk will not materialize for several years, by which time the officer may have changed departments or gone to a different bank.  That raises the possibility of collusion between the bank's agent and its customers.  The bank is harmed even though it "knows" (through its agents) that the information it is getting is bad because that knowledge is not used to its benefit.  And it is harmed even if no loss ever materializes because it is taking on more portfolio risk than it is getting fairly compensated for.

[Admiral Yi]

Commercial real state suffers from recurring principal agent problems because loan officers are compensated based on their loan books and client lists.  A loan officer has an incentive to take on risky business for the bank if the risk will not materialize for several years, by which time the officer may have changed departments or gone to a different bank.  That raises the possibility of collusion between the bank's agent and its customers.  The bank is harmed even though it "knows" (through its agents) that the information it is getting is bad because that knowledge is not used to its benefit.  And it is harmed even if no loss ever materializes because it is taking on more portfolio risk than it is getting fairly compensated for.

But this is my point and the objection the defense raised.  What idiot bank just takes the valuations as is on the loan docs and spits out a loan.  Surely on a deal of any size the lender is performing its own due diligence?  And then chuckled at the valuations and made the loan or not based on its own appraisal?

And if not, it would surely be simple enough to demonstrate in court that the bank made an unwise loan, compared to its own lending standards, and was therefore harmed by the fraud?

One of these two cases must be true, no?

[Admiral Yi]

Sorry - so there's a really low bar - no intent/recklessness, no reliance, no harm etc. That reminds me of other laws aimed at businesses which are strict liability where the breach itself is enough to be pursued by the regulator or criminally.

It's particularly common in environmental law because intent or negligence is sort of irrelevant, the purpose of the law to an extent is to get businesses to take proactive steps to not leak chemical waste into the water table (for example). Similarly there's no need to show harm (although there is in civil damages claim) because the breach itself is the problem - but also practically you're shutting the door after the horse has bolted and it would take an awful lot to disentangle the causes because there's so many other factors (other environmental factors in the area etc).

It feels like the NY approach is almost like a strict liability approach (as in environmental regulations) where the untruth is treated like a pollutant in the market.

But in environmental reg the harm has already been demonstrated--dumping this chemical causes people to grow a third eye, pumpiing out this smoke makes people get cancer.  We don't regulate emissions and waste because it's virtuous, we regulate it because of the harm it causes.

[The Minsky Moment]

What idiot bank just takes the valuations as is on the loan docs and spits out a loan.  Surely on a deal of any size the lender is performing its own due diligence?  And then chuckled at the valuations and made the loan or not based on its own appraisal?

That's just what I tried to explain above.  A bank operates through its employees.  And its employees may have personal incentives to make decisions to the detriment of the bank. 

This particular legal standard is not unique to New York state.  Under the federal bank fraud statute, there no requirement to prove harm to the bank.  The feds don't need to show even risk of loss much less loss.  They just need to prove that the defendant obtained money (e.g. a loan) pursuant to a scheme involving making false statements.

Thousands of people have been charged and convicted of crimes on this standard and done jail time.  There is nothing special or unusual about the plight of Donald Trump.

[Jacob]

It doesn't seem particularly weird that it's illegal to lie to obtain a loan, independently of the outcome of that lie.

[Admiral Yi]

This particular legal standard is not unique to New York state.  Under the federal bank fraud statute, there no requirement to prove harm to the bank.  The feds don't need to show even risk of loss much less loss.  They just need to prove that the defendant obtained money (e.g. a loan) pursuant to a scheme involving making false statements.

Well OK then.

[grumbler]

It doesn't seem particularly weird that it's illegal to lie to obtain a loan, independently of the outcome of that lie.

The outcome pf the lie is that more deserving applicants don't get a loan because the fraudsters got ahead of them in the queue through fraud. Acknowledging that we don't know who the victims were, specifically, doesn't hide the fact that people were harmed by the fraud.

[jimmy olsen]

Holy shit! Powell flips in Georgia!

https://www.cnn.com/2023/10/19/politics/sidney-powell-fulton-county-georgia-2020-election-subversion

[Gups]

What idiot bank just takes the valuations as is on the loan docs and spits out a loan.  Surely on a deal of any size the lender is performing its own due diligence?  And then chuckled at the valuations and made the loan or not based on its own appraisal?

That's just what I tried to explain above.  A bank operates through its employees.  And its employees may have personal incentives to make decisions to the detriment of the bank. 

This particular legal standard is not unique to New York state.  Under the federal bank fraud statute, there no requirement to prove harm to the bank.  The feds don't need to show even risk of loss much less loss.  They just need to prove that the defendant obtained money (e.g. a loan) pursuant to a scheme involving making false statements.

Thousands of people have been charged and convicted of crimes on this standard and done jail time.  There is nothing special or unusual about the plight of Donald Trump.

Over here a bank will secure an independent valuation of the asset from a specialist firm (CBRE, JLL, Knight Frank etc) and will generally rely on that report and the firm's insurance over.  It may do checks or peer review for a particualrly big loan/refinance and may get legal and other reports too. Obviously I don't know how it works in the US generally or in NYC in particular but I'd be shocked if it wasn't fundamentally the same.

[The Minsky Moment]

It may not be hugely surprising to learn that the financing of the Trump Organization was outside the norm in the commercial real estate business.

NY commercial RE lenders can be notoriously tolerant of things like past financial problems and regulatory question marks but by 2010 even their patience was wearing thin with the Trump businesses. But Trump did have a good relationship with the wealth management group at Deutsche Bank, which provided banking services for his personal finances.  So he went around the Deutsch real estate group, and convinced his client service reps on the wealth management side to provide business finance as well.

Of course, to the extent that the bank was providing finance for a specific building, I'm sure they did independent DD on that building as you suggest. Eg for the loan on Doral, the bank checks out Doral; for the loan on Chicago, the bank diligences Trump Chicago.

But by going through the wealth management group AND providing a *personal guaranty*, Trump secured preferential rates.  The issue in the AG case was the personal guarantee.  To support the guarantee, Trump had to provide statements of personal financial condition, including valuations of assets that he owned.

So for example, for a loan to Doral, the bank would secure an independent appraisal of Doral, but they wouldn't necessarily get an independent appraisal of the value of Trump's 5th avenue personal apartment, just because it was one asset of many listed on his personal financial statement.

[Gups]

Thanks, that makes a lot of sense.