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Blog Post | November 23, 2016

Non-Familial Trump-Era Corruption?

Ethics in Government

There is belated but considerable press attention to Donald Trump’s nearly inextricable conflicts of interest: He and his family run a complex, far-flung, non-public company that largely relies on his name as a branding asset.

Entities without America’s public interest in mind, be they foreign or domestic companies, are already beginning to cultivate the Trump family. Ivanka Trump, groomed to run the family business in something that will be a blind trust only in the most Orwellian sense imaginable, is being included in meetings with international leaders potentially useful to “The Trump Organization.”

And Trump has encouraged them, telling the New York Times, “The law’s totally on my side, the president can’t have a conflict of interest.”

It’s…not good.

But lest one be wholly distracted by familial self-dealing and assessing the various problems posed by the role of son-in-law Jared Kushner

Or wound up about former Speaker of the House Newt Gingrich planning to be a “sort of be a senior planner” in the Trump administration while serving as “a senior adviser at Dentons, the law and lobbying giant.”

There’s more. Two giants of the shadow banking field are exerting enormous influence and potentially making billions by virtue of their close ties to Electoral College winner Donald Trump. Trump appears poised to make Crony Capitalism Great (in scale) Again.


Consider hedge fund billionaire John Paulson. As The Huffington Post noted, “To the victor belong the spoils. President-elect Donald Trump may have won election with the support of white working class and rural voters in northern states raging against the elites, but the biggest winner of all could end up being hedge fund billionaire John Paulson.”

Is Paulson merely a winner because he was one of Trump’s few full-throated elite backers? No, it’s because:

Now, Paulson is a top policy advisor to the incoming Trump administration and he is poised to cash out from the administration big league. Back when Fannie Mae and Freddie Mac were taken over by the federal government, their shares were declared value-less. But speculators bought up their stock at pennies on the dollar, with the hope of pressuring the government to recapitalize the housing lenders […] and release them back to the private market. If the shares could rise from just pennies to $30 or 40, the gains would be astronomical.

Paulson is one of the biggest investors in Fannie and Freddie stock and signs point to Trump going forward with their preferred policy. It will provide a windfall of hundreds of millions if not billions for billionaires like Paulson and Fairholme Capital Management’s Bruce Berkowitz, among others. Berkowitz backed Trump and donated $125,000 to his campaign.”

As David Dayen notes, Paulson has an in with Goldman Sachs alum turned hedge funder and foreclosing banker Steven Mnuchin. Mnuchin, you may recall, is a former business partner well positioned to be nominated as Treasury Secretary.


Per Fox Business,

“Billionaire financier Carl Icahn is weighing whether he will take a position with the new administration as an adviser on economic matters, the FOX Business Network has learned. It’s unclear if Icahn, an early Donald Trump supporter, would take an official position with the incoming Trump White House or remain an informal adviser on economic matters as he has done through the President-elect’s campaign, according to two sources with direct knowledge of Icahn’s thinking. […]

Icahn has said if he took an official position it would be unpaid and he would continue to work largely out of his offices in New York City, where he runs his investment company Icahn Enterprises.”

Does that sound okay to you — an adviser helping form policy while managing billions of dollars in investable assets? Even Fox Business seems…skeptical:

“Even an informal role in developing economic policy would pose a conflict of interest for Icahn and his investment firm, which owns interests in numerous companies and manages his enormous net worth. Robert Rubin, the Treasury Secretary to former president Bill Clinton, placed his wealth, attained while the head of Goldman Sachs, into a so-called blind trust while he served in the cabinet position, where he had little control over the management of his assets.”

How might Icahn benefit from his role as “unpaid adviser who invests?” Well, a head start in knowing the details of Trump’s deregulatory agenda might help. Icahn himself “believes […]an increase in bank regulations and his costly healthcare reform law commonly referred to as Obamacare — slowed the economic recovery considerably.”

Is this merely speculation? Well, not so much. “Indeed, after Trump won the 2016 presidential contest, Icahn announced that he went out and began snapping up stocks, which have been on an extended rally amid Trump’s plans to cut taxes and regulations.”

Icahn appears set to make billions investing based on foreknowledge of Trump’s actions in office.


You hear a lot of discussion about “Trump shifting the Overton window” and “normalizing Trump.” Regardless of what jargon is or is not best in understanding Trump, one lesson seems clear. The Revolving Door Project was created because even mundane, widely accepted corruption was rightly undermining the public’s faith in government.

The fact that Trump poses unique risks of corruption does not mean we should become uncaring about craven corruption just because it is precedented. Crony capitalism is failed capitalism.

Ethics in Government

More articles by Jeff Hauser

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