Republican presidential front runner Donald Trump’s relationship with Wall Street bankers comes under scrutiny.
Something that the main stream media failed to do when president Obama was running for office claiming that he wasn’t taking money from Wall Street lobbyists.
Wall Street On Parade reports:
Five days ago, the Washington Post ran an article that was headlined “Why the rise of Donald Trump has even Wall Street worried.” It quoted an anonymous source who stated that “I can’t find connective tissue between the financial sector and Trump.”
Similarly, eight days ago the Wall Street Journal reported that Trump’s creditors “mostly are small firms, from New Jersey-based Amboy Bank to specialized real-estate firm Ladder Capital Finance LLC.” The article noted that Deutsche Bank, a German bank, “is the only bank with a big Wall Street presence that continues to lend to him.”
On July 15 of last year, Donald Trump filed a 92-page financial disclosure report with the Federal Election Commission. (He has thus far refused to disclose his IRS tax returns, stating that he is being audited.) On page 47 of his disclosure document, Trumps lists to whom his businesses owe money. Ladder Capital is listed as holding a mortgage of more than $50 million. With no dollar range shown, as is typical, it could be $50 million or $250 million for all we know. Ladder Capital is also listed as holding an additional mortgage on another property in the range of $5 million to $25 million.
The opportunity to find out what Ladder Capital is all about came on February 6, 2014 when the company began trading publicly on the New York Stock Exchange after raising $225 million in an Initial Public Offering (IPO). An IPO requires the public filing of a detailed prospectus with the SEC, which can shed a great deal of light into otherwise dark corners.
Ladder Capital, a major lender to Donald Trump, is about as entangled and beholden as one can get to the mega Wall Street banks. In fact, its IPO was underwritten by Deutsche Bank Securities, Citigroup Global Markets, Wells Fargo Securities, Merrill Lynch, and J.P. Morgan Securities. First we learn from the prospectus that Ladder Capital’s business model is to “generally securitize our loans together with certain financial institutions, which to date have included affiliates of Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, RBS Securities Inc., UBS Securities LLC and Wells Fargo Securities, LLC.”
Then the prospectus explains what else is going on between Ladder Capital and its Wall Street bank underwriters:
“Some of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions. Examples include but are not limited to:
“Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC acted as underwriters in connection with the offering of our Notes by two of our subsidiaries;
“Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, or certain of their affiliates, have had and may in the future have certain roles in connection with our securitizations, including but not limited to, as underwriter, co-manager, trustee, certificate administrator and/or master servicer;
“Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, or certain of their affiliates, are counterparties to financing arrangements with certain of our subsidiaries, including, as applicable, our existing revolving credit facility, master repurchase agreements relating to loans and/or securities, global master securities lending agreements and a master mortgage loan securities contract;
“An affiliate of Deutsche Bank Securities Inc. is, and certain other underwriters or their affiliates may be, lenders under our new revolving credit facility, which is currently being negotiated, for which Deutsche Bank Securities Inc. is acting as lead arranger;
“Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, or certain of their affiliates, are counterparties to International Swap Dealers Association, Inc. Master Agreements with one of our subsidiaries;
“Affiliates of Wells Fargo Securities, LLC act as loan servicer for our conduit loans, document custodian for all of our loans and custodian for our managed account securities; and
“J.P. Morgan Securities LLC and its affiliates act as our prime broker and also provide us with securities pricing services;
“From time to time, we may also co-fund commercial real estate mortgage loans or enter into other commercial real estate financing transactions with certain of the underwriters and/or their affiliates.”
With a ticker symbol of LADR, since going public in early 2014 the stock has lost 31 percent of its market value. The company’s web site explains the nature of the company as “a leading commercial real estate investment trust (‘REIT’) that originates and invests in a diverse portfolio of commercial real estate and real estate-related assets, focusing on senior secured assets.”
On December 18 of last year, the Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency jointly issued a statement warning banks about potentially lax procedures involving commercial real estate lending.
The Wall Street banks that are engaged in these business dealings with Ladder Capital do not have a particularly illustrious history since the Wall Street crash. A unit of Deutsche Bank has pleaded guilty to a felony count for its involvement in rigging the Libor interest rate benchmark. Citigroup received the largest taxpayer bailout in U.S. history during the 2008 crash, getting $45 billion in equity infusions, over $300 billion in asset guarantees, and over $2 trillion cumulatively in revolving, below-market-rate loans from the Federal Reserve. Last year on May 20, it admitted to a felony charge brought by the U.S. Justice Department for its role in rigging foreign currency markets.
JPMorgan Chase lost over $6.2 billion of depositors money trading exotic derivatives in London (London Whale fiasco), admitted to two felony counts in 2014 for its role in the Bernie Madoff Ponzi scheme and admitted to one felony count on May 20, 2015 for its role in rigging foreign currency markets.
Merrill Lynch was in the throes of collapse and was merged into Bank of America at the peak of the crisis in 2008. It received approximately $2 trillion in cumulative, secret, below-market-rate loans from the Fed to shore it up as well as taxpayer infusions of equity capital.
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