Doug Heller, the executive director of Consumer Watchdog, said Trump is the “most egregious, almost comical example” of the disparity between what the average American faces when going through bankruptcy and the “ease with which the very rich can move in and out of bankruptcy.”
.. “Under the American bankruptcy laws, if you end up in bankruptcy because you’re struggling with divorce or medical payments or a sudden change of income, it’s a disaster. If you fail miserably with huge dollars involved then you just need some accountants to rework your books,” Heller said.
.. “There’s that old saying, ‘If you owe your banks a little, you’re at their mercy. If you owe the banks a lot, the banks are at your mercy. They saw the best way for him to repay the money was to keep the Donald afloat.”
.. Donald struck a deal with the banks to hand over half his ownership, and half of the equity, in the casino in exchange for a lower interest rate and more time to pay off his debt. He sold off his beloved Trump Princess yacht and the Trump Shuttle airplane to make his payments, and his creditors put him on a budget, putting a cap on his personal spending.
.. He also had the humiliation of having some bankers deciding how much money he could spend — the numbers are just astonishing — the amount of his monthly budget,” LoPucki said.
.. banks would often agree to lose millions in reorganizations like Trump’s to prevent the massive losses they would incur if they foreclosed on the property.
“Banks will take considerable haircuts,” Pottow said. “It’s sort of like you have a sick patient so you cut off a couple toes to stop the gangrene. Now he’s missing a few toes, but he’s still alive.”
.. “Here’s a guy who’s failed so miserably so many times and it’s not as though he had to claw his way back after seven years in credit hell. He just said. ‘OK, this isn’t my problem anymore.’ For him, it’s just been a platform to the next money-making scheme,”
.. In 2004 Trump Hotels and Casino Resorts Inc. filed for voluntary bankruptcy after accumulating $1.8 billion in debt.
.. “In 2004 is where he lost control of his name. One rule when you have a name like Trump is you never let anyone own it and control it. He got into such a bad spot here that he ended up with others owning and controlling his name. They can do what they want once they own it,” LoPucki said.
.. Shortly after the proceedings, Trump told CNN’s Geri Willis that his personal fortune would not be affected. “This is a very small portion of my net worth. It’s less than 2 percent,” he said.
.. in 2008, so too did Trump’s real estate holdings. Trump Entertainment and his affiliated companies had $2.06 billion in assets and was $1.74 billion in debt.
.. LoPucki said it was very unusual for anyone to have that many large businesses go through bankruptcy. Most of the debt Trump incurred was through bonds that were sold to the public.
“People knew who Donald Trump was and for that reason were willing to trust the bonds, and they got burned,” LoPucki said. “The people who invested with him or based on his name lost money, but he himself came out pretty well.“
Guest post: Why regulators should focus on bankers’ incentives
I contend that the regulatory failures that led to the crisis and the shortcomings of regulation since are largely derived from a failure to identify the persons responsible for bad decisions. Banks cannot take decisions, exhibit behaviour, or have feelings – but individuals can. The solution lies in reforming the governance set-up and realigning incentives faced by banks’ management.
Recent regulatory problems have been greatly reinforced by a widespread tendency to apply human characteristics, i.e. to anthropomorphise, to an inanimate institute, in this case a bank. We tend to talk about Bank X having assumed too much leverage, or having behaved in an improper fashion—rather than management of Bank X did such and such; We say that Bank X got bailed out rather than the creditors and clients of Bank X got bailed out.
.. When bad behaviour occurs at a lower level, e.g. traders conspiring to rig Libor, or junior employees mis-selling products onto uninformed customers, should managers, directors and CEOs be able to shelter behind the fact that they did not know what was going on? Should they, could they, have taken steps to find out? There is surely a case for reversing the burden of proof. Each manager should be held responsible, and subject to suit, unless they can demonstrate that they took all reasonable measures to oversee and to constrain the actions of their juniors.
..We would be told that such measures would make banks unduly risk averse and prevent qualified bank managers going into the profession. Where is the evidence for that? Banking worked on the basis of unlimited liability up to the second half of the 19th Century, and banks then took plenty of risks.
.. Avgouleas and Goodhart argue that history shows that when a bank’s difficulties reflect broader macroeconomic problems rather than bank-specific issues, imposing haircuts on creditors of one bank is likely to accelerate panic and risks contagion to other institutions, which may require public funds to shore up the system as a whole.
.. If, instead, incentive structures were changed to impose appropriate penalties for failure on the banker, then bankers would themselves choose whatever structure, perhaps smaller and simpler, would provide them with an acceptably reduced chance of failure.
.. Managers on the spot will have a better idea of what they can safely undertake, than illustrious independent outsiders.
.. If a bank CEO knew that his own family’s fortunes would remain at risk throughout his subsequent lifetime for any failure of an employee’s behaviour during his period in office, it would do more to improve banking ‘culture’ than any set of sermons and required oaths of good behaviour. The root of the problem is the bad behaviour of bankers, not of banks, who are incapable of behaviour, for good or ill. The regulatory framework should be refocused towards the latter, with a focus on reforming incentives.
Is a 6 digit numerical password secure enough for online banking?
My bank went through a major redesign of their customer online banking system recently. The way security is managed across the platform was also reviewed. The password I am able to set now to log in is forced to be 6 digits long, numerical.
.. In the case of your bank, the user name is a 16-digit number – your card number. You do generally keep your card number private. Sure, you use it for card transactions (online and offline) and it is in your wallet in plaintext – but it is reasonably private. This allows the bank to have a stronger lockout policy without exposing users to denial of service attacks.
In practical terms, this arrangement is secure. If your house mate finds your card, they can’t access your account because they don’t know the PIN. If some hacker tries to bulk hack thousands of accounts, they can’t because they don’t know the card numbers.
.. So while this arrangement is not typical, it appears that it is not so crazy after all. One benefit it may have is that people won’t reuse the same password on other sites.