Donald Trump Speaks the Truth

I never thought I'd write this, but Donald Trump speaks the truth, at least as far as bankruptcy is concerned. 

There's plenty to criticize regarding Donald Trump, but I really wish the media would back off the bankruptcy angle of his career, or at least be smarter about it.  

Let's start with the facts. Donald Trump has never filed for personal bankruptcy. But companies that he owns have filed for Chapter 11 four times. The mere fact of these filings is somehow imputed to be a personal failing of Donald Trump. I have never heard anyone suggest that the filings were because of Trump's bad management. Perhaps they were, but a bankruptcy filing is not in-and-of-itself a sign of any sort of moral failing, lack of business acumen, etc. Sometimes businesses go bankrupt because they're poorly run, and sometimes because of factors beyond their control. The Donald wasn't filing for bankruptcy like 50 Cent to attempt to avoid paying an intentional tort judgment. And indeed, how, much, if at all, was Trump involved in the management of the companies? I wouldn't be shocked if he was basically licensing his name.

In any event, Trump's response about his companies' bankruptcy filings is "what's the big deal? I took advantage of the law. So do lots of people." (My paraphrase.)

You know what? He's right. Bankruptcy is a background term to every contract.  It's an embedded option.  Lenders price for it.  This is old news to bankruptcy scholars, even if it still shocks some people. (Sanctity of contract, they wail, forgetting that contracts are written against the backdrop of bankruptcy!) Trump had every right to file his companies for bankruptcy, and no one should weep for his lenders having lost money.  They were sophisticated parties ("sharks" he called them, but that's a bit harsh, I'd just say "consenting adults"), who presumably priced for Trump's bankruptcy risk and had diversified portfolios. Frankly, Trump would be a fool if he hadn't filed for bankruptcy. 

What ticks me off about the media questioning is that it suggests that Trump's move of "taking advantage of the Chapters" (spoken like an old bankruptcy hand...) imputs some sort of moral turpitude, while an entire business model—private equity—that is often touted as a pinnacle of American ingenuity (see Mitt Romney) is built on the idea of "heads I win, tails bankruptcy". That's the story of the leveraged buyout. Is that gamble really any different from Trump's? Leveraged gambling seems to be the story of America.  

It's frankly quite refreshing to hear the Donald's honesty about bankruptcy. Makes me wonder if President Trump would have supported cramdown in 2009...