There’s been a lot of media coverage in the last few months on Trump’s failed business ventures, including Trump Airlines, Trump University and GoTrump.com. But fewer people are aware of the short-lived Trump Mortgage, an endeavor that got off the ground in 2006 and cratered less than two years later, after the housing market crash. So, what exactly was Trump Mortgage?
In 2006, Trump opened a mortgage brokerage that operated out of Trump Tower in Manhattan, during the housing bubble right before it burst. The company had a goal of generating $3 billion worth of mortgages, but ended up hitting only $1 billion before going out of business.
With more attention focused on Trump business ventures recently, publications like The Washington Post, CNN Money and Time have taken a closer look at what happened to the NY mortgage company, especially in light of comments Trump himself has made on the campaign trail.
Trump has said that he predicted the crash, saying in 2015 that he knew the housing market “was a bubble that was waiting to explode.” He’s also said the downfall of Trump Mortgage was the result of poor management, and he had very little to do with it.
However, The Washington Post points out that during the launch of Trump Mortgage at a glitzy press event in 2006, Trump seemed exuberant about entering the mortgage business. He introduced CEO EJ Ridings (a supposed Wall Street expert with years of experience), joking that if the company wasn’t a big success, “you’re fired.” It turned out Ridings had been introduced to Trump by his son, Donald Trump Jr. Ridings had grossly overinflated his qualifications, having only spent 3 months at a Wall Street firm and a few years as a mortgage broker before that.
CNN Money points out that before Trump Mortgage launched in 2006, he gave an interview to CNBC about the new venture. When asked what he thought about the future of housing, given concerns of a bubble, he said it was a great time to start a mortgage business. He also wrote a blog titled “The Housing Bubble: Doom and Gloom Don’t Pay” for Trump University students. He wrote, “You need to take risks in business. Are you the type of person who takes advantage of positive situations when they present themselves, riding them out as long as they last? Or do you heed every message of doom and gloom, avoiding risks that could be some remarkable opportunities?”
In 2007, NY business magazine Crain’s published a piece about the rise and fall of the company. They reported that Trump “downplayed his role in the failure.” Trump said he simply licensed his name to the mortgage company, and had no ownership stake.
Trump Mortgage didn’t end there. Brooklyn-based company Meridian Financial took on the Trump moniker, becoming Trump Financial. Its CEO David Brecher said, “I could not think of another branding name that has as much clout.” Trump Financial quietly exited the market two years later.
Was Trump’s decision to start a mortgage business in 2006 just bad timing, or a terrible business decision all-around? What do you think? Let us know in the comments!
Turn on you local news, pick up a newspaper, read any blog or even listen to President Obama, the economy is in a serious recession and your business is likely to decline and possibly fail. Prepare yourself, cut your expenses, trim your staff and pray you can make it. Is this how you feel each and every day? I know I have and I’m starting to resent it. Unfortunately, much of the financial crisis we’re experiencing is nothing more than a self-fulfilling prophecy.
I’m reminded of a fable I heard a very long time ago.
Mr. Battaglia had a flourishing hot dog stand on Rt. 38 on the edge of a very busy shopping center near Lombard. He had signs extending every few miles from Chicago to Geneva. They read: Stop at Battaglia’s! We Serve the Best and Largest Hot Dogs in the Midwest, Tasty Char-Grilled Franks with a Sauce from a Cherished Family Recipe. He ran ads in the newspapers and handed out circulars in the cities around him. His hot dogs and service were good and his business was BOOMING. Things could not have been better.
He decided to expand. He met with a financial consultant who had an MBA from one of the larger business schools. The consultant, after hearing Mr. Battaglia’s expansion plans, said “All of the financial writers and even Washington say that the business outlook isn’t bright. We’re on the brink of a serious recession, there is double digit inflation, money is tight and expensive, there is an energy crisis and people won’t drive to your hot dog stands. It would probably be wiser to think in terms of a holding action and even a cut back in expenses.”
Mr. Battaglia, who didn’t have a great deal of formal education, respected the learned counsel of his advisor. He went back to his hot dog stand and tried to think of ways to cut costs to prepare for the oncoming recession. What to cut? Not the hot dog and bun orders — he needed those for his present business. He decided one of the expenses he could cut immediately would be the newspaper advertising and the circulars. He stopped these services immediately. He realized that the consultant’s advice was sound because within four weeks his sales began to drop. He thought to himself, “The consultant and financial forecasters are really smart. The recession is beginning.”
To cut expenses even more, he decided to take down half the signs which would cut his sign maintenance costs. At the end of two months his business was down 40%. “This recession is really serious,” he told his family, “but I’m going to give it one last try.” He took his diminishing capital and put the road signs back up, began advertising in the newspaper and passing out circulars again. At the end of three months his business was once more booming. He was thankful that the recession was so short-lived and that he survived it.
What part of your financial difficulties could be answered in a simple fable?