CEO Daily: Trump’s unblind spot

Nov 12, 2016

Saturday Morning Post: The Weekly View from Washington

So much for the big, beautiful wall that Donald Trump promised to erect between his business and his administration. As a candidate, Trump said if elected, he’d establish a “blind trust” to manage his money-making endeavors by handing control of the empire to his three eldest children. Never mind that that setup doesn’t meet the most meager definition of the term, which typically implies stewardship by an independent trustee, and Trump’s approach asks the public to give him the benefit of the doubt that he won’t discuss his globe-spanning enterprise with his family. On Friday, his campaign announced that Don Jr., Ivanka, and Eric would all be joining the transition team and therefore playing an active role in selecting the people who will staff his government. With that, Trump reduced to rubble any pretense of a separation between private and public interests within his clan.

The setup by all accounts is perfectly legal. There are few guardrails on how presidents manage their personal financial affairs, since the law restricting outside income for executive branch employees exempts them. But the vastness of Trump’s operation introduces unique challenges for avoiding conflicts of interest. Consider: We estimate that Trump earned $166 million in 2014, though he disputes the figure. And since his company is private, the personal financial disclosure form he filed with the Federal Election Commission in 2015 and has pointed to since as the most thorough accounting of his investments offers only an incomplete picture of its scope. The “real numbers,” Trump told us this spring, are much bigger. “We don’t disclose these things.”

What we do know is that Trump’s overseas holdings are extensive. By his own boast to us, as of this spring, he was negotiating 121 licensing deals “all over the world.” (See Newsweek’s reporting for a tour of those entanglements.) Each foreign project, to the extent he remains apprised of it, presents a potential problem for a man about to assume wide latitude over U.S. foreign policy. That’s to say nothing of the issues posed by his ongoing domestic concerns and the dozens of active lawsuits facing his operation. The extraordinary circumstances of his wealth demand extraordinary reassurances that he’ll seal off his presidency from his financial interests. What Trump is offering instead is a perversion of the spirit of a blind trust: That is, trust and don’t verify.

Tory Newmyer
@torynewmyer
tory_newmyer@fortune.com

Top News

•  Trump walks back Obamacare repeal pledge
Trump ran in part on a promise to shred President Obama's signature healthcare overhaul. But in the wake of his victory, the president-elect is signaling he's already willing to discuss leaving parts of the law in place. Trump says he "very much" favors the prohibition on insurers denying coverage based on preexisting conditions and wants to continue allowing young adults to stay on their parents' plans. Trump credited his change of mind to an appeal he said Obama made to him during their White House meeting this week. The law, he said, will be "amended, or repealed and replaced" — a significant shift from his campaign rhetoric. Trump also appeared to soften on his pledge to appoint a special prosecutor to investigate Hillary Clinton's use of a private email server while Secretary of State, indicating he wants to prioritize his legislative agenda. Wall Street Journal
•  Trump team seeks delay in Trump U. fraud trial
Trump’s legal team is seeking to delay a federal fraud trial related to charges against Trump University in light of his victory in the presidential election. The case took center stage in the campaign when Trump accused the presiding judge, an Indiana-born son of Mexican immigrants, of being incapable of impartiality based on his heritage. Now Trump's lawyers are asking that judge to shelve the case until after the president-elect is inaugurated. They're also hoping to protect their client from taking the stand in the case, pointing to the fact that a sitting president has never had to testify in court as a defendant. Trump might testify by video. A likelier outcome, however, appears to be that the two sides will now reach a settlement. USA Today
•  Christie suffers another setback

A spoils-style approach to governance can cut in two directions — a lesson Chris Christie is learning the hard way. The New Jersey governor’s star has fallen precipitously since the conviction of two of his top aides on public corruption charges earlier this month. And on Friday, President-elect Trump removed Christie as the leader of his transition team, replacing him with Vice President-elect Mike Pence. Rich Bagger, a Christie ally helping run the transition team, likewise is being pushed aside, in favor of Rick Dearborn, chief of staff to Alabama Sen. Jeff Sessions. Christie has made no secret of his interest in landing a plum gig in a Trump administration. It isn’t clear what kind of offer, if any, will be forthcoming. Fortune
•  Dems face identity crisis after election losses
In the early aftermath of Trump's win, Democrats are trying on a range of responses, from qualified offers to cooperate on issues of common interest to demands that Trump first address the ugliness unleashed by his campaign. Soon to be out of power on both ends of Pennsylvania Avenue, Democrats also have some major personnel decisions to make as they try to forge a path back from the wilderness. The fight over who will next lead the Democratic National Committee is already shaping up as a proxy war for the direction of the party, with liberal Minnesota Rep. Keith Ellison carrying the torch for the progressive wing and others, including former Maryland Gov. Martin O'Malley, eyeing bids. Fortune

Around the Water Cooler

•  Trump tough talk on trade is about to get real
Trump's policy agenda remained flimsy at best throughout his campaign, a fact that's now casting considerable uncertainty over how he'll approach the early going in his presidency. Throughout, he maintained unusual consistency on one point: He believes U.S. trade policy has been a disaster for American workers and needs serious retooling. What he'll do about it remains less clear. As president, Trump will enjoy expansive authority to tear up existing agreements and also to slap tariffs on imports from trading partners he believes have been taking advantage of the U.S. For example, on the North American Free Trade Agreement, which Trump regularly pilloried on the trail, he'd only need to give written notice to withdraw from the pact in six months. Congress and multinationals keen to see the country avoid trade wars will have little leverage to stop him. Since the modern history of trade has only seen it move toward liberalization, a big question mark hangs over the potential effects of provoking confrontations with our top trading partners. Fortune
•  Goldman is sitting pretty thanks to compliance delay
Goldman Sachs is about to reap the rewards of stalling compliance with Dodd-Frank's Volcker Rule. The provision of the landmark Wall Street reform package limits the ability of banks to place big bets with their own capital, and many raced to comply with it after the law's passage by divesting or spinning off their proprietary trading desks. But Goldman still has billions of dollars in assets that would violate the rule, the apparent result of a strategy to take advantage of the time it takes to actually get the regulation on the books. Now, Trump's team is signaling it wants to tear up Dodd-Frank altogether. And while it probably won't be able to go that far, Trump is reportedly eyeing the Volcker Rule as one piece he'd like to dismantle. If that's the case, Goldman's bet on Washington's inability to implement its own lawmaking will prove to be a profitable one. LinkedIn
•  Republicans toss aside deficit concerns
The GOP spent eight years railing against what they charged was the fiscal profligacy of the Obama administration. Trump's win appears to have curbed the concern about deficit spending. The president-elect is already talking up plans to make good on an expensive agenda that includes massive infrastructure investments and tax cuts without corresponding reductions in spending. Trump economic advisor Anthony Scaramucci penned an op-ed Friday arguing the incoming president's infrastructure program will practically pay for itself since interest rates remain so low — and besides, our crumbling public works are in desperate need of repair. That's precisely the case Democrats made through the thick of the economic crisis only to meet categorical resistance from their Republican counterparts. Fortune
•  Unions try to understand what went wrong
After a sweeping Democratic defeat being laid at the feet of working-class white voters, union leaders are struggling to understand why their own ranks deserted the party in such large numbers. Organized labor invested in a major effort to get out the union vote for Clinton, but she edged Trump among union households by the smallest margin since Walter Mondale's historic wipeout against Ronald Reagan in 1984. That poor performance was especially consequential in the swath of Rust Belt states that typically vote Democratic in presidential elections but broke instead for Trump, providing his winning margin in the electoral college. Labor's political brains don't appear to have any ready answers, with some speculating that the election turned into more of a personality contest than a referendum on the candidates' respective economic visions, and others giving credit to Trump's populist focus on ripping up trade agreements. Politico

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