In the 1990s, long before he became president, Donald Trump was known as a cash-strapped New York City businessman with shaky credit.
"His record of defaulting on loans and stiffing his business partners was very long and very well-documented," New York Times finance editor David Enrich says. "Any mainstream financial institution that had competent risk management systems in place — there is no way they were going to do business with Donald Trump."
Enter Deutsche Bank, which Enrich says was a "second-tier player" in the banking world in the 1990s. Seeking to make a name for itself, the bank was willing to work with Trump when others would not.
"The bank was so hungry for profits, for short-term profits, and so hungry to make a name for itself in the United States that it was really eager to just disregard any red flags that presented themselves with clients," Enrich says. "Trump would default on a bond offering. He would default on a loan. He would sue the bank. And yet, time after time, Deutsche Bank executives kept going back to him for more business."
Congressional committees have since subpoenaed the bank's records on Trump — including suspicious activity reports that are usually filed with regulators. Meanwhile, the Trump family has sued the bank to block it from complying with the subpoenas that they've received from these congressional committees.
All told, Enrich estimates that Deutsche Bank loaned Trump some $2 billion — which helped pave the way for his political rise.
"I think that's a big part of the reason that Donald Trump is president today, because of the financial support he received over many years from his lender of last resort," Enrich says.
Enrich has spent years reporting on Deutsche Bank, which, in 2007, was the world's largest, with $3 trillion in assets. He traces the bank's shadowy practices — which range from laundering money for Russian oligarchs to violating international sanctions — in the new book, Dark Towers.
Interview highlights
On Deutsche Bank's concerns about Trump holding political office
As a leading candidate for the president of the United States, he is what's called, in banking terms, a "politically exposed person," which means there is heightened risk of corruption ... that this person could be involved in bribery or that their money could be from ill-gotten means. The bank was very wary of doing business with Trump as the election neared and, in fact, rejected [a] requested loan that he made in early 2016. ...
Inside the bank, compliance officers had been looking at some of the transactions that were going in and out of Donald Trump's bank accounts, and Jared Kushner's bank accounts, too. Kushner was also a big client of Deutsche Bank. And what they were seeing was that money, in some cases, was flowing to international sources, in some cases wealthy Russians — that raised a lot of concerns from a money-laundering perspective. So compliance officers within the bank essentially blew the whistle and said: These transactions are troubling. We need to report them as suspicious to the federal government. And these concerns were kind of elevated up the flagpole within Deutsche Bank, and managers and executives at a higher-level ultimately decided that, no, these concerns did not need to be escalated to the government or even reported to the government. But within the bank, there was a big concern that something weird was going on in the Trump bank accounts.
Within the bank, there was a big concern that something weird was going on in the Trump bank accounts.
On Deutsche Bank's ties to the Nazi regime
This was the bank that helped do everything from finance the construction of concentration camps. It helped with the financing for the company that manufactured poison gas. It participated in the "Aryanization" of businesses all over Europe, including in countries that Germany had conquered. It was selling gold that the Nazis had extracted from the teeth of Jews, selling that internationally to raise hard currency for the Nazis. So this was a bank that was really an important part of the Nazi military machine. Now, in fairness to the bank, that is true for most large German companies that existed at the time, and still exist to this day. So it's not that Deutsche Bank was uniquely evil during this period — but I don't think there's any sanitizing of this basic fact: The reality is that they were a party to genocide.
On Deutsche Bank's transformation in the 1990s
Deutsche Bank went from being a complete nonentity on Wall Street and in London to being, virtually overnight, one of the leading players on the street. Edson Mitchell [who led the bank's London office] was the one who led that charge, and he was a fairly impulsive, very charismatic, very energetic salesman. ... Largely through the force of his personality and through the power of persuasion of having a few billion dollars at his disposal to spend on hiring people, [Mitchell] hired thousands and thousands of people, not just from Merrill Lynch, but really from across Wall Street. And so Deutsche Bank all of a sudden became one of the most aggressive places to work on Wall Street.
On how CEO Josef Ackermann's leadership changed the bank in 2002
[Ackermann] wanted to increase the bank's profitability within two years by about 600 percent. That is crazy. It's wildly ambitious. [He was] reckless and he was a taskmaster and he was someone whose staff was very afraid of disappointing him. He could get extremely angry. And sometimes [he'd] blame his subordinates for failings, not just in private, but also in public. So people are really scared of doing anything that would incur his wrath. So everyone's set out to make Ackermann's mandate, make it their own personal mission. The entire incentive structure within the bank quickly changed. And the way that the bank decided whether or not to make loans or enter into other transactions for customers also changed. If it wasn't going to be enormously profitable in the immediate term, they just wouldn't do the business anymore.
The consequences of that are seen, with hindsight, [as] fairly predictable, which is that the bank is going to be doing things that are not in customers' interests, but are in the bank's interests. And it's a very straight line, I think, between that mentality and a situation where the bank starts ripping off its customers, manipulating markets, laundering money, violating sanctions, on and on and on.
On Deutsche Bank violating American sanctions
This is an international bank and it has a presence, a headquarters in Germany and presences all over the world, but because it has a big American operation, it has to adhere to American law, and American law at the time imposed very strict sanctions on Iran, Syria, Myanmar and Libya, among other places. But Deutsche Bank wanted to do business in those countries. The fact that they were under sanction, in some ways, increased the value of the services the bank could provide, because there weren't all that many banks that were willing to provide financial services in those countries.
So they just went ahead and did the business and they took extraordinary lengths to conceal what they were doing. They [engaged] in a practice that was known as "stripping," where they would remove any references to, for example, the Syrian counterparties they were working with in order to avoid triggering any alerts in their American computer systems or with American regulators. And over a period of several years, they engaged in billions of dollars of business with entities that, in Iran's case in particular, were very closely tied to the Iranian military and were later blamed for really helping finance a lot of terrorism that was going on in Iraq after the Iraq war.
On Deutsche Bank laundering money for Russian customers
Many Western banks were very wary of doing business with these Russians because there were a lot of suspicions. And, in fact, it was true that a lot of this money came through corruption or kleptocracy, things like that. Deutsche Bank was very happy to fill that void.
The money laundering business was very lucrative for Deutsche Bank and it did it really all over the world. The biggest places it was doing it were with Russian customers. And Deutsche Bank has a long, proud history of being one of the few Western banks [that has], more or less without interruption, been operating in Russia for a very long time. And Russia in the early 2000s was a place where there were a lot of people getting very rich very quickly, often through suspicious means. It became very important for them to have a way to get their money out of Russia and converted from rubles into euros or dollars or pounds. ... Many Western banks were very wary of doing business with these Russians because there were a lot of suspicions. And, in fact, it was true that a lot of this money came through corruption or kleptocracy, things like that. Deutsche Bank was very happy to fill that void. It arranged for a number of workarounds for Russians where they could either move their money to a country like Latvia, for example, and then have it wired into the U.S.
On the chaos at the Deutsche Bank office in Jacksonville, Fla., which analyzes suspicious transactions
This was a place where they have thousands and thousands of employees who are trained to look for potentially suspicious transactions involving money laundering, tax evasion, bribery, things like that. In any bank that is one of, if not the most important, operations to prevent a bank from getting into trouble and violating the law. And Deutsche Bank's operations there were a catastrophic mess.
I've talked to probably 20 people who either currently or previously were there, and without failure, every single one of them has told me that they have never worked at an institution as messed up as Deutsche Bank. The reason it's messed up, in this case, is not that their employees aren't good at what they do. [The company] essentially set them up to fail. Their technology systems were completely out of date. People weren't properly trained in some cases. But more than that, there is enormous pressure from their higher ups to just churn through transactions as quickly as possible, and the less of a fuss you raised about any particular transaction, the better. There is enormous pressure to just get deals done, as one person told me. That's obviously antithetical to the notion of doing a good job and taking a close look and really being conservative about whom you're doing business with, but that was the Deutsche Bank way.
Sam Briger and Mooj Zadie produced and edited the audio of this interview. Bridget Bentz, Molly Seavy-Nesper and Meghan Sullivan adapted it for the Web.
Copyright 2023 Fresh Air. To see more, visit Fresh Air.