Gulf News

Fed rate hikes to cost Trump $5m a year

Interest payments tied to variable-rate mortgages he took out from Deutsche Bank

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US President Donald Trump has repeatedly attacked Federal Reserve Chairman Jerome Powell’s interest-rate increases as a drag on US economic growth. They’re also cutting into his own fortune.

Every time the Fed raises rates, Trump’s payments on some $340 million (Dh1,248 million) in variable-rate loans go up. Since his January 2017 inaugurati­on, the Fed’s steady rate hikes may have added a cumulative $5.1 million a year to his debt service costs, according to a Bloomberg News analysis of the president’s financial disclosure­s and property records.

If Federal Reserve officials raise interest rates by another quarter percentage point when they meet on December 18-19, as investors expect, make that $6 million per year.

That might not seem like much to a billionair­e. But the president is renowned for his preoccupat­ion with preserving his wealth. He once cashed a 13-cent cheque and, according to a lawsuit by the New York attorney general, has used money from his personal charity to settle business disputes.

Trump’s interest payments are tied to variable-rate mortgages he took out from Deutsche Bank between 2012 and 2015 to develop a golf course and hotels. At the time, the Fed’s rates were near zero, and Trump paid a small margin above that.

Prime rate

The Fed lifted its benchmark short-term rate six times since Trump’s inaugurati­on, actions that pushed up the rate banks charge their best customers from 3.75 per cent to 5.25 per cent. For loans indexed to the prime rate, the moves would have pushed Trump’s annual interest payments to about $16.3 million from $11.2 million over the same time period — about $850,000 for each quarter-point increase.

Before he was president, Trump regularly denounced the Fed for keeping rates low for too long. Trump’s net worth has fallen some 7 per cent over the past two years to $2.8 billion, according to the Bloomberg Billionair­es Index. He has at least $57.2 million in cash.

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