President-elect Trump is set to become the richest president in U.S. history. More unusual, his wealth derives from privately held companies largely run by himself and his children. Most unprecedented, we do not know the extent of his business interests because he is the first presidential candidate to be elected without releasing any tax returns.
The president-elect's wealth, company structure, and secrecy could create problems once he assumes the presidency on January 20th. These issues could range from small-scale conflicts of interest to widespread corruption to outright violations of the Constitution.
Why is it important?
There are many federal laws that prevent executive branch officials from profiting from their positions. Typically, they cannot invest in areas their work affects. These laws do not apply to the president because, the reasoning goes, his work affects all areas.
The Constitution's rules on the subject, however, do apply to the president. Under Article 1, Section 9, no official is allowed any kind of "emolument" from any foreign state. An emolument is a "compensation for labor or services"—which includes business exchanges with foreign governments and companies backed by foreign governments.
Since the 1960's, most presidents have avoided these conflicts (and controversy) by selling their investments and putting their money in a "blind trust." For a trust to be "blind," the person who owns the investments cannot know what the trust contains and the person who oversees the trust cannot have a financial stake in the investments themselves.
President-elect Trump has made some statements regarding these issues. He says he will leave his two sons in charge of his businesses. He says he will step back—but will retain his ownership stake in the company—to focus on governance with his daughter. By definition, this is not a blind trust because of the president-elect's prior knowledge of the investments and his children's financial interests.
Should Trump put his assets in a blind trust before becoming president?
In this case, blind trust would be ineffective, unrealistic, and unfair. Further, it is completely at the president-elect's discretion—and he has wisely chosen not to take the step.
First, blind trusts don't work. Mitt Romney once acknowledged, "the blind trust is an age-old ruse.” To stick with the example, Romney's blind trust—which did in fact meet the criteria to earn the name—invested $10 million in a fund managed by Tagg Romney, his son. The idea that the person managing a blind trust is not swayed by personal interest, relationships, or knowledge of the owner is absurd. A blind trust is not the solution many claim it to be.
Further, in order for Trump to create a blind trust, he would have to sell all his business holdings. Worse, he would have to do so under time pressure and would be forced to accept enormous personal financial losses—which could affect not only his own wealth and that of his family, but the stability of a business network that employs thousands of people. It would be a fire sale.
Critics claim the president-elect would violate the Emoluments Clause without a blind trust. According to two constitutional lawyers, who served in the Justice Department and the White House under George H. W. Bush, the clause "does not limit Trump’s ability to benefit from dealings with non-state foreign entities... whether a “state-controlled” entity falls within the emoluments clause prohibitions has traditionally been addressed on a case-by-case basis, depending principally on how independently such an entity operates from an actual government." In other words, Trump's business dealings would not automatically violate the Emoluments Clause, and any questionable circumstance could be considered individually and avoided if need be.
Trump can keep his business holdings and avoid conflicts of interest—all without a blind trust.
As Trump and his family enrich themselves, they risk distorting the American economy, foreign policy, and national security. A blind trust would help to mitigate this problem.
Trump says he will step back and allow his sons to run his business, but will retain his ownership stake in the company. His lawyer, Michael Cohen, incorrectly called this a blind trust. Not only does Trump know exactly what the investments are, he and his children have financial interest in promoting these investments through the presidency.
If Trump does not put his assets in a true blind trust, he will violate the Constitution on his first day in office. Trump has innumerable business dealings in at least 20 countries around the world, including China, Saudi Arabia, Turkey, Azerbaijan, Great Britain, India, and Qatar. These dealings will all become potential violations of the Emoluments Clause the moment he becomes president.
The conflicts have already begun. At the same time as Trump's infamous call to the president of Taiwan—which caused significant uproar and potential political conflict with China—the Trump Organization was meeting in Taiwan with Taiwanese political officials to discuss an expansion of Trump Hotels in the country. In Turkey, Trump seems to acknowledge a problem: "I have a little conflict of interest 'cause I have a major, major building in Istanbul. It’s a tremendously successful job." He later spoke with Turkish President Recep Erdogan and touted his business partners on the call. Other examples include his DC hotel, Deutsche Bank debt, Saudi Arabia deals, UK wind farm, and many more. What happens when the Trump family interest is not the same as the country's?
The idea that these conflicts of interest will improve once Trump is president is deeply, dangerously naive. A blind trust is one crucial (historically normal) step towards protecting our country.
- The Atlantic's catalogue of Trump's current known conflicts of interest
- "Unless Trump acts to put appropriate distance between himself and his business ventures, these questions are likely to continue throughout his time in the Oval Office. Below is an attempt to catalogue the more clear-cut examples of conflicts of interest that have emerged so far."
- Constitutional lawyers David Rivkin and Lee Casey case against a blind trust
- "It is clear that Trump cannot satisfy all of his critics, but these measures are both reasonable and workable. They would—or should—reassure most Americans that his administration is acting with probity."
- Vanity Fair on the "age-old ruse" of a blind trust
- "As a freshman senator, Barack Obama—whose wealth comes almost entirely from his book royalties—set up a blind trust but later that same year sold all of his stocks and closed the trust because he decided that even such an arrangement could not protect him from the appearance of a conflict. Most of his wealth is now invested in U.S. Treasury bonds and diversified funds—about the most transparent option available. What’s good for the country is good for Obama, and vice versa, to coin a phrase."
- The New York Times on the implications of the Emoluments Clause
- "The Emoluments Clause “surely” applied to [President Obama], and the [Nobel Peace Prize], which included a check for about $1.4 million, was the sort of thing that would be barred if it came from a foreign state. In the end, however, Mr. Barron concluded that Mr. Obama could accept the prize because the committee that chose him was independent of the Norwegian government and the prize itself was privately financed.... But he said that the answer would be different if a foreign government sought to make a payment to a sitting president. In a footnote, Mr. Barron added, “Corporations owned or controlled by a foreign government are presumptively foreign states under the Emoluments Clause.”