Trump Saves About $1 Million With Powell’s Interest Rate Cut

(Bloomberg) -- President Donald Trump is likely to save nearly $1 million in annual borrowing costs after Federal Reserve Chairman Jerome Powell cut interest rates this week.

The quarter percentage-point reduction in the Fed's benchmark short-term interest rate, which reverses a December hike of the same amount, brings Trump's total estimated annual cost from the U.S. central bank's rate moves to about $16.3 million, according to a Bloomberg News analysis of the president's most recent financial disclosure form and local property records.

Until this week, Trump's floating-rate debt cost him about $17.1 million in annual interest payments.

Powell's move followed a prolonged public campaign by Trump to convince the Fed that it needed to cut rates to boost the U.S. economy. He has previously bemoaned what he has described as billions of dollars in losses he's sustained as a result of being president. The figure could not be independently verified.

Trump, through his namesake company, has some $340 million in floating-rate loans. The Fed's rate changes spread through financial markets to influence what borrowers, such as the Trump Organization, have to make in debt service payments.

Between 2012 and 2015 Trump took out a series of loans from Deutsche Bank to develop hotels in Washington and Chicago and a golf course outside Miami. Every quarter-point move by the Fed changes Trump's annual interest payments by an estimated $850,000, Bloomberg's analysis shows.

This week's rate cut, the first since the global financial crisis of more than a decade ago, drops to about $5.1 million the extra interest payments Trump's been making since a series of Fed rate hikes following his January 2017 inauguration.

Trump's interest payments are pegged to either the prime rate -- what banks charge their best customers -- or one of seven tenors of the London interbank offered rate, also known as Libor. The benchmark federal funds rate set by the Fed generally moves both the prime rate and Libor. Trump's loan documents don't specify whether Trump and Deutsche Bank elected to use Libor or the prime rate when calculating Trump's payments.

Bloomberg's analysis is based on the prime rate. It's also based on how much Trump borrowed, rather than how much he presently owes. Trump's debt from Deutsche Bank requires him to make balloon payments when the loans come due in 2023 and 2024, property records and his financial disclosure form show.

Trump Organization spokeswoman Amanda Miller and chief lawyer Alan Garten didn't respond to a request for comment.

To contact the reporter on this story: Shahien Nasiripour in New York at snasiripour1@bloomberg.net

To contact the editors responsible for this story: Kevin Whitelaw at kwhitelaw@bloomberg.net, Joshua Gallu, Alex Wayne

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