Concern over the economy at large is not President Donald Trump’s only issue with the Federal Reserve raising interest rates: according to The Los Angeles Times, those rate hikes are causing Trump’s loan payments to rise about $5 million per year, slicing into his personal fortune.
Every time the Fed raises rates, Trump’s payments on about $340 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 an additional quarter-percentage point when they meet Dec. 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 check and, according to a lawsuit by the New York attorney general, has used money from his personal charity to settle business disputes. Trump has denied misusing charity funds.
The president has repeatedly disparaged his pick to chair the Fed, Jerome Powell, reportedly going so far as to ask whether he has the legal authority to fire him.
Trump has been increasingly strident in criticizing Powell since July, arguing the central bank’s policies are threatening an economic boom that he sees as a validation of his push to cut taxes and slash regulations.
By October, shortly after the Fed’s most recent rate increase, he said the central bank was “going loco” and identified it as his “biggest threat.” Last month, Trump told the Washington Post he was “not even a little bit happy with my selection of Jay,” whom Trump chose to be Fed chairman. This week, he urged Powell against the expected December increase, telling Reuters the central bank “would be foolish” to proceed.
The Fed has lifted its benchmark short-term rate six times since Trump’s inauguration, actions that have pushed up the rate banks charge their best customers to 5.25%, from 3.75%. 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.
How does Trump’s criticism square with his thoughts on interest rates before becoming president?
Before he was president, Trump regularly denounced the Fed for keeping rates low for too long. “Record inflation,” for example, was always around the corner. But his apparent change of heart amplifies worries that his decision to maintain his debt-laden business empire while in office may influence his performance as president.