Tags: Distressed | Debt | Experts | Trump | White House | Team

FT: Distressed-Debt Experts Dominate Trump White House Team

FT: Distressed-Debt Experts Dominate Trump White House Team

By    |   Friday, 28 April 2017 01:35 PM

President Donald Trump has filled his economic team by thinking outside the box and selecting a wide array of officials with a unique approach to wheeling and dealing “shaped by the world of dealmaking and arbitrage,” the Financial Times reported.

The FT highlighted these officials:

  • Treasury Secretary Steven Mnuchin worked at Goldman Sachs “but his biggest business success was an aggressive buyout” of distressed American bank.
  • Gary Cohn, chief economic adviser, also worked at Goldman. Cohn became a star in the “ultra-aggressive, arbitrage-driven world” of commodities trading.
  • Wilbur Ross, commerce secretary, created a private equity and distressed-debt firm, as did Carl Icahn, an informal adviser who backed Trump early in the campaign.
  • Tom Barrack, another early Trump backer and influential adviser, is a private equity real estate investor.
  • The only top Trump official (or adviser) with “classic” experience of running a mainstream, gigantic corporate bureaucracy is Secretary of State Rex Tillerson, former Exxon CEO.

“This distinction matters. Financiers who build their careers by handling distressed assets are trained to make high-risk, high-reward trades, particularly if they can control downside risk. They scorn bureaucratic process and focus on results," the FT explained.

"They will pivot and cut their losses if a deal goes sour. They embrace brinkmanship and will often be ultra-aggressive at the start of a bid, but later retreat to cut a deal. Above all, distressed-debt players are opportunistic, not ideological: they are constantly hunting for value in assets and trades that are mispriced or widely scorned,” the FT said.

“This horrifies Beltway insiders. And it may end in disaster: there is a good chance nothing significant gets done this year because the team cannot actually cut any deals. In the world of distressed-debt trading or leveraged buyouts, it makes perfect tactical sense to start a bid by dispatching an aggressive one-page letter to your counterparts establishing goals. But that is not how legislation is executed in Washington,” the FT reported.

Meanwhile, Trump's recent failure to push a healthcare overhaul through Congress, as well as other miscues, now have investors a little less sure he will be able to make good on his promises, Reuters reported.

The S&P 500 is near record highs after the administration unveiled a long-awaited proposal Wednesday to steeply cut corporate tax rates. But the plan may be unpalatable to Republican fiscal hawks since it lacks proposals for raising new revenue and would potentially add billions of dollars to the federal deficit.

"The stability of the market and its ability to rise is still based on the feeling that the administration may be getting its act together," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York. "But at some point investors will ask if any of this stuff is going to happen or if it's all talk."

(Newsmax wire services AP and Bloomberg contributed to this report).

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They scorn bureaucratic process and cut their losses if a deal goes sour
Distressed, Debt, Experts, Trump, White House, Team
Friday, 28 April 2017 01:35 PM
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