According to reports by Reuters news agency and the German newspaper Handelsblatt, Special Counsel Mueller has issued a subpoena to Deutsche Bank. If the allegations are true, the subpoena of President Trump’s financial records, allegedly issued a few weeks ago, seems to indicate that Mueller’s investigation has now turned to the President.
Deutsche Bank is reportedly cooperating with the investigation and has already submitted documents regarding the Trump family, but has declined to make a statement, asserting that they do not comment on their clients. As far as clients go, Deutsche Bank seems to have had a lucrative relationship with the real estate developer turned politician, at one point lending him $640 million to build Trump International Hotel & Tower in Chicago. Although Trump unsuccessfully sued the bank in 2008 for $3 billion in damages, Deutsche is one of his preferred lenders.
President Trump also borrowed $170 million from Deutsche Bank for the historic Old Post Office in Washington D.C., which he converted into a hotel, quipping in a debate last September that he would end up on Pennsylvania Avenue “one way or another,” a clever way to promote on national television the prime location of his new property.
ValueWalk's Raul Panganiban interviews Kirk Du Plessis, Founder and CEO of Option Alpha, and discuss Option Alpha and his general approach to investing. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with Option Alpha's Kirk Du Plessis
President Trump currently owes over $300 million to the bank. His daughter, Ivanka, and son-in-law, Jared Kushner, are also clients. The finances of the Trump family will allegedly be investigated as well under the subpoena, which Trump had previously indicated he believed was crossing a line.
This is not the first time Deutsche Bank has been pulled into their client’s political troubles. In June, House Democrats requested information on the President’s finances, which the bank denied, pointing towards US privacy laws that would inhibit them from doing so, leading several members of Congress to issue a letter claiming privacy laws do not apply to congressional request.
This January, Deutsche Bank was fined $630 million for failing to prevent $10 billion in “mirror trades” believed to be a part of a Russian money laundering scheme operating through Deutsche Bank’s Moscow branch. In June, the Guardian reported that the bank had conducted an internal investigation of President Trump’s finances and reportedly found nothing suspect. The investigation did not turn up any connection between the Trump family and the Moscow mirror trades.
The Media and the Market
The Mueller investigation continues to carry on, shrouded in mystery, leading to media and financial speculation.
Earlier this week, ABC falsely reported that retired Lt. Gen. Michael Flynn was prepared to offer testimony that then candidate-Trump, directed him to make contact with Russia. ABC ultimately corrected their error to indicate that the direction from Trump came after the election and was related to fighting ISIS. They have drawn further criticism for not removing the story completely, instead only issuing a correction at the bottom of the page. The journalist who broke the story, Brian Ross, is now facing an unpaid four week suspension.
On Friday, Lt. Gen. Flynn did, however, plead guilty to lying to the FBI, the details of which are still unclear.
Despite the later correction, the false ABC report initially caused the Dow to drop 350 points, a stark contrast against the Dow’s surge just the day before. After ABC issued a correction, the Dow largely recovered, with last week seeing its peak performance of the year. Deutsche Bank stock has also fallen in value since news of the subpoena was made public.
The plunge that followed the now debunked story raises an interesting discussion about the role of the news media today. For one, it provides a useful metric for measuring the effects of so called, “fake news,” a term thrown around loosely on both sides of the political aisle. The links between the market and the media seem to have only intensified in the social media age, a relationship that becomes more prominent as political tensions continue to grow.
Allegations of fake news aside, this incident should also give news outlets pause. Their news stories clearly have the power to impact the financial markets. If their stories are poorly researched, incorrect, or presented with a strong bias, what kind of responsibility does a news outlet hold for the consequences of a story?
As far as the Deutsche Bank Mueller investigation goes, it’s interesting, and perhaps troubling, to consider how the developing case could impact the market, considering that during the Watergate Scandal and President Nixon’s subsequent resignation, the stock market took a major hit.
Monday saw another unmistakable surge in the Dow after the Senate passed their version of the the Tax Cuts and Jobs Acts, which would cut the corporate tax rate from 35% to 20% and repeal Obama Care’s individual mandate.
In Their Words
Both President Trump and Russian authorities have denied collusion to sway the 2016 election. The President has also denied having financial interests in Russia. These statements have been echoed by other members of the Trump team, including Kushner who told congress, “I did not collude, nor know of anyone else in the campaign who colluded, with any foreign government. I had no improper contacts. I have not relied on Russian funds to finance my business activities in the private sector. I have tried to be fully transparent.”
Tomorrow, Donald Trump Jr. will face the House Intelligence Committee in a closed door testimony as a part of their investigation into Russian collusion in the 2016 election. Reports claim that Trump Jr. will also appear before the Senate Intelligence Committee later this month, while Kushner will soon be brought before the House Committee again.
In October, the Mueller investigation saw its first arrests with Paul Manafort and his business associate Rick Gates turning themselves in to the FBI on charges of money laundering and lobbying for a foreign government. Manafort allegedly lobbied on behalf of then Ukrainian President Yanukovych, who has strong ties to the Kremlin. Manafort served as campaign manager for the Trump campaign beginning in June 2016 before being replaced by Kellyanne Conway in August. Gates likewise briefly served on the campaign.