The Daily Beast Catalogues Fred Trump's Profiteering Through The Federal Housing Program



"Ike Didn’t Like Donald rump’s Dad at All"
"Donald Trump insists that despite his bullying bombast he’s “a nice person” and during the last GOP debate he attached himself to Dwight Eisenhower, the very embodiment of presidential niceness, to make the point.

“[P]eople liked him,” Trump noted with his usual his word salad style. “‘I like Ike,’ right? The expression. ‘I like Ike.’” Defending his desire to repeat Ike’s grotesquely named “Operation Wetback” mass deportation policy, Trump said, “Dwight Eisenhower. You don’t get nicer. You don’t get friendlier.”

Eighty-eight people died during Operation Wetback and even Bill O’Reilly of Fox News joined the chorus that has demolished Trump’s deportation fantasies. However no one, so far, has noted that Ike and the family Trump had a run-in back in the ’50s that was anything but nice.
The conflict involved Donald Trump’s father, Fred, who built an enormous real estate empire on a foundation that included state and federal loan subsidies. Fred had used Federal Housing Administration intended to help build affordable housing for military vets and others. When Ike heard of the profiteering practiced by many of the builders, he suspected a scandal and ordered an investigation. The probe was led by William McKenna, a lawyer and expert in housing, finance, and organized crime.
McKenna discovered a pattern of abuse in the housing program, with builders lavishing gifts—TVs, watches, appliances—on bureaucrats charged with determining who got access to the government money. The most glaring problems were in a federal office in New York run by a veteran political fixer named Clyde L. Powell.
Although his official salary was quite modest, Powell lived an extravagant lifestyle. Powell’s savings accounts noted frequent deposits in excess of his annual salary. An architect said he had bribed him with $10,000. A lawyer who was part of the city’s Democratic Party machine admitted he gave Powell nearly $50,000.
As the man who controlled the FHA’s New York office, Powell controlled the flow of money for Beach Haven, a big apartment complex Fred Trump built with FHA loans. He allowed Trump to start building before Beach Haven was actually approved and start renting to vets and others six months before he had to start repaying his loan.
In that time Trump pocketed $1.7 million in rent payments. Trump was also allowed to pocket most of a fee—5 percent of the Beach Haven development’s cost—that was earmarked for architectural work. Trump was also permitted to borrow more in federally subsidized funds—$3.7 million, to be precise—than he actually needed.
Eisenhower truly loved the fighting men he’d led to victory in World War II. When he learned of the manipulations practiced by developers to increase their profits he called them “sons of bitches.” After his investigation McKenna reported that Trump ranked near the top among builders who shared in excess payments approved by the FHA officials who were almost certainly on the take. His findings led to Senate hearings directed by Homer Capehart, a senator from Indiana, and Connecticut’s Prescott Bush, whose grandson Jeb was then 1 years old.
McKenna’s testimony about Trump had appalled Capehart, who said the details had made him “nauseous” and that builders had taken advantage of both the federal government and countless World War II vets. Capehart, a Republican, also said that the builders and the FHA were mired in “a grand scandal” far worse than the infamous Teapot Dome corruption case of the 1920s, in which bribes were accepted by officials to grant rich oil leases on federal land.
A parade of bureaucrats and developers, Trump included, testified in July 1954. Clyde L. Powell deflected his interrogators by repeatedly citing the protections against self-incrimination enshrined in the Constitution. One builder pounded the witness table as he insisted upon his innocence. Another suffered a heart attack in the hours after his testimony.
No one performed more brilliantly than the witness who consumed most of the afternoon hearing on July 12. Dapper in a fine suit and carefully trimmed mustache, Fred Trump sat at the witness table flanked by attorneys. With a flair that foreshadowed his son’s future performances on TV, Trump outlined the convoluted but ultimately legal means he used to get the most for himself out of a program created to benefit vets and others deemed deserving of help.

At times Trump’s testimony proceeded with a “Who’s on first?” quality worthy of Abbott and Costello. Asked when he had purchased some land, Trump answered, “Five or eight or ten years” prior. Questioned about a project estimate that included an extra 5 percent “architect’s fee,” which mostly went into his own pocket, Trump insisted it was included to satisfy the FHA. When a skeptical Senator Capehart pressed him, Trump added, “And it is provided by the regulation.”
“What is provided by the regulation?” said Capehart.
“The 5 percent architect’s fee.”
“Have you ever seen a regulation that says that?”
“No, I’m a builder.”
“Then how do you know these regulations provide for a 5 percent architect’s fee?”
“They wouldn’t have allowed it if they didn’t.”
So it went for much of the afternoon with Trump warning at times, “That is a very iffy question,” and then launching into descriptions of the complex methods he used to squeeze maximum profit out of the taxpayers.
He explained, for example, that the land under his Beach Haven development was held by a trust devoted to his children. The buildings, however, were owned by half a dozen corporations. Every year these six entities paid rent to the trust—really his children—for the use of the land. Under the terms of the lease the Trump kids might receive $60,000 or more in pure profits every year for 98 more years. Then lease could be renewed for another 99 years.
With similar candor Trump explained how he had paid himself the general contractor’s fee that had been included in the estimate he submitted to the FHA, and how he fattened his own wallet by having one of his corporations do business with another of his. To the senators this was the equivalent of a man mowing his own lawn and then insisting he should be paid for the chore. Trump insisted that he was more like the tailor who pays a low-wage assistant to sew a custom suit, then charges his customer full price. If the quality is the same, thanks to the tailor’s supervision, why shouldn’t he get the money?
In Trump’s tailoring at Beach Haven consisted of a plan he submitted to the government that called for extra high construction costs, which allowed him to borrow more money and get the government’s approval to charge higher rents. The final tally on the project showed that Beach Haven had been built for $4 million less than the estimate. (Worth $35 million in 2016 dollars.)
The extra high rents set when the project was approved remained in place, even after the excess profits were revealed, because the FHA permitted it. Similarly, the cash left over from the FHA building loan stayed in a Trump bank account. As far as he was concerned, this money was fairly earned and, technically speaking, not personal income. As he explained, as long as he didn’t put the cash in his pocket, the $4 million could be regarded as a rainy-day fund for Beach Haven.
With the occasional aid of his lawyers, Trump testified for more than two hours straight. Much of what he said would disturb anyone who believed that the taxpayer dollars invested through the FHA program were supposed to serve the noble public purpose of aiding veterans as much as possible. But Trump and other builders would say that their windfall profits compensated them for the excellent work they did creating tens of thousands of homes at a breakneck pace.
Any suggestion that he had violated any regulations or laws was “very wrong, and it hurts me,” said an indignant Trump. He was the one who ought to be vexed, not the senators, because of the “untold damage to my standing and reputation.”
Fred’s ability to return fire when he was criticized was almost as good as his son’s would prove to be decades later. But Fred was probably more charming, and perhaps better at winning over erstwhile adversaries. After the hearing Capehart bumped into Trump at the airport in Washington. Capehart greeted him cheerily and encouraged him to “keep up the good work” on housing in New York."