Warren Buffett's Decades-Old Critique of Trump's Financial Strategy Resonates Amid $355 Million Fraud Verdict

A decades-old analysis from Warren Buffet, the guiding force behind Berkshire Hathaway has resurfaced in the backdrop of a landmark ruling that against former President Donald Trump. A judge recently ordered Trump to pay $355 million for fraudulently reporting the values of his properties and prohibited the ex-US president from assuming the role of director in any New York-based company for three years. In his 1991 analysis, Buffet stated that “Trump was never right”. 

What Was Warren Buffet’s Analysis of Donald Trump?

Buffett's insights shared during the series of lectures at Notre Dame in 1991 are preserved on TilsonFunds.com. In his lectures, Buffet described Trump’s overreliance on leveraging and how he went wrong with borrowing as well. He described that Trump consistently overpaid for properties that he bought by borrowing money from people. His assets, what he paid for them, and his borrowings had no real equity in them, Buffet claimed.

“He was terrific at borrowing money,” Buffet said. He further added that at the time, Trump was probably a billion dollars in the hole because of overpaying.

“You don't need leverage in this world much. If you're smart, you're going to make a lot of money without borrowing,” Buffett said indicating that a conservative approach to finance projects is always better than rapid expansion with increased debt.

In the lecture, Buffet went beyond financial critique and he pointed out that intelligence alone does not guarantee success. “I've seen all sorts of people with terrific IQs that end up flopping in Wall Street or business because they beat themselves,” he said.

The billionaire investor has taken multiple swipes at Trump over the years. In 2019, in an annual shareholder letter, he criticized Trump’s policies and said that no one person should claim credit for the U.S. economy’s good health.

Buffett had previously supported Hillary Clinton in the 2016 elections, and in the 2019 letter he wrote that “it is beyond arrogance for American businesses or individuals to boast that they have ‘done it alone’,” The Guardian reported.

Trump’s Failures with Properties

Several of Trump’s ventures especially those in the casino and hotel industries have failed over the years. Projects in Atlantic City and New Jersey struggled financially for years eventually facing bankruptcy.

One of his most ambitious projects, the Trump Taj Mahal, filed for bankruptcy in 1991, following a pattern of overleveraging and financial mismanagement that Buffett pointed out in his lecture. Trump’s Plaza Hotel also filed for bankruptcy around the same time, indicating a similar trend.

Recent Ruling Against Trump

On February 16, in a sweeping civil fraud verdict, a New York judge ordered Donald Trump to pay penalties worth a whopping $355 million, after finding out that the real estate tycoon had misrepresented his wealth for years.

Judge Arthur Engoron delivered the verdict after the trial in New York. Attorney General Letitia James’ lawsuit punishes Trump, his company and executives, and his two eldest sons, for scheming to dupe banks, insurance providers, and others by inflating the former president’s wealth on financial statements, according to AP.

The landmark verdict forces a shakeup at the top of the Trump Organization, putting the company under court supervision, and curtailing its business as of now.