I used to come over that bridge and I used to say, “I want to be in Manhattan someday.”
—DONALD TRUMP
Donald Trump’s first Manhattan apartment gave him a raptor’s view of the city from seventeen stories above the sidewalk. Completed in 1959, the building at 196 East Seventy-fifth Street was faced in the glazed white brick that came into wide use in the mid-twentieth century as developers imitated architect Gordon Bunshaft’s stylish Manhattan House at Sixty-sixth Street and Third Avenue. (Manhattan House was eventually designated an official landmark.) Young Trump wasn’t much concerned with the aesthetics of postwar architecture on the East Side. He was mainly interested in gaining a toehold in the place that had dominated his imagination ever since he knew what waited on the western end of the Queensboro Bridge. To his delight, he had landed in one of the borough’s tonier precincts, and thanks to rent-control laws it was a bargain.1
Reverse commuting in a Cadillac convertible, Donald spent his days in Brooklyn with his father where anyone could see that blight was spreading out from the poverty zones and threatening previously stable communities. Were the downturn a typical part of the real estate cycle, the depressed prices would have been attractive to a developer with cash on hand. However, the trouble in Brooklyn was more fundamental. Most of New York City’s decline in population was occurring there. When newcomers did fill the homes and apartments vacated by would-be suburbanites, they were less affluent and less educated.2
A similar process was occurring across the country as cities emptied and real estate development in the suburbs boomed. The contrast between the urban and suburban experience was especially pronounced for the middle class. In the cities, midrange home values stagnated and even fell because demand declined. In the suburbs, new-home buyers who made low-down-payment purchases often saw the value of their home rise quickly and then traded it in for a bigger and fancier residence. As people caught on to the seeming magic of “trading up” with the help of rising values, houses became not just homes, but assets that could be leveraged to produce wealth. In California, a real estate speculator named Albert J. Lowry began renting hotel ballrooms where people paid to attend his seminar called “How to Be Successful in America.”
Lowry taught that with a little cash and a lot of nerve, anyone could achieve success by locating undervalued or foreclosed properties, improving them with low-cost renovations and repairs, and selling them at a profit. Naturally, if everyone who attended a local Lowry seminar immediately put his lessons to work, they would compete for the same number of bargain houses. Demand would outstrip supply and bargains would disappear. But only a small percentage of his students would actually follow through. Some became so successful that they became the subjects of stories Lowry told in his classes, although none could match his own orphanage-to-mansion biography. A few became his partners in the seminar business. This enterprise was so successful that Lowry, decked out in a three-piece suit and toupee, taped a thirty-minute TV commercial that he paid stations to air in the middle of the night.
When he appeared in New York City, Lowry offered his seminars on weeknights, which made it easier for suburban commuters to attend. As they went home by train, they passed through parts of the Bronx, Brooklyn, and Queens where almost no one was investing in real estate. Although few knew it at the time, New York City had entered a period of profound economic change. Private-sector employment, which peaked in 1969, had begun to slide and wouldn’t fully recover for more than forty years. For most of the same period, rising top-tier salaries received extravagant attention in the press, but median incomes for city residents remained below the national average. In time, Manhattan’s rich would push out from their bastions in Midtown and on the East Side to claim, block by block, new territories for luxury apartments and high-end shops. The displacement of the poor and the middle class would be recognized as a threat to the rich culture of the borough. However, in the late sixties and early seventies, the threat of blight was a far more urgent concern.
Keen to protect the center of the city’s economy, officials of the Lindsay administration pushed a host of ideas to aid development in Manhattan. New expressways were proposed to replace the crumbling West Side elevated highway and to link the Holland Tunnel and the bridges to Brooklyn. According to proponents, these highway projects would create jobs and, supposedly, aid business. However, they would also displace tens of thousands of people, which is why they met fierce resistance among local citizens. Opponents were joined by preservationists, who agreed with Ada Louise Huxtable, the architecture critic. She noted that the highway route through lower Manhattan seemed designed to create “the most possible historical and architectural damage.” When the highway plans were presented at neighborhood meetings, angry residents often shouted down city officials as they tried to speak.
In the end, despite great sums invested in planning and studies, neither of the Manhattan freeways would be built. The construction industry would survive, instead, on the development of offices and residential buildings. The Twin Towers of the original World Trade Center, which became the tallest buildings in the world when they were completed in 1973, led this activity. For a moment this prompted envy among the real estate elite. The owners of the Empire State Building, which saw its forty-year reign as “world’s tallest” end when the Twin Towers were completed, even announced a plan to add eleven stories and recapture the title. But the idea never progressed beyond talk. In the meantime the Port Authority of New York and New Jersey, which owned the Trade Center, struggled to fill them with tenants. The two towers wound up contributing to a glut in office space, which suppressed rents.
Housing construction spent the early 1970s in the doldrums as well. Only two significant projects were completed in this period, including a complex of 1,470 apartments called Waterside Plaza and a development to house twenty thousand on Roosevelt Island in the East River. Both were overseen by Richard Ravitch, whose firm, HRH Construction, had completed the development of Trump Village. Both were also financed by low-cost state bonds.
Despite the glimmers of hope represented by the HRH projects on the East Side, a fortress-Manhattan mentality prevailed in many discussions about the future of the city as frightening reports of crime and despair arrived from the outer boroughs. In the South Bronx, where 40 percent of the population depended on welfare, law-abiding people feared leaving their apartments even during the day. In buildings that had been abandoned by their landlords, tenants struggled through the winters without heat. Eventually eighty thousand people found themselves without reliable water and were, at times, forced to haul buckets to and from fire hydrants. Packs of dogs roamed the streets. Trash accumulated in vacant lots. A local physician declared the Bronx “a necropolis.” Manhattanites saw shades of the necropolis in parts of Harlem and in the Lower East Side slums and in the peep-show-and-crime district around Times Square. By 1975, real estate executives would have to fight a sense of panic as prices for some residential buildings dropped as much as 50 percent and demand all but disappeared.3
While others watched fear and anxiety wash over the real estate business, Donald Trump saw opportunities. In his block-by-block exploration of Manhattan he had noted several sites where he could imagine a better use for the available space. This exercise required a creative mind that could recognize that a neighborhood needed more high-end housing or a low-rise block was ready for a big, mixed-use development. Traffic flow, access to mass transit, and the value of nearby parcels all played into the calculations. These imaginings were just the start. Once he identified a spot, Trump would have to acquire it, and that could mean negotiating with a number of owners who might raise their prices as soon as they figured out what game was afoot.
Given the extreme difficulties posed by sites with multiple owners, developers in Manhattan were most interested in those rare big parcels controlled by single entities. In many cases these owners were government agencies and large corporations, which rarely parted with property. In Manhattan, in the early 1970s, one exception was the remnants of the Penn Central railroad. Comprising several formerly great lines, Penn Central was careening toward bankruptcy. But the railroad still controlled hundreds of pieces of real estate that could be sold to raise cash. Trump, like others in New York real estate, was especially interested in the railroad’s little-used train yards on the West Side of Manhattan. One was in Midtown. The other was on the Upper West Side. They were the last large undeveloped tracts in the borough. A bankrupt railroad might make the yards available at an extremely attractive price for the buyer with foresight.
Years would pass while the Penn Central shed assets and died a slow death. Trump would bide his time, enjoying what New York could offer a young man with a good income, a rich father, and no real responsibilities. In the winter of 1969–70, he dabbled in the entertainment business as the coproducer of a Broadway play. The critics did not find much to like in Paris Is Out!, which told the story of a squabbling, middle-aged suburban couple. “I neither hated it nor liked it,” wrote Walter Kerr. “I simply sat there and looked at it.”4 Closed soon after it opened, the play did succeed in giving Donald Trump the title of “Broadway producer” to carry with him as he traveled a circuit of nightspots that included 21, the Four Seasons, and a members-only restaurant-bar-discothèque called Le Club.
Le Club was renowned for attracting beautiful women, who commanded Trump’s attention in ways that drink and drugs could not. (He would eventually confess that sex was his one real indulgence.) As he would write, “Some were vain, some were crazy, some were wild, and many of them were phonies.” Trump would live up to his NYMA “ladies’ man” designation, expending much time and energy in the pursuit of models, flight attendants, and others he found attractive. He also made fast friends with older, powerful men who might help him advance. First among them was the owner of the New York Yankees, George Steinbrenner. A bombastic bully who was a perfect subject for the tabloid press, Steinbrenner had used outbursts and tantrums to make himself into a national household name, which was a rarity for baseball owners of the day. He doubtless considered his personal fame to be good for business, and the recognition suited his ego.5
The whole point of Le Club was to be noticed as powerful or beautiful and to be photographed alongside a celebrity and thereby become one yourself. The place was founded and operated by the fashion designer Oleg Cassini and his brother, Igor, who had previously written a celebrity-gossip column under the name Cholly Knickerbocker. Igor claimed to have coined the term jet set and for a brief time published a magazine called, simply, Status. Le Club was all about status. It claimed the names of thirteen princes and four barons on its rolls, and its board of directors included the Maharaja of Jaipur and the Duke of Bedford. Although twelve hundred people belonged to Le Club, half were out of towners, and the place was so small that it couldn’t accommodate more than two hundred in a night. The exclusivity meant that once you got inside, you stood a good chance of meeting certain first-tier celebrities—Diana Ross, Al Pacino, various Kennedys—or one of the real regulars. This latter group included Trump, Steinbrenner, and the most famous/infamous lawyer in New York City, Roy Cohn.6
With his McCarthy hearings well in the past, Roy Cohn of the 1970s was the ultimate wheeler-dealer attorney. Raised, quite literally, in the political clubhouses where his father traded in favors and influence, Cohn was fixing speeding tickets while still in high school. As a grown-up lawyer he devoted much of his time and energy to proving that he was extremely well connected to powerful people who could get things done. Forever gathering and disseminating gossip as well as meaningful information, Cohn spent his days on the phone with local judges, city officials, New York’s Catholic cardinal, and politicians around the country. He tape-recorded many of these conversations and would later use the contents of calls to pressure people. When he couldn’t fix a problem through his connections, or his clients’ money, he went to court, where, in most cases, he performed quite brilliantly, whether he was defending organized-crime figures or defending himself against charges of unproffessional conduct. “A total genius” was how Donald Trump would describe him, adding, “But he would kill for somebody that he liked.”7
For much of his life Cohn faced an almost constant threat of prosecution on charges related to his tax returns—IRS officials ultimately pegged his debt at $7 million—and his professional conduct. (He once put a pen in a comatose man’s hand in an attempt to get a signature on an amendment to his will.) Although repeated efforts were made to prosecute or discipline him through the bar association, all but one failed. The last, which ended with the revocation of his law license, occurred just prior to Cohn’s death in 1986 at age fifty-nine.
More than most, Cohn was a man of seemingly irreconcilable contradictions. Although he was gay, he befriended homophobes, opposed gay rights efforts, and helped persecute other gay men. Though Jewish, he often spewed anti-Semitic remarks. His bulging eyes were ringed with dark circles, and his face, made leathery by too much sun, was scarred by plastic surgery. But he dressed impeccably—fine suits, silk ties, matching handkerchiefs—and was so vain that he never appeared in public with a hair out of place. He looked like a gangster who had worked his way up through the ranks the hard way. He spoke in a soft, conspiratorial voice, and his accent, though mild—“open da door,” go out “fuh lunch”—betrayed a bit of the New York streets. Some of his favorite phrases, including “along those lines” and “at a given time,” made him sound like someone trying hard to sound like a fancy lawyer. Although obviously brilliant, he sometimes stumbled on common terms. In a radio interview he granted to promote a book he wrote, Cohn said that Joseph McCarthy’s main problem was that he “would not observe the social amenities.”
Cohn’s style appealed to those who thought they needed a tough guy on their side, and it helped him to fit in with a clientele that included plenty of genuine mobsters. Among others, he represented reputed crime bosses and shady characters he helped to skim free cash out of X-rated-movie houses. Because authorities were never permitted to bug an attorney’s office, his were sometimes used by suspected criminals seeking to avoid surveillance. Cohn’s own businesses included a scam that cheated the City of New York out of the part of the rent due on parking-lot leases. A parking lot employee manager eventually confessed that Cohn was the ultimate beneficiary of the scheme and that he had pocketed thousands of dollars every week.8
Like many of the gangsters he represented, Cohn possessed a kind of charm that many who would have preferred to hate him found compelling. Loyal and generous, the gossip he shared over drinks or in the backseat of his rattletrap Rolls-Royce—his initials RMC were on the vanity license plates—made anyone who listened feel privileged and a little bit powerful. At Le Club, Cohn and Trump could have traded stories about mutual friends and acquaintances, including a host of political bosses such as Fred Trump’s old friend Abe Beame, whom Cohn had known for many years. Cohn and Trump were also connected by a mutual interest in the outcome of a housing-discrimination case brought against the Trump Organization in the fall of 1973 by the federal government.
Based on complaints from officials of the Urban League’s Open Housing Center, who sent black and white applicants to test landlord practices, the Justice Department had asked agents of the Federal Bureau of Investigation to probe the Trumps’ operation. This work led the Department of Justice to sue the family’s real estate company, Trump Management Corporation, alleging that the company had refused to rent to prospective tenants “because of race and color.”The Trumps weren’t singled out for this attention. In 1971 the Justice Department’s Civil Rights Division had settled a similar complaint against the firm owned by Samuel J. LeFrak, who was an even bigger apartment operator in Brooklyn and Queens. (He owned twenty-one thousand apartments. The Trumps’ holdings were reported, variously, as fourteen thousand, fifteen thousand, or sixteen thousand units.) But where LeFrak had moved quickly to negotiate a settlement, the Trumps had hired Cohn and signaled their willingness to wage a long fight.
On January 12, 1974, Cohn and Donald Trump, who was becoming the face of the family business, called the press to a conference room at the New York Hilton. (A favorite spot of publicity hounds, the hotel had recently been the site of the first cell phone call in history, which was made by an executive for a firm developing the technology.) Cohn told reporters that the federal government had failed to provide the name of a single person who had allegedly suffered discrimination by the Trumps and announced that he had filed a countersuit claiming the Trumps had suffered $100 million in damages due to the “irresponsible and baseless” claims of the civil rights office. When Donald Trump spoke, he sounded a bit like a lawyer himself as he refuted the charges in a way that left him an out should the evidence prove him wrong: “I have never, nor has anyone in my organization ever, to the best of my knowledge, discriminated or shown bias in renting our apartments.”
Where Trump and the Feds disagreed, he said, was on the landlord’s standards for approving or rejecting a tenant. The government’s lawyers, acting on claims of would-be renters, said that black applicants with the same financial qualifications as whites who were given leases had been turned away. Donald Trump insisted this was not true and that his company only sought to exclude welfare recipients, who, he feared, would not pay rent and move out in “one or two months.” Trump said that Samuel LeFrak’s settlement required that he rent to applicants on welfare, and that if Trump agreed to the same type of settlement, tenants would flee his buildings and entire “communities as a whole.” Although LeFrak tried to dispute this description of the arrangement, Trump was in fact correct. LeFrak had agreed that applicants who were not working but received enough in welfare to pay their rent could live in his buildings.
When asked about his organization’s record, Donald estimated that seven hundred, or 4.3 percent, of his company’s apartments were rented to blacks. At the time Brooklyn was 25 percent black and Queens was 13 percent. Some of the disparity between the population figures and the Trump record could be explained by location. Many Trump buildings were in white-majority communities such as Coney Island, which was 85 percent white according to the 1970 census. It was possible that few blacks sought to live in these areas. However, housing was in short supply and the rents charged at Trump properties made them affordable even for applicants on the lower rungs of the middle class. And the complaint from the Urban League presented claims of apparent discrimination.
In a different historical moment, the federal government would never have bothered to consider the racial makeup of Trump’s tenants. However, after the president’s landslide reelection in 1972, officials of the Nixon administration had decided to step up their enforcement of the Fair Housing Act of 1968. The act, approved by Congress in part to respond to the racial conflict across the nation, barred discrimination in housing, including a landlords’ practice of “steering” applicants away from certain buildings and toward others, depending on their race. (LeFrak’s firm had been accused of sending minority applicants to his buildings that were primarily occupied by blacks.) Apparently concerned about how white backlash would affect his reelection campaign, Nixon had offered only lukewarm support to the affirmative-action initiatives of his housing secretary, George Romney. But after Nixon was returned to office in a landslide victory, his administration began to focus on enforcement of the housing act and brought hundreds of complaints against landlords across the country.
Few landlord defendants responded to the Justice Department with a countersuit like the $100 million claim Roy Cohn filed on behalf of the Trumps. Cohn also complained that federal officials were “storm troopers” who had used “Gestapo-like tactics.” Federal judge Edward Neaher bristled at Cohn’s words, noting it was the first time he had ever heard anyone accusing the FBI of Nazi-style behavior. He dismissed the countersuit as a waste of “time and paper” and pushed the parties to negotiate. In his talks with federal lawyers Cohn attempted to bully Donna Goldstein, the young government attorney assigned to the case. The result, recalled by J. Stanley Pottinger, who was then chief of the Civil Rights Division at the Department of Justice, showed the limits of Cohn’s influence.
“I was sitting in J. Edgar Hoover’s old office, which I had somehow been assigned, and my deputy Jim Turner comes in and says, ‘We’ve got a problem. Would you see Donna Goldstein? She’s quaking in her boots because she understands you’re going to fire her.’”
According to Pottinger, Roy Cohn had screamed at Goldstein about a supposed error she had made in some bit of paperwork. He had said that he was a big player in the Republican Party and that he was going to call the White House and the attorney general and arrange to have her fired.
Pottinger doubted Richardson would even take a call from Cohn. “The thing about the attorney general and Nixon too, was that they really wanted to do the right thing on this issue. We were given a big budget—I had two hundred attorneys working for me—and I had gone to this meeting at the White House where [chief domestic adviser John] Ehrlichman told us, ‘It’s time. Go. Go. Go.’”
In the Trump case, Pottinger was confident in the evidence, which included testimony from current and former Trump workers who said they were required to report the race of those seeking apartments and had been instructed to discourage black applicants. One said that Fred Trump had told him to deny apartments to blacks who applied. “Donna told me how Cohn had threatened her. I said, ‘Fuck him. Go do your job and don’t worry about it.’”
With the government standing firm, Cohn began to negotiate in earnest. Eventually his clients would agree to a settlement that required a public pledge of nondiscrimination. As Donald Trump would later say, “It meant nothing because we never discriminated in the first place.” However the settlement also imposed a protocol on the company that was a first in New York City. For two years the Trumps would be required to supply weekly lists of vacancies to the Urban League’s Open Housing Center. When vacancies opened up in buildings where fewer than 10 percent of the tenants were black or Hispanic, the center would then have three days to submit applications from minority clients who wanted those apartments. If qualified, they were to get preference.
As Donald managed the firm’s dealings with the federal government, he established a template for most of the legal disputes he would face in the future. Whenever possible he would, in Roy Cohn style, go on the offensive. He would admit no wrongdoing and define a conflict to insist that he was the victim, and not the perpetrator of some immoral or illegal act. In the civil rights case, for example, he said the government had singled out the Trump Organization because as a large-scale operator it was an easy target. He also said the Feds were trying to force the company to rent to welfare recipients. Neither claim was precisely on point. The government was taking action against landlords big and small. And though regulators intended to end discrimination against welfare recipients, they weren’t seeking to require Trump or anyone else to house them. They just wanted landlords to acknowledge welfare payments as income that could be used to pay rent.9
When he talked about welfare instead of race, Trump played to the prejudices of those who were inclined to think of assistance payments as handouts for undeserving black families. The linking of the words welfare and black had begun in the 1950s as blacks in the rural South moved to the urban North and some became eligible for welfare programs. When President Johnson declared a “war on poverty” in his 1964 State of the Union address, the American public saw a dramatic increase in national press reports on issues related to the poor. Although blacks represented about 30 percent of the welfare rolls, when national magazines published photos of recipients, most—about 75 percent in the year 1967—depicted black people. As the press also reported abuses by some recipients, welfare was symbolized, in many minds, by the image of working-age black women with children who maintained secret relationships with men who refused to care for their dependents. These “welfare queens” represented a tiny criminal element among recipients, but their existence, and attendant press accounts about them, were enough to make welfare a code word that communicated racist assumptions.10
Did Donald Trump know that as he complained about being forced to accept tenants on welfare he was using code—eventually this would be called dog-whistle language11—to play on racial animus? He insisted that he never intended such a thing, and complained to The New York Times that efforts to test the practices of real estate managers amounted to “a form of horrible harassment.” But in choosing to have Cohn fight the government and claiming the Feds were trying to force him to accept welfare clients, Trump did play on stereotypes. (Cohn’s own prejudices—he often used such words as spic and nigger and fag—have been widely reported.) When the case was finally settled, Trump agreed to a process that would make it much easier for minority applicants to move into his buildings. This type of agreement was all the federal prosecutors wanted when they first approached the Trumps, and it could have been reached without any political threats against Donna Goldstein or press conferences at the New York Hilton.
The lawsuit likely made more New Yorkers aware of the Trump name and added to Cohn’s fame. Cohn understood that legal proceedings were rich with opportunities for contact with the press—lawsuits were often newsworthy—and it hardly mattered whether one was making an accusation or defending against one. As Senator McCarthy’s accuser-in-chief, Cohn had discovered he could easily manipulate powerful columnists such as Walter Winchell and Westbrook Pegler, who considered themselves his teammates in a kind of game played against various witnesses. Winchell actually threatened Washington Post reporter Murrey Marder, who had doggedly exposed McCarthy’s witch-hunt tactics. “We’re going to get you,” Winchell had muttered to Marder in a crowded elevator. Cohn and company never did “get” Marder, but the incident showed how certain members of the press identified with the man who supplied them with bits of information about suspects in Hollywood or Washington, which they then used to decorate their gossip columns and gain readers.
After his defeat in Washington, Cohn used the same techniques of friendship and leaks to favored columnists in New York City. In 1973, as Cohn helped the Trumps fight the Feds, he also aided their mutual friend Abe Beame by telling journalists at The New York Times that Congressman Mario Biaggi had cited his constitutional right against self-incrimination, under the Fifth Amendment, when called before a federal grand jury. Biaggi was, at the time, Beame’s toughest opponent in the upcoming primary election that would determine who would represent the Democratic Party in the November mayor’s race. Grand jury proceedings are supposed to be confidential, and “taking the Fifth,” as the expression goes, is not to be regarded as a sign of guilt. When The Times went to Biaggi with the information from Cohn, Biaggi denied it. This denial backfired when other sources confirmed Cohn’s leak. A spate of press reports followed, detailing investigations into Biaggi’s finances and possible political corruption. Release of the grand jury testimony proved Biaggi had lied about refusing to answer questions, and his campaign was destroyed. In November 1973, Beame, who had twice been city comptroller, won the mayor’s job by a margin of more than forty points.12
* * *
Beame’s election, after would-be reformer John Lindsay’s tumultuous eight years of struggle, turned control of the city government over to the clubhouse Democrats of Brooklyn, who had a long and mutually beneficial relationship with the Trumps. A year later, Beame’s help would ensure that another Brooklyn Democrat and Trump friend, Hugh Carey, became governor of New York State. But as both men realized their great ambitions, they found themselves overwhelmed by the fiscal crisis that brought New York City, long mismanaged and lacking a coherent financial-management system, to the brink of bankruptcy.13
The moment many Americans recall from the crisis came when Republican President Gerald Ford refused to help the city and the New York Daily News announced the news with a huge headline, FORD TO CITY: DROP DEAD. Although the president never uttered these words, they did express his sentiments as he rejected a request that the federal government guarantee city bond issues. Afterward, he offered lectures on fiscal responsibility and said the city needed to slash municipal spending. Many GOP officials considered big Northern cities, which were generally controlled by Democratic Party machines, to be corrupt beyond redemption. The riots of the 1960s had only confirmed their doubts about urban America. To them, the thought of mayors in these places being forced to slash spending and lay off unionized municipal workers, who always voted for Democrats anyway, didn’t seem like a bad idea.
Beame did enact cost-cutting measures, but he was forced to reverse some of these moves. A street protest by construction workers, for example, broke a freeze he had placed on city building projects. The construction-spending thaw brought Beame only momentary peace. Soon the city’s lenders tightened the mayor’s access to credit, and lawmakers in Albany, many of whom shared an anti-urban frame of mind, demanded new bridge tolls, increased mass transit fares, and even a four-day workweek for city employees to reduce payroll. As the fight over these ideas and others raged, members of the police and firefighters unions printed and distributed an ominous flyer warning tourists about the dangers posed by city layoffs. Titled “Welcome to Fear City,” it advised visitors to “stay off the streets after 6 PM even in Midtown Manhattan.” Sanitation workers conducted a wildcat strike that left tons of stinking garbage on the streets, and highway workers tied up traffic with roadside pickets. The backups became nightmarish when three drawbridges were raised and then their operators disappeared.
During months of argument involving city officials, financiers, and politicians in Albany, Abe Beame suffered one indignity after another as unions, bankers, and other public officials required him to meet their demands before they would help. When he signed an ordinance imposing a wage freeze on city workers, the mayor was subjected to hissing and catcalls and shouted questions: “Who is the boss? Is it the people or the banks? Who is calling the shots?” By the end of the summer of ’75, state officials and lenders were calling the shots as special agencies were created to guarantee city bond payments and oversee its administration. A more-or-less final resolution to the crisis didn’t come until municipal unions agreed to buy $500 million in city bonds, and President Ford, under pressure from foreign leaders who feared the ripple effects of a default, reversed his position on federal loan guarantees.
The city’s wounds, as a result of the crisis, would include steep declines in public housing programs, cuts in programs that fed poor children, sweeping layoffs in the police force, and began requiring that City College students pay tuition. Add less significant indignities such as fewer school-crossing guards and reduced Staten Island ferry service, and New Yorkers found themselves living in a city where life had become a little less pleasant and a bit more challenging. Perhaps worse than the cuts was a sharp drop in housing construction, which dipped to a rate not seen since the Great Depression. In 1975 permits were granted for fewer than four thousand residences.
For Mayor Beame, who had promised to bring “new pride” to New York, the fiscal crisis brought humiliation as his powers were diminished and he appeared, in the words of one local writer, to be “a busted man.” Although he would be judged among the city’s worst mayors, due to his fiscal impotence, Beame was not as polarizing as some of his contemporaries. Two other prominent mayors of the 1970s, Sam Yorty of Los Angeles and Frank Rizzo of Philadelphia, distinguished themselves by rhetoric that inflamed racial animosities and contributed to violence in the streets. Compared with these men, Beame was a paragon of calm, continually seeking to soothe and placate everyone from the titans of Wall Street to the citizens who turned on their televisions to watch him struggle to explain the fiscal crisis and his plans for resolving it.
The mayor could have been excused if he had shown flashes of anger. Never a compelling personality, he had been denied the easy road to power taken by the telegenic Lindsay. Instead he had toiled inside the Democratic machine for more than thirty years, patiently serving others and awaiting his shot at the big job. When he finally got it, financial time bombs planted years before he took office began to explode. Beame was also hurt by the recession that began in 1973 and marked the end of the golden age of the American economy. Exacerbated by an embargo by oil-producing countries, which pushed prices up fourfold in two years, the recession wreaked havoc with businesses, depressed tax receipts, and threw people out of work as the national economy contracted during Beame’s first year in office.14
* * *
Watching as Mayor Beame struggled and the city was overwhelmed by a sense of crisis, Donald Trump sensed opportunity at hand. Beame had made few proposals for development in the city, but one that he favored called for a new convention center to maintain New York’s status as a prime locale for big meetings. Chicago officials had recently opened a huge new meeting facility at McCormick Place and would soon expand it. An equally large convention center was planned for San Francisco. In New York, tourism had steadily declined from 1969 to 1975, but it still brought more than $1 billion into the city every year. Determined to revive the industry, Beame included a convention-center development in his 1977–78 budget and identified three possible sites. The leading contender was a Penn Central rail yard covering forty-four acres along the Hudson River between Thirtieth and Thirty-ninth Streets, and the development rights for the property were controlled by Donald Trump. The story of how he acquired them illustrates his reliance on cronyism, stubbornness, and an odd kind of charm. This formula, which called for a greater measure of style than substance, would power him through a lifetime of deal-making.
The Penn Central Midtown train yard was located partly within the notorious Hell’s Kitchen, a waterfront neighborhood of docks, dives, warehouses, and cheap apartments where crime had flourished for generations. Although the repeal of Prohibition put an end to liquor smuggling, it did not put the gangs of Hell’s Kitchen out of business. In the 1960s and ’70s the neighborhood’s dominant crime organization, an Irish American crew called the Westies, operated in alliance with the Gambino family of the Italian mob. Terrifyingly violent, the Westies were connected to more than fifty murders in ten years.15
Although most New Yorkers avoided Hell’s Kitchen, especially after nightfall, Donald Trump was drawn to the Penn Central yard even before Beame recognized the site as a potential location for the convention center. Trump’s realization was hardly a stroke of genius. New York developers had long coveted the Hell’s Kitchen yard and a second West Side train facility known as the Sixtieth Street yards because they were the only large, privately held open tracts left in Manhattan. For decades they had watched freight traffic decline—from about two hundred thousand cars per year to fewer than twenty-five thousand—waiting for the moment when these properties would become available. The moment arrived in 1973, when the railroad’s trustees hired a consultant named Victor Palmieri to sell its real estate to satisfy creditors in what was then the largest bankruptcy case in US history.
A lawyer who had paid his way through Stanford with a construction job in Alaska, Palmieri said he enjoyed working in crisis situations because they allowed him to cut through bureaucracy and “be a success or failure in a relatively short time.” The bankruptcy court approved Palmieri’s appointment, which came with a salary of $150,000 per year and the potential to make millions of dollars in commissions on properties estimated to be worth more than $1 billion. This would be easy money. In a bankruptcy the trustees who control a corporation typically have little motivation to seek the best prices as they sell assets. The money paid will not fund future business activity or find its way to their pockets. Instead they want to move quickly, satisfying the barest requirements of the court overseeing the disposal of assets, and get away from the rotting corporate corpse. Thus, Palmieri’s job would be to find buyers and make deals as quickly as possible.16
Politically connected at the highest levels, Palmieri had undertaken big jobs before. In 1967–68, for example, he had helped organize and run the Kerner Commission, a historically important presidential panel that reported on recent race riots. For the Penn Central job he put together a team of experts in law and real estate. Responsibility for the rail yards in Manhattan fell to Edward “Ned” Eichler, whose family had founded a large and innovative home-building company in the San Francisco Bay Area. Eichler Homes was known for offering affordable, airily designed houses inspired by the sensibilities of Frank Lloyd Wright. Eichler houses helped define California modern style, and the company sold more than eleven thousand of them, including the one where Paul and Clara Jobs raised their adopted son, Steven. As it profited, Eichler also pursued an unannounced social agenda, refusing to follow the informal racist practices of the past and selling to all qualified buyers. As a result, its subdivisions were integrated from the moment they were settled. The company also marketed itself with a certain fifties flair. In 1956 Eichler built and put on display an all-steel, experimental home with the jet-age name of the X-100. It was built with two indoor gardens, a plastic-domed skylight, and motorized sliding doors.17
Ned Eichler left the family firm after a heated dispute with his father. He then went to work for Palmieri in New York. As he settled into his office, he received a letter from Donald Trump of the Trump Organization in Brooklyn. Although Eichler didn’t recognize the name, he was happy to hear from anyone with an interest in the rail yards. Though attractive as open parcels, the yards would require an enormous effort on the part of any developer, who would have to negotiate with multiple layers of bureaucracy and deal with the opposition that was sure to arise from neighborhood organizations resistant to change. The city’s fiscal problems and a rapidly decelerating real estate market only added to the challenge. As Eichler scanned the industry, he saw few developers with the experience and audacity required to get the most out of such big sites in a place such as Manhattan. Even William Zeckendorf, the real estate swashbuckler, had put his campaign to emerge from a recent bankruptcy on hold and retreated to the sidelines.
After he spoke on the phone with Trump, Eichler accepted an invitation to visit Avenue Z on a late January day. There he found a young man practically bursting with ambition. At age forty-two, Eichler was fifteen years older than his host, and he considered the slim, blond-haired Trump to be remarkably boyish and outlandishly ambitious. He would describe him to the writer Gwenda Blair as “full of his own ego, wanting to make his way in the city.” Eichler was impressed by the younger man’s energy, even though he sometimes spoke in fatalistic terms. He recalled that Trump explained his impatience by saying he expected to die before age forty. He also told Eichler, “I’ll never marry.”
On a tour of the Trumps’ outer-borough empire, Eichler noticed that the buildings he saw were well designed, well constructed, and well maintained. But he worried about the political complexity of building a massive apartment complex in Manhattan, and he couldn’t forget that when he had asked if anyone at the Penn Central offices knew of the Trumps, no one had been able to say who they were. When he told Trump that he was worried that a company based in a humble office in Brooklyn lacked the necessary clout, Trump said the firm was up to the job. Eichler said it would help if he could go to City Hall and ask Mayor Beame to vouch for the Trumps. Trump asked, “When do you want to see him?” Eichler matched Trump’s bravado, answering, “Tomorrow at two p.m.” Trump said he would send a car to fetch Eichler at one thirty. Trump didn’t want the man from Penn Central to be late.
At the appointed hour, Eichler walked into the mayor’s office and found the Trumps, father and son, waiting with Beame and John Zuccotti of the New York City Planning Commission. After some pleasantries the mayor told Eichler, “Whatever my friends Fred and Donald want in this town, they get.”
As a bit of business theater, the City Hall meeting was worthy of a Tony. It confirmed that the Trumps were so well connected that they were more likely than others to get city approval for developments on Penn Central’s properties. This political power meant something to Eichler and Palmieri, whose fees and commissions—which ultimately exceeded $21 million—depended on options being converted to actual property purchases. Personally, Eichler was more taken with the obviously close relationship he saw between Donald and Fred. Where Eichler had suffered due to his father’s lack of support, he noticed that Fred was unwavering in his commitment to Donald and his ambitions. The elder man’s support was so complete that Eichler would recall it many years later as a key factor in his assessment of the Trumps as developers. But while Eichler felt confident in their ability to work with the city, and construct apartments, a deal to sell them the rail yards would also have to satisfy the bankruptcy court in Philadelphia, where the remains of Penn Central’s assets were being sorted.
Bankruptcy judge John P. Fullam was responsible for managing the disposal of the Penn Central assets outside of the passenger and freight business that would be assumed by two federally created entities called Amtrak and Conrail. Fullam would try to get the greatest compensation possible for creditors, who were represented by a small army of attorneys including a pioneer in class-action lawsuits named David Berger. (Based in Philadelphia, Berger would eventually represent neighbors of the Three Mile Island nuclear power station after it suffered a partial meltdown.) As Eichler and Palmieri worked to submit a proposal for the rail yards to the judge, they were under pressure to maximize the amount of money that would eventually find its way to Berger’s clients. The prospects for profit seemed to improve when they received an inquiry about the properties from a well-known builder and real estate operator called the Starrett Corporation.
Famous for constructing the Empire State Building in less than a year’s time, Starrett was a formidable outfit. Among other projects, the firm had built the twelve thousand apartments of Parkchester in the Bronx as well as Stuyvesant Town and Peter Cooper Village, on the East Side of Manhattan. These developments were comparable to the kind of multibuilding communities that would be appropriate for the rail yards and far exceeded anything ever attempted by the Trumps. Starrett was also willing to make a deal that, under the right conditions, would pay Penn Central almost $40 million more than the maximum that might be paid by the Trumps. Starrett and the Trumps were, however, in business together in Brooklyn at an apartment complex called Starrett City. In August of 1974 Donald visited with Robert Olnick, who was Starrett’s chief executive officer, and reminded him of this relationship. Olnick then telephoned the broker who had been working for him on the Penn Central deal and told him to drop it. Before the call ended, though, he said that if the Trumps faltered, Starrett would take up the project again, under the same terms.
With Starrett out, Eichler committed to Donald Trump as the “horse” that Penn Central would ride, which meant that he would enjoy special consideration and protection. He and Trump also attempted to socialize a bit. They golfed at the exclusive Winged Foot club in Westchester County and dined with Roy Cohn at the Four Seasons restaurant. Eichler didn’t find much to like in Cohn and took note when the attorney announced he had been meeting with Hugh Carey, who was running for governor, and Donald said of Carey, “He’ll do anything for a developer who gives him a campaign contribution.” The Trumps would donate $135,000 ($556,000 in 2015) to Carey’s winning campaign. Only the candidate’s brother would give more.
Reported by New York journalist Wayne Barrett, Trump’s comment about Carey was the kind of unseemly statement that would make any circumspect person such as Eichler feel uneasy. Eichler had a similar reaction when Trump, just like the builders who had greased FHA bureaucrats with gifts, sent him a television set for Christmas. Eichler sent it back. “I never at any time liked Donald personally,” said Eichler years later, “but that never had anything to do with whether he was the right person” to develop the Penn Central rail yards.
Certain that Donald’s inexhaustible supply of energy and desire would cause buildings to bloom on the West Side yards, Eichler pressed ahead with the Trump proposal. The creditors’ attorney David Berger and his associates questioned people involved with the deal and discovered that Eichler had treated the Trumps as favorites because he thought they possessed unique political connections. Berger’s firm also found that the appraisal done to set a value for the sites had been based on similar land in Brooklyn and the Bronx but not Manhattan. In fact, adjacent land had recently been sold for more than six times the $4 per square foot estimated for the yards. This information was contained in a lengthy deposition sent to Judge Fullam by Berger and his associates. At roughly the same time Richard Ravitch of HRH Construction wrote judge Fullam to make an offer for the sites.
In his letter, Ravitch said that even though he had been eyeing the yards for development for almost a decade, he only learned they were for sale when the Trump deal was submitted to the court. Donald Trump doubted this was true, since Penn Central’s bankruptcy was perhaps the most widely reported business event of the 1970s, and that its properties would be sold was also known. But this point hardly mattered since Ravitch followed up his letter with a proposal that was, in some ways, a better deal for the Penn Central creditors. The HRH bid, combined with David Berger’s criticisms, threatened to upend the arrangement that Eichler and Trump had worked hard to complete.
Although Eichler and Palmieri wanted to complete their work and earn their commission from the Penn Central trustees, they could afford to wait for the judge to work out the issues related to the yards. Donald Trump wasn’t so patient. He also recognized in David Berger the same type of roadblock his father had encountered when he tried to acquire the bankrupt Lehrenkrauss mortgage operation in 1933 and decided to try a play from the old man’s book. He went to Philadelphia and, according to Wayne Barrett, “swooped into Berger’s offices wearing a long, dark green cape, wrapped around his shoulders, jittery and flushed.”
After Trump found Berger in a conference room, the two men retired to talk in private. When they were finished, they had agreed that Penn Central, and thus its creditors, should receive better terms, which could amount to $20 million or more should the Trump vision ever materialize. They also agreed that the railroad should pay Donald Trump to cover his time and whatever expenses he incurred as he tried to make something happen on the sites. Presumably Berger would collect a somewhat higher payment for his services from the creditors if the full amount due to them was increased. He was, after all, working for a share of the proceeds. But other than this potential gain, which would not be realized for many years, nothing in the arrangement seemed to benefit Berger in any way. (A federal prosecutor would eventually look into the matter and reach a similar conclusion.)
The turnabout stunned a young Berger associate named Edward Rubenstone, who had devoted himself to fighting for the Penn Central creditors and believed they would do better with a truly open competition for the West Side yards. For his part, Eichler marveled at Trump’s resourcefulness. Later he would say, “Whatever Donald did, assuming he did anything, it was a very clever accomplishment.” When he was informed of this turn of events in November 1974, Judge Fullam responded skeptically. “I am not at all satisfied from what I have heard that there has been adequate consideration given to the competing offers,” he told the parties when they gathered before him in March 1975. In particular Fullam wanted to hear more from Richard Ravitch. However in the time between hearings, recently elected New York governor Hugh Carey, whom Donald Trump considered so eminently corruptible, named Ravitch to lead an investigation into the severe financial crisis at the state Urban Development Corporation. The agency had run afoul of the markets and could no longer attract bond buyers. Its commitments exceeded anticipated revenues by more than $500 million.
The UDC’s trouble had been caused, at least in part, by its having operated outside the usual system of checks and balances that allowed legislators and others to oversee state agencies. It had been formed for the express purpose of allowing state officials to evade laws that required them to get voter approval, via ballot referendum, before selling bonds to raise money to finance, among other things, housing projects undertaken by private companies, including HRH. Ordinary bonds were considered secure investments because the state could not escape its commitment to pay back investors, plus interest. The type sold by the UDC was devised by the Wall Street lawyer John N. Mitchell, who called them “moral obligation” bonds and who eventually explained that “the purpose of them” was to allow the powers that be to avoid voter accountability. Though morally obliged to pay these debts, the state was not legally bound to honor them. When New York City ran into fiscal trouble, investors considered the possibility that state officials might not behave morally and stopped buying the bonds.
With Ravitch occupied with the UDC, he did not press Judge Fullam on the West Side yards. In March of 1975 the bankruptcy court in Philadelphia approved the arrangement worked out by David Berger and Donald Trump. Penn Central officials were modest in assessing the prospects, noting that if all went well, the sale would generate between $62 million and $120 million. Donald Trump, given his first-ever opportunity to practice a some major ballyhoo, said that the railroad/creditors were in line to get $300 million from two massive projects. He said he would build twenty thousand apartments on the uptown parcel. The smaller Hell’s Kitchen site would accommodate ten thousand housing units or perhaps a different kind of development. Publicly Trump mentioned an industrial or shipping center, but in private he had talked about it as the perfect spot for a city-financed convention center. He estimated that eventually $1 billion would be expended at the two sites, with construction beginning in eighteen to twenty-four months.
Thousands of laborers would be employed by the work, said Trump, and he hoped to win state-subsidized funding under programs to aid construction of housing for middle-class tenants. Rents would range between $100 and $115 per month, per room.18
Having used political connections and insider status to prevail in his first big deal, Trump could have seen all around him ample evidence that many people considered some rules to be optional. On the very day his triumph was announced, federal prosecutors in Trenton were selecting jurors for a trial in which developers were charged with attempting to bribe the mayor of Fort Lee—on the New Jersey side of the George Washington Bridge—to win approval for a $250 million project. In New York City, two policemen were indicted for shooting a clerk and stealing $2,000 from a grocery store that was a front for drug sales. And in Newark a bank officer confessed to embezzling almost $400,000 to pay gambling debts. Jeffrey Miller said he intended to repay the money by picking winning horses at local racetracks, but his plan didn’t work out.19
Of course Miller and the others were the ones who got caught and therefore represented merely the tip of the corruption iceberg. Their alleged crimes paled in comparison with the intersecting deceptions practiced by the US government in its war in Vietnam and by the Nixon administration in the Watergate scandal. The political burglary carried out on Nixon’s behalf at the Watergate building led to the first presidential resignation in history. Various officials, including former attorney general John N. Mitchell (inventor of the moral obligation bond) were convicted of felonies. Public trust in institutions, as measured by opinion polls, began a decline that would never be fully corrected. Fully 70 percent of those polled in the early 1960s said they had faith in their political leaders. By the early 1980s only 25 percent expressed the same sentiment.20
Although many felt unmoored by the events of the seventies, young Donald Trump would consider Watergate and the lies told to justify the Vietnam War evidence of the world as it was—dangerous, corrupt, and full of intrigue. An intensely competitive young man who believed he was superior to others, Trump accepted that people would seek advantages wherever they could find them. Thanks to the advantages conferred by his father, and Abe Beame, he had won the trust of Ned Eichler and Victor Palmieri, who became his allies in the bankruptcy court.
The city would actually purchase the Hell’s Kitchen site for the new convention center, paying just $12 million, a sum that surely disappointed the Penn Central creditors. Their take would be reduced by a commission paid to Palmieri’s firm. Trump was deprived of the big score he would have posted if he had gotten the land and built a commercial or residential project. However, he did net a $500,000 sales commission, which, added to the sum already paid to him for his time and expenses by the Penn Central trustees, meant that he earned $1,250,000 in payment for all of his scurryings and machinations. His big regret would be that the city refused his request that the convention center be named for his father, Fred. That honor would go to former US senator Jacob Javits, whose career in politics began when he worked as a volunteer in Fiorello La Guardia’s campaign for mayor.