The real estate negotiation technique Trump uses as President
Donald Trump uses executive orders like land acquisition professionals use letters of intent.
When I first saw the headlines touting Donald Trump’s repeal of Dodd-Frank by executive order, I literally laughed out loud. I wondered, who does he think he is, Emperor Trump? Does he really think he can change laws by executive order? Does he fail to understand the separation of powers in the US Constitution?
The US Constitution, the document Trump swore to uphold, bestows all lawmaking power on the US Congress. The chief executive, the President, can either sign a Congressional bill, or he can veto it, but the President has no power to make law — not that Trump’s supporters seem to understand that.
The more I thought about what Trump actually did, his actions started to make sense. His presidential orders are the opening round of negotiations with Congress, the Courts, and the Bureaucracy concerning the changes he would like to see instituted in Washington.
The letter of intent to purchase
The first step in any real estate negotiation is to issue a letter of intent (LOI) to purchase. A LOI basically says that if the subject property meets certain conditions that a buyer will pay a stated amount for the property under various terms. If the seller agrees to a letter of intent, the buyer begins due diligence to research the property’s condition, and after obtaining the results of the research, the two parties negotiate over remediation costs to arrive at a final purchase price and terms.
Very few properties actually transact with the price and terms in the letter of intent. The letter merely serves as the starting point for a negotiation. It’s similar to the initial offer in a residential real estate deal except that the letter of intent is more malleable, and the ensuing negotiation is far more complex.
Everyone knew Donald Trump had no government experience when he was elected president. What was known is that he is an autocratic leader of a private sector real estate business who is fond of saying “you’re fired.” An autocratic management style works for an entrepreneur operating his own business. He is accustomed to the people around him doing what he wants when he wants it, or he will fire them. When he issues edicts in his business, they are followed without question. Unfortunately, that isn’t how government works.
Trump’s background in real estate negotiation and his experience running a private sector real estate company explains much of what we’ve seen in the first few weeks of his presidency. When Trump issues a presidential order, I don’t think he really expects it to be the final word on the matter. Instead, he recognizes the presidential order is his letter of intent to pass legislation.
Whereas previous presidents articulated an agenda and meet with Congressional leaders to prompt them to act on the President’s agenda, Trump follows a different path, issuing presidential orders to shake things up and force the courts and Congress to act. Remember, Trump was sent to Washington to shake things up.
The brilliance of this unconventional approach is its directness and simplicity. His working-class supporters neither care about nor understand the complexities and nuances of Washington politics. What they see is the president they elected doing exactly what they elected him to do: shake up Washington. Even if Trump fails, like his ban on Muslim travel will likely fail, he still looks like a hero because he tried. The presidential order (later to be overturned) is a new form of symbolic politics, and his supporters will eat it up.
The directness of this measure also makes his desires and goals abundantly clear. He doesn’t need to worry whether or not Congress will misinterpret or distort his intent because he laid it out very clearly in his presidential order.
Whether this style and strategy will be successful remains to be seen, but these presidential orders are not the ravings of a delusional fool who believes he’s was elected Emperor, despite what many on the left say. This is a method and a strategy known to work in complex real estate deals, and Trump is molding the presidency to take advantage of his strengths in areas he understands very well.
More like a call for analysis and review
President Donald Trump’s executive order to roll back the Dodd-Frank Wall Street Reform Act doesn’t do much by itself. Instead, the move mostly points to an already existing act championed by House Financial Services Committee Chairman Rep. Jeb Hensarling, R-Texas, to replace Dodd-Frank, a blog post from Mayer Brown attorneys Laurence Platt and Joy Tsai stated.
The blog stated that the order… sets out the core principles for regulating the financial system.
This is a classic letter of intent strategy just like what Trump would do to begin a real estate negotiation.
Despite calls that his administration would be “doing a big number on Dodd-Frank,” the blog stated, “His recent executive order on core principles appears to be more of a tempered call for analysis and review rather than an outright demolition of existing financial regulations… .”
What the order does show, the blog explained, is where the administration’s policy is likely headed.
The reason I laughed out loud when I first heard of this presidential order is that it was portrayed in the media as being a rewrite of existing law, something the president has no power to do. When I read the comments on a posting over at HousingWire, it was clear than many of Trump’s supporters are completely clueless and really believed Trump’s presidential order meant something — and that’s when I fully realized the brilliance of what Trump had done.
The blog stated that the core principles identified in the executive order mirror key principles in the “Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs” Act (CHOICE Act) by Hensarling. “A sign that the Executive and Legislative branches intend to collaborate to replace at least some Dodd-Frank provisions with CHOICE,” the blog stated.
And Hensarling also pointed out the similarities, saying that much of the order “mirrors” the Financial CHOICE Act, the Republican-led effort to repeal and replace Dodd-Frank.
“I’m very pleased that President Trump signed this executive action, which closely mirrors provisions that are found in the Financial CHOICE Act to end Wall Street bailouts, end ‘too big to fail,’ and end top-down regulations that make it harder for our economy to grow and for hardworking Americans to achieve financial independence,” Hensarling said.
After looking at the order, the blog stated that in itself it is not a significant overhaul of Dodd-Frank.
The core principles in the executive order should simply be viewed as a policy placeholder for the re-thinking of Dodd-Frank, in terms of both potential legislative and regulatory changes, the blog stated.
In other words, it’s the beginning of the negotiation.
I articulated the reasons I believe Dodd-Frank overhaul is a battle Trump would lose. In short, if he goes too far and actually tries to repeal the law, Senate Democrats will filibuster, and the Republicans will get nowhere. However, even the Democrats recognize Dodd-Frank isn’t perfect, and some provisions of the law may be negotiable. Any progress Republicans make on this issue can be spun as a victory, particularly in our age of alternate facts.
Any skilled negotiator realizes that they never get everything they want out of the process. Trump doesn’t need to get everything in his presidential order for the negotiation to be a success.
Success to a dealmaker is a deal. Whether or not the terms are favorable is a secondary measure of success. When viewed from that perspective, I would be very surprised if Trump doesn’t succeed on many of these initiatives he set in motion with his controversial presidential orders.
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