ANDREA BERNSTEIN: In the fall of 2018, Kushner Companies, the family real estate business of presidential son-in-law Jared Kushner, had just unloaded its marquee skyscraper at 666 Fifth Avenue in midtown Manhattan. The debt burden had become untenable. 

[SLOW, LOW MUSIC PLAYS]

BERNSTEIN: So the company was looking for a new line of business, and it decided to invest in an area that had once been the foundation of the company’s business model: suburban, multi-family housing. 

It needed hundreds of millions of dollars in financing to consummate the deal. So it went to Freddie Mac, the government-sponsored lending agency.  

HEATHER VOGELL: They said, you know, “We're interested in buying eight of these properties. Um, what do you guys think?”

BERNSTEIN: This is Heather Vogell of ProPublica. Freddie Mac — people mostly just call it Freddie — works by buying up loans from primary lenders, who can then go on to make more loans. 

Once Freddie buys up loans, it packages them and sells them to investors. The bulk of the debt Freddie Mac sells is backstopped by the federal government — which means if the loans default, taxpayers could be on the hook.

VOGELL: Freddie started doing some preliminary underwriting, checking out the deal, getting some quotes for Kushner Companies. And then Kushner Companies came back shortly after and said, “Oh wait, wait, wait, wait! We want to buy 16 of these properties. Not just eight.”

BERNSTEIN: So now the deal was getting really, really big.

VOGELL: So Freddie said, “Okay, let's investigate that deal.” They came back with some quotes.

BERNSTEIN: But, then, for reasons we don’t know, Kushner Companies said, “Never mind,” and stopped pursuing Freddie Mac financing.

[A BEAT FOR MUSIC]

BERNSTEIN: Then, by February 2019, interest rates had dropped.  

VOGELL: So then — actually, on Valentine's day in 2019 — Freddie Mac was contacted by Berkadia. 

BERNSTEIN: That’s the primary lender. Berkadia, which is a Berkshire Hathaway company, said, “That deal we were talking about? Let’s meet to discuss it.” Six days later, they did.

VOGELL: There was a meeting on February 20.

BERNSTEIN: It was about a business plan for the assets, the track record, and a general overview of the Kushner Companies.  We know all this because Heather got ahold of a timeline of the deal.

VOGELL: So at this meeting you had — the origination lender, Berkadia — you had some advisors, you had executives from Kushner Companies, and you also had Nicole Kushner Meyer, the sister of Jared Kushner.

BERNSTEIN: Nicole Kushner Meyer looks like her brother: tall and thin, brown hair, brown eyes, same dimpled cheeks as Jared. When Jared Kushner left for the White House, she took on a more substantial role in the family real estate company.  

[MUSIC STARTS TO RAMP UP]

VOGELL: Nicole Kushner Meyer followed up after that meeting, sending multiple emails to Freddie Mac officials.

BERNSTEIN: Wheels were turning. 

VOGELL: And after that, the deal moves pretty quickly. 

BERNSTEIN: The deal the Kushner Companies negotiated was massive.

VOGELL: This was not a $200 million deal. This was not $3 hundred million deals. This was walking in asking for $800 million — which is — no matter who it is, that's a big deal for Freddy. Um, and then it's having a Kushner, sitting there at the table talking about it.

BERNSTEIN: Freddie Mac says no one discussed Jared Kushner at this meeting and that no political influence was brought to bear. Heather took a look at the data [PAUSE] and she found the deal was unusually favorable for Kushner Companies, and riskier for Freddie Mac (and, ultimately taxpayers), when compared for similar loans Freddie issued in 2019.

[MUSIC OUT]

VOGELL: You know, the question is, um, if property values plummeted and Kushner Companies property values plummeted and Kushner Companies ran into trouble — which is not so hard to imagine right now, given what's happening to real estate because of the pandemic — um, would taxpayers end up being on the hook?

BERNSTEIN: One other thing you need to know about Freddie Mac: after the last recession, in 2008, so many mortgages failed that Freddie Mac and its sibling Fannie Mae nearly went under. U.S. taxpayers had to bail them out nearly $200 billion. So after that, Freddie got a federal monitor, to make sure it didn’t take on excessive risk. 

[ESOTERIC MUSIC FOR A MOMENT, THEN THEME MUSIC STRINGS PLAY]

BERNSTEIN: So you have the situation of the family company — which is, I mean, it's not that big a company — but it gets this big loan, by Freddie Mac standards, at the same time that Jared Kushner is in the White House. And that's why the bells are going off?

VOGELL: Exactly, exactly. No matter who it is, that's a big deal for Freddy. Um, and then it's having a Kushner, uh, sitting there at the table, um, talking about it.

[TRUMP, INC. THEME MUSIC PLAYS IN FULL]

BERNSTEIN: Hello, and welcome to Trump, Inc., a podcast from WNYC and ProPublica that digs deep into the business of the Trump family. I’m Andrea Bernstein. Today on the show: the Kushner Companies’ unusually favorable deal, and what it tells us about the conflicts baked in to the Trump White House, where neither the President nor his family members have divested from their family businesses.

[MUSIC OUT]

BERNSTEIN: When Jared Kushner was appointed Senior Advisor to then-President-elect Donald Trump in early 2017, he was CEO of Kushner Companies, furiously negotiating to relieve the debt burden on 666 Fifth Avenue. Russian, Chinese, and Saudi leaders and businessmen sought him out, understanding early that he would emerge as a powerful figure in the Trump White House. They were not wrong. 

In the nearly four years of Trump’s presidency, Kushner has outlasted the vast majority of Trump’s appointees, and enjoys unusual access to both the West Wing, where the president works, and the East Wing, where the family gathers. 

From the beginning, the White House said Jared Kushner would “recuse from particular matters that have a direct and predictable effect on his financial interests and will comply with financial disclosure requirements.” When he did disclose his assets, it became clear that Jared Kushner, every year he worked in the White House, was earning tens of millions of dollars from his family business. 

This arrangement has caused no end of tangles, like when Jared Kushner negotiated a generous deal — later withdrawn — with a Chinese insurance company for 666 Fifth Avenue, or when Nicole Kushner Meyer invoked her brother’s connections to the White House while pitching investors in Beijing, or the time Jared Kushner met at the White House with senior executives from banks who also gave Kushner Companies large loans. Each time, both Jared Kushner and Kushner companies said the business and the White House are entirely separate.

KATHLEEN CLARK: So what's at stake is whether or not, um, government power is being used for the good of, you know, the people in power and those closely related — the Kushner family.

BERNSTEIN: Ethics expert Kathleen Clark.

CLARK: Or whether government power is used in the ways that, you know, Congress intended, or whether we have, basically, a fundamentally corrupt system.

BERNSTEIN: We’ll hear more from her later in the episode.

[A BEAT OF QUIET MUSIC]

BERNSTEIN: Jared Kushner failure to divest also had an effect on the family business, people with first-hand knowledge told me. After awhile, banks became skittish about big Kushner deals. They don’t want the scrutiny — what’s called “headline risk.” By 2018, the company was under pressure.

The Kushner Companies didn’t respond to requests for comment for this story. In the past, Charles Kushner has said it “remains a very strong real estate business,” adding, “the future of Kushner Companies is indeed very bright.” 

[MUSIC BEAT]

BERNSTEIN: So let’s go now to that big loan deal Jared’s sister, Nicole Kushner Meyer, negotiated. In fact, let’s go to the apartments. 

ALEC MACGILLIS: This is Alec MacGillis, a reporter with ProPublica, and I’m, today, driving to check out another apartment housing complex owned by the family of Jared Kushner and I’m puzzled … [FADES UNDER]

BERNSTEIN: Back in 2017, Alec MacGilles had a story co-published in the New York Times Magazine called “Jared Kushner’s Other Real Estate Empire in Baltimore.” At the time, people knew about Kushner’s Manhattan real estate, but not so much about Kushner’s more low-rent properties in Maryland.

MACGILLIS: Most of his apartments are in very humble, sort of working-class, modest areas out on the edge of town, along highways, strip malls, that kind of area. [FADES UNDER]

BERNSTEIN: As Alec reported, those apartments in the exurbs of Baltimore were populated by tenants of modest means who were subject to a relentless series of legal actions by their landlord, even when they were withholding rent because of mold or sewage problems or other serious concerns. A Kushner spokesperson told Alec at the time the company had “fiduciary obligation” to its ownership partners to collect as much revenue as it could. 

[MUSIC BEAT]

BERNSTEIN: Recently, Alec drove out to have a look at the multifamily units Kushner Companies had newly purchased — the ones that were part of that big 2019 acquisition. 

MACGILLIS: Right now I’m going through one of Baltimore’s loveliest neighborhoods in North Baltimore, called Mount Washington, that used to be a weekend retreat for wealthy people downtown. 

BERNSTEIN: This complex, called Bonnie Ridge, didn’t look like the ones he’d seen before. 

MACGILLIS: A Mercedes SUV …

BERNSTEIN: Alec went to check out a second complex that was part of that big Kushner Companies deal.

MACGILLIS: Right along I-95 — near where I-95 meets the Baltimore Beltway. This is where the IKEA is, um, Panera, Chick Fil A — oh, and a [CHUCKLES] Jared Jewelry store. A more sort of a typical, middle-class, suburban — exurban part of town, definitely a little more upscale than the areas I’m used to visiting over here for Kushnerville.

BERNSTEIN: Alec drove to a complex right off the highway. 

MACGILLIS: Here we are. “The apartments at Cambridge Court: Beautiful apartment homes,” that’s what the signs says. [TURN SIGNAL CLICKS] And once again a Westminster community, that is the mark of Kushnerville, so I know I’m in the right place. Wow. These are definitely nicer than what I’m used to. 

[OMINOUS MUSIC UP]

BERNSTEIN: In May of 2019, Bloomberg News reported “Kushner Companies gets $800 Million in Federally-Backed Apartment Loan.” Eyebrows shot up. ProPublica’s Heather Vogell:

VOGELL: And shortly after Bloomberg broke that story, Senator Elizabeth Warren and Senator Tom Carper sent a letter asking questions and raising concerns that Kushner Companies had been given some sort of special treatment in getting this deal with Freddie.

BERNSTEIN: The letter acknowledged there was “no specific indication of any wrongdoing by Freddie in this matter,” but it said the size of the deal, coupled with Jared Kushner’s refusal to divest, quote, “raise significant questions about the circumstances under which Freddie approved — and Kushner Companies received — this loan. 

VOGELL: I wanted to kind of really look under the hood and really sort of get into those details a bit and see what I could find out.

BERNSTEIN: And what did you find out as you — as you peered under the hood? [BOTH LAUGH]

VOGELL: Well, you know, I talked to a lot of people in the industry. I talked to a lot of people who are close to Freddie and people who know things about the Kushner’s business, and it seemed that a lot of those people had sort of the same questions I did and didn't have, um, concrete information on the answers.

BERNSTEIN: Those answers were hard to come by at first. Remember, Freddie Mac’s function is to keep money flowing to the housing market by buying loans from lenders, packaging them up, selling them to investors, and guaranteeing much of the loans in case of default.

But — especially for its biggest borrowers — Freddie Mac customizes each of its loan deals, so it can be hard to compare one to another. So Heather waited until all the data was in for 2019. 

VOGELL: Now, we can go back and take a look at the other loans that Freddie was making in 2019 with similar market conditions, and compare the deal that Kushner got with what other borrowers got at the same time. And that’s what proved to be most revealing to me.

BERNSTEIN: Much of the information Heather needed was on Freddie Mac’s website, but in different places, through different portals.

VOGELL: And so we tried to pull, you know, a lot of that into a single database. It allowed us to make comparisons among other loans that Freddie was making at the same time, and also to look over time for these properties.

BERNSTEIN: There was, first, the type of loan.

VOGELL: One of the things that stood out right away was that this was a ten-year, interest-only loan.

BERNSTEIN: The data showed very few other borrowers obtained this type of loan where you don’t have to pay any principal, just interest, until the loan is due.

VOGELL: Only about 6% of the loans Freddie did in 2019 were interest-only for 10 years or longer. So this is not unheard of and it's certainly a type of deal that they do — but it was unusual.

BERNSTEIN: 94% of the loans Freddie Mac funded in 2019 were not interest-only, publicly available data shows. There’s a reason for that. Interest-only loans are better for borrowers — like Kushner Companies — because they keep monthly payments low. But they move the risk from the borrower to the lender, because there’s the chance the borrower won’t be able to make the big lump-sum principal payments at the end of the loan. 

[MUSIC QUIETS]

BERNSTEIN: Other terms stood out, too. Kushner Companies was allowed to take on an unusual amount of debt relative to the value of the properties.

VOGELL: The Kushner Companies deal took it almost, you know, right up to the ceiling that Freddie allowed, which is about 70% — you can borrow about 70% of the value of the property.

BERNSTEIN: Kushner Companies loans averaged 69%.

So, one, they had interest-only loans. Two, they rose right up to the loan-to-value ratio limit. And, three, the data that underwriters — that is, the bean counters at Freddie Mac who comb through the numbers — used to calculate risk didn’t match reality.

HEATHER: An underwriter's going to look at, um, the historical profits, the occupancy, other factors about the property, and they are going to say, “Hey, okay, we can expect the revenue to be a certain amount, we can expect the expenses to be a certain amount, and then we can expect, you know, the profits to be a certain amount.” And that is, experts tell me, a number that is supposed to be A) accurate, uh, B) not aspirational. 

But with the Kushner loan, it was not accurate and it was aspirational. Even before COVID-19 hurt real estate, the apartments were making less than Freddie Mac — using Kushner’s numbers — expected.

VOGELL: And what we found was that if you look at the overall loan package, that the underwriter's expectations fell short by 12%.

BERNSTEIN: Is that a big number?

VOGELL: Yes. 

BERNSTEIN: What all of this means is: better deal for Kushner Companies, more risk for Freddie Mac and investors.  And this risk isn’t theoretical. Freddie and its sister agency Fannie faced a tsunami of defaults in single-family home loans in 2008, almost $200 billion worth. And many of those defaults came from risky, interest-only housing loans.

[MUSICAL BEAT]

And this loan — it went to one of the most powerful officials in the country’s family business, after his sister met with loan officials. How did this happen?

BERNSTEIN: To be clear, there's no smoking gun email. There's no phone call that we know from the White House. 

VOGELL: No.

BERNSTEIN: There's nothing that we have seen that says, “Give this loan to Kushner companies.”

VOGELL: No. 

BERNSTEIN: Freddie Mac said in a statement it does “not consider the political affiliations of borrowers or their family members.” It called ProPublica’s analysis “random, arbitrary and incomplete” and asserted that the Kushner loans “fit squarely within our publicly-available credit and underwriting standards. The terms and performance of every one of these loans is transparent and available on our website, and all the loans are current and have been consistently paid.”

We wondered, even if there were no overt influence, could politics still have been in play? We asked the former director of the Federal Housing Finance Agency 

MEL WATT: My name is Mel Watt, former Director of the Federal Housing Finance agency.

BERNSTEIN: This is the federal agency which is supposed to keep an eye on Freddie Mac, making sure it doesn’t take on too much risk. 

Watt, a former North Carolina member of Congress, was appointed to his post by President Barack Obama, and stayed on for the first two years of Trump’s presidency. His relatively small agency was responsible for oversight of the much larger Freddie Mac. 

BERNSTEIN: And I'm just wondering, from what you know about how federal agencies work, whether you think there could have been somebody who interpreted it that they had to give a good package because they understood the family relationships, even if nothing was said.

WATT: Yeah. If these decisions were being made by one individual, that would be a lot more likely, but, um, these decisions don't get made by one individual at Fannie Mae or Freddie Mac. And — but is it possible? Yes. I mean, I don't know what else I can add to this discussion. I mean, I — [LAUGHS]

BERNSTEIN: [LAUGHS] Right. Well, one question I have, sort of philosophically, is —

WATT: But if you're trying to get me to say it is likely, it is — uh, I — I have to tell you that I think it is unlikely. 

BERNSTEIN: I'm not actually trying to get you to say anything, other than what you believe. [INDISTINCT CROSSTALK] But I just want to be —

WATT: Okay, I understand. But, you know, I am just trying to also be clear about what I am saying. In my judgment, it is unlikely that that would have been a decisive factor in making an individual decision to back a loan.

[MUSIC PLAYS, SLOWLY]

BERNSTEIN: Mel Watt left in 2018, before the Kushner deal was done. [PAUSE] There’s a new director now. His name is Mark Calabria, formerly Vice President Mike Pence’s chief economist.

Calabria, who was confirmed in April 2019, has called for an end to the conservatorship, the close financial control that his agency has exerted over Freddie Mac and Fannie Mae since the 2008 crisis. 

VOGELL: The transition from the Obama appointee to the Trump appointee was happening at the same time as this deal was coming together. And it was really — I would imagine — a great time of uncertainty for people at Freddie Mac and Fannie Mae who were, um, seeing a new person come in who had really his own take on things.

BERNSTEIN: Neither the White House nor Kushner Companies responded to multiple requests for comment. [PAUSE] After the break, the ethical implications of the Kushner-Freddie Mac deal.

[MIDROLL]

[MYSTERIOUS MUSIC PLAYS]

BERNSTEIN: We’re back. Jared Kushner says that when he joined his father-in-law’s administration, he took the necessary steps to meet ethics rules. Here he is in 2019, in a TV interview with Axios’ Jonathan Swan.

JARED KUSHNER: I disclosed all my holdings to the Office of Government Ethics and what I did with that is, they told me what to divest, what to keep, what rules to follow.

BERNSTEIN: But the rules don’t encompass all the various situations that Jared Kushner’s not-divesting have led to — like the one we’re talking about now, where his family company got big loans after his sister called on Freddie Mac officials. 

CLARK: One of the aspects of Freddie Mac’s mode of dealing that makes it, uh, particularly risky from an ethical point of view is that it's hard to tell whether they are giving special treatment.

BERNSTEIN: I called up one of the foremost experts on Trump business ethics. 

CLARK: My name is Kathleen Clark. I'm a law professor at Washington University.

BERNSTEIN: While Freddie Mac has credit parameters, Heather Vogell learned, it also customizes deals. They’re not off the rack. They’re boutique.

CLARK: And so, if that's the mode of dealing, that's a high risk. There's a risk of corruption, there’s a risk of improper influences.

[MUSIC SLOWLY OUT]

BERNSTEIN: Obviously I care — [BOTH LAUGH] and agree that one should care, but I would like to hear from you why — 

CLARK: [ECHOING BERNSTEIN] Why?

BERNSTEIN: — people in general should care about this kind of transaction. What — what is at stake?

CLARK: Yeah. So what's at stake is whether or not, um, government power is being used for the good of, you know, the people in power and those closely related — the Kushner family — or whether government power is used in the ways that, you know, Congress intended, whether it's used for the public good in general.

BERNSTEIN: So Jared Kushner's family company got a very generous loan package from Freddie Mac. They're a real estate company. He's not involved in the day-to-day managements in any way that we know of. Is it a problem? I mean, aren they entitled to continue to do business while he is senior advisor?

CLARK: You know, neither I, nor others involved in — in government ethics  advocacy, think that the Kushner companies should be, expropriated — [LAUGHTER] that’s not what we're talking about.

What we're talking about is whether the government is run in a way that we can have confidence that people are treated, fairly and equally under the law and, and not not given — unfairly — favorable treatment because of their connection to the president.

And I think that one of the things that this situation — the Kushner situation, — has exposed is a weakness in our government financial disclosure laws, or, maybe put more generally, not just financial disclosure, but the conflict-of-interests laws.

BERNSTEIN: So one of the things I’ve been wondering is that, in those cases where Jared Kushner did divest, he just turned over assets to his close family.

CLARK: If in fact what he's done is just parked the asset with his mother or another close family member, and then he can be expected to go and retrieve that after government service, that basically makes a sham of the entire conflict-of-interest, um, regime.

BERNSTEIN: Say that Jared Kushner never benefits — that he wasn't parking an asset, that he never was getting an income stream from this particular set of properties. Does the fact that close relatives benefit create a problem, create a conflict?

CLARK: Yes. Maybe not a conflict in that technical sense of the financial conflict-of-interest statute, this criminal statute. But it matters from a different point of view. It matters in terms of whether or not officials were treating this situation impartially, or whether someone Kushner companies got different treatment because of their connection. 

BERNSTEIN: Now, Freddie Mac says Jared Kushner was not discussed in the meeting.

BERNSTEIN: I mean, we don't have a memo that says, “The White House says they want us to give the Kushner Companies this loan [CLARK LAUGHS] on especially favorable terms, that the White House wants Freddie Mac to back this favorable loan — favorable and large loan for Kushner Companies while its underlying properties are performing less well than average.” Is there still a problem?

CLARK: I — I guess I would just say that points to the fact that a in-person meeting is risky and it's difficult to verify whether something untoward was said or not. We simply have to trust them that nothing inappropriate was said.

ANDREA ON TAPE Okay. So let's say that Nicole didn't just say, “I just finished lunch with my brother and he would love for you to do this.” And let's assume that none of that happened, and they'd just walked in as Kushner Companies.

And yet somebody in the hierarchy of Freddie Mac thinks, “Oh, we should do this. Her name is Kushner.” Still a problem?

CLARK: Yeah, that — that absolutely is a problem

BERNSTEIN: If you were the Kushner Companies and you were trying to do the right thing — if, say, you were the Kushner company's ethics advisor — what would you advise them to make sure that this all is good and looks good?

CLARK: I'd leave it to the professionals. I’d keep family members away from it. Even if there's not direct White House intervention are they responding sort of in the shadow of the possibility of White House intervention, or in the hopes of keeping on the good side of the White House?

BERNSTEIN: When Donald Trump was elected President, he didn’t divest from his company. He had “a no-conflict situation,” he told the American people. His cabinet and family members — Ivanka Trump, Jared Kushner — followed his lead. And as we’ve been covering over the past years at Trump, Inc., those arrangements have led to a ball of ethical concerns nearly impossible to untangle. 

CLARK: Our mechanisms of accountability — of legal accountability — have failed us. And so the Trump administration, um, and the — initially, the Republican control of Congress, then the Republican control of the Senate, has demonstrated the weakness in our accountability systems, because President Trump has gotten away with it.

[MUSIC TRANSITIONS TO THE CREDITS THEME]

BERNSTEIN: Kathleen Clark is a law professor at Washington University in St. Louis.

[MUSIC UP FOR A MOMENT]

BERNSTEIN: This episode was reported by Heather Vogell and produced by Katherine Sullivan. Nick Varchaver edited this episode. Jared Paul does our sound design and original scoring. Hannis Brown wrote our theme and additional music.

Huge thanks to ProPublica’s Alec MacGillis for driving out to the Kushner Company complexes.

Matt Collette is the executive producer of Trump, Inc., Emily Botein is the Vice President of Original Programming for WNYC, and Steve Engelberg is the Editor-in-Chief of ProPublica.

I’m Andrea Bernstein. Thanks for listening.

[MUSIC OUT]

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