July 26, 2017

Van Hollen Calls on Federal Reserve to Investigate Deutsche Bank’s Conflicts of Interest with Trump

U.S. Senator Chris Van Hollen, member of the Senate Banking Committee, today wrote to Janet Yellen, Chair of the Board of Governors of the Federal Reserve System, and William Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York. He is asking that the Federal Reserve investigate Deutsche Bank and the possible conflicts of interest it faces with the outstanding loans to President Trump and his family. The concern is that President Trump may have undue influence on the bank’s operations and its interactions with its regulators and law enforcement.

“As an intermediary holding company supervised by the Federal Reserve with deposits insured by the FDIC, Deutsche Bank USA falls clearly under the supervisory umbrella of the Federal Reserve,” Senator Van Hollen wrote. “Therefore, I am requesting that you to provide my office and the American people with a clearer picture of the President’s relationship with Deutsche Bank and guarantee that you will continue to supervise and regulate this institution as you would any other.”

The full text of the letter is below and here.

Dear Chair Yellen and President Dudley,

I write to you with great concern regarding conflicts of interest between Deutsche Bank and the President of the United States, and to better understand how these conflicts may impact ongoing investigations and regulatory oversight by the Federal Reserve.

Over the course of the year, I have written to Attorney General Jeff Sessions and the President and CEO of Deutsche Bank USA regarding these concerns. Neither party has provided my office with sufficient responses. In light of the resignation of Walter M. Shaub Jr., the Director of the Office of Government Ethics, the need for accountability and clarity with regard to the President’s conflicts of interest is greater than ever.

One legal expert called the relationship between the President and Deutsche Bank “the biggest conflict that we know about in terms of dollar amounts and the scale of legal exposures.”  That same expert also said that it “may be impossible” to avoid the appearance of impropriety related to these obligations.  President Trump’s limited financial disclosures make clear that he has significant liabilities to Deutsche Bank. Moreover, these loans have personal guarantees which means if Mr. Trump fails to pay his loans Deutsche Bank would have to sue the President of the United States.  However, because the President has failed to release his tax returns and provide clear information on his financial disclosures, we do not know the full extent of these conflicts. 

These liabilities are separate from the conflicts of interest and liabilities of the President’s family, which are extensive. For example, the President’s son-in-law, Jared Kushner, holds a multi-million dollar line of credit at Deutsche Bank.  One of these loans, totaling $285 million, was finalized a month before Election Day.  Mr. Kushner is now a federal employee who serves as Senior Advisor to President Trump, with a portfolio that includes tax and banking policy.

As an intermediary holding company supervised by the Federal Reserve with deposits insured by the FDIC, Deutsche Bank USA falls clearly under the supervisory umbrella of the Federal Reserve. Therefore, I am requesting that you to provide my office and the American people with a clearer picture of the President’s relationship with Deutsche Bank and guarantee that you will continue to supervise and regulate this institution as you would any other.

This oversight is important because Deutsche Bank has a long record of violations and a culture of noncompliance. It has repeatedly violated supervisory standards, failed its stress tests, and engaged in shady practices in the United States and around the world. For example, the Federal Reserve recently levied $41 million in fines against the bank as part of the Russia Mirror Trading money laundering scandal. Foreign regulators have also undertaken numerous enforcement actions against Deutsche Bank. I commend the Federal Reserve for its strong oversight of Deutsche Bank, but I also believe it is crucial that the Federal Reserve fully take stock of the risk that Deutsche Bank’s relationship with the President may have undue influence on the bank’s operations and its interactions with its regulators and law enforcement.

The Federal Reserve is, of course, an independent regulator that should operate independently from the President. It is vital that the Board of Governors safeguard its independence and be proactive in preserving public confidence. That confidence may be tested as new Presidential appointees join the Board of Governors. It is therefore doubly important that the Federal Reserve be transparent about the potential conflicts between the President and the banks it oversees. Therefore, I ask that you provide a briefing and written answers to the following questions:

1. Information regarding any Politically Exposed Person’s review undertaken by Deutsche Bank as it relates to President Trump and his Administration , and all communications between Deutsche Bank and the Federal Reserve Board (FRB) on this matter. Please describe the risk management that the bank is now undertaking with the accounts identified in this review. Please identify any irregularities that came up in the review and how Deutsche Bank should manage these irregularities.

2. Written assurances that the Federal Reserve will continue to supervise Deutsche Bank with the same vigor as it would any other financial institution regardless of existing relationships and outstanding loans the bank has with the President and his family members.

3. Please provide aggregate numbers on Deutsche Bank’s exposure to President Trump and Mr. Kushner.

4. An explanation about how the Federal Reserve has worked with Deutsche Bank on any restructuring of President Trump’s or Mr. Kushner’s debt, including whether or not it has been sold to foreign entities.

5. Assurances that you have worked with Deutsche Bank to ensure appropriate risk management and ethical processes to ensure its relationship with the President or his family does not result in preferential treatment in that debt restructuring that would violate federal ethics laws.

6. Details of the Federal Reserve’s policies regarding your oversight of financial institutions and conflicts of interest between staff, the board of governors, and highly placed political officials, including the President.

Please respond by August 21, 2017. My office would be happy to work with you on any appropriate arrangement that you might require to ensure compliance with applicable privacy rules and regulations.

Sincerely,

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