Not every U.S. President has used blind trusts during their time in office. In fact, Obama was the most recent president that chose not to use a blind trust. However, the Obamas had bank accounts, treasury notes, index funds and college savings that were unlikely to pose any direct conflicts of interest while in office. President elect Donald Trump can’t say the same thing regarding his financial portfolio—he’s set to be the wealthiest president in American history.
Trump’s attorney, Michel Cohen, recently announced that Trump’s massive business holdings would in fact be placed into a blind trust to be controlled by his three eldest children. If you’re not sure whether that sounds like a conflict of interest in and of itself, let’s take a look at what a true blind trust should look like.
“Blind” means Blind
A blind trust is a trust in which the trustee has full discretion over the assets and the trust beneficiaries have no knowledge or communication of the holdings of the trust. These are typically used by federal officials to avoid any potential conflicts of interest that may arise during their time in office. The federal government recognizes “qualified blind trusts” (QBT), but in order for them to be qualified, the trusts must not be affiliated with, associated with, related to, or subject to the control or influence of the federal official.
A trustee has full discretion over the assets within a blind trust, which means a trustee should not be a current or former investment advisor, accountant, attorney, or relative. In other words, in order for a trust to be completely blind, the trustee needs to essentially be a stranger. At the very least, it should be someone that doesn’t have any personal incentive or ties to the federal official.
Not only do Trump’s children have financial beneficiary conflicts with managing the trust, but they continue to advise Trump on his transition team, making the details of the trust extremely accessible to Trump. It’s a bit misleading for Cohen to represent Trump’s plans as a blind trust. It’s not blind at all.
What’s another important requirement of a blind trust? It’s hard for a trust owner to be truly bling to their holdings unless assets are liquidated and then transferred into the blind trust. Doing so allows the the trustee to reinvest and/or manage the assets at their discretion, leaving a trust owner completely blind. This would require Trump to sell everything, some of which he doesn’t even have the power to do without partner consent. Letting his children take over and run the businesses isn’t enough for him to be completely blind.
Unprecedented Business Dealings Present Greater Conflict of Interest Threats
So, we’ve settled on the fact that, as of now, Trump’s blind trust will not actually be a blind trust. Why should it matter, you ask?
Trump is unique from any other president in that so much of his wealth is tied to the “Trump” brand. Trump has listed roughly 500 companies on his latest FEC filing and has business deals in more than half a dozen countries. There has never been a president with as vast of business conflicts both domestically and internationally before and, even despite the best of intentions, anyone with the sheer number of companies as Trump would be hard pressed to make completely unbiased decisions.
A blind trust, a true one, would prevent partial decision making for personal economic interest, which is why conflict of interest laws were created in the first place.
In the wake of the Nixon Watergate scandal, the Ethics in Government Act of 1978 was passed, creating mandatory public disclosure laws for public officials and their immediate family. In addition to public disclosure, the Act mandates that officials cannot use their public office for personal gain. Congress has, however, exempted presidents and vice presidents from these conflict-of-interest laws on the basis that a presidency has so much power that any possible decisions or actions would be nearly impossible to be kept free from conflicts of interest; requiring the executive office to remove themselves from decision making when there’s a conflict could create constitutional issues.
There’s a deep seated principle that an official shouldn’t use public office for private gain and, even despite the looser legal requirements, most presidents have have opted to take measures to separate themselves from their personal financial assets in order to avoid conflicts of interest. Nevertheless, Trump has construed these looser requirements to mean “the president can’t have a conflict of interest.” I do believe that’s quite the opposite of the intent of the exemption but, even so, there isn’t really anything stopping Trump from continuing to operate business as usual.