Todd H Baker is the managing principal at Broadmoor Consulting.
Despite the headlines, the lawsuit brought by the Trump Organization against Capital One earlier this month has nothing to do with its ostensible subject, the dreaded demon of “debanking”. It has everything to do with the fact that Capital One needs a favour from the president if it wants to get its acquisition of Discover approved by federal bank and antitrust regulators. This should set the alarms off in corporate boardrooms everywhere.
The suit asserts that some of the Trump Organization’s bank accounts at Capital One were closed in 2021 for political reasons, which the bank denies. The suit itself has little or no merit, as many legal commentators have noted, although it stokes the right-wing grievance machine still outraged that Nigel Farage lost his Coutts private banking privileges when his balance got too low.
In a normal world this kind of suit would easily be dismissed by the courts. But things are not so simple in Trump 2.0, where the mingling of personal and governmental interests is a feature not a bug.
When someone brings meritless legal claims — a Trump speciality — one has to assume that there is more at stake than the desire for a trial by jury. Sometimes it’s just to make news and affect public opinion. In this case, the debanking claims against Capital One conveniently give the president’s business interests the opportunity to get something in return for the exercise of Presidential authority. By any definition other than the Supreme Court’s, this smells like a quid pro quo.
At least there’s not a pattern here or anything . . . Well, actually, there is a pattern here.
The Capital One lawsuit is quite similar to the defamation claim brought by Trump’s private interests against Disney/ABC alleging libel. ABC, facing similarly weak claims, reportedly settled for $15mn not because they might lose but because their commercial interests require administration action from time to time, and they feared retribution. Trump’s ongoing multibillion-dollar suit against CBS over the editing of a 60 Minutes interview with Kamala Harris, is also reportedly close to settling because Paramount, the CBS owner, needs approval of its proposed acquisition by Skydance. And then there is claim against Meta that was settled for $25mn earlier this year.
The willingness of these companies to pay to keep on the president’s good side is like chum in the water to Trump 2.0, which knows a good thing when it sees it.
In case you are wondering why something like this hasn’t happened before, it is worth pointing out that no other president in US history has retained the ownership and control of the large operating businesses necessary for this type of activity to work. Prior to 2016, it was considered beyond the pale for any president to have commercial conflicts of interest of any kind. Now it happens without comment, or with a shrug for the Trump exception.
This lawsuit puts Capital One and its board in an impossible position, which is the point of the whole exercise. For a relatively small amount, Capital One can settle the lawsuit with the expectation that it will be forgiven for lèse majesté, and its acquisition of Discover will be approved. It could probably even follow the “wink and a nod” approach and reach a settlement an appropriately cleansing number of months after the deal is approved. Problem solved for Capital One.
But the problem is just postponed, not solved. The demands for this type of “co-operation” in exchange for official action will never end, as business interests in authoritarian states have learned to their dismay time and time again. When your “business friendly” government places a price on friendship, you’ll keep paying and paying.
This is the dilemma all CEOs will face in the near future. As a collective matter — and as citizens — CEOs should openly resist any slide towards a “pay to play” relationship with government figures. But individually, they can convince themselves that their fiduciary duty to shareholders requires quiet submission. Courage is required to reject this way of thinking. Will any US CEO be brave enough?
The Capital One/Discover and Paramount/Skydance cases may also answer the vexing question about why the Trump Administration is continuing active antitrust enforcement despite strenuous opposition from its largest financial supporters in technology and finance.
As Trump has repeatedly shown, he is not a negotiator in the traditional sense. He’s not looking for win-win solutions. Instead, he seeks to combine bottleneck or blocking positions and litigation threats to force favourable outcomes.
What better example than to use his power over the approval or denial of mergers on antitrust grounds to get what he wants in other spheres from the companies involved?
