Megan McArdle is a voice of reason.
And for recap of the circumstances that led to Trump's huge mid-90's loss, we can hear from The Donald himself, in this Art of the Comeback excerpt:
One day, while walking down Fifth Avenue, hand in hand with Marla, I pointed across the street to a man holding a cup and with a Seeing Eye dog. I asked, "Do you know who that is?"
Marla said to me: "Yes, Donald. He's a beggar. Isn't it too bad? He looks so sad!"
I said, "You're right. He's a beggar, but he's worth about $900 million more than me." She looked at me and said, "What do you mean, Donald? How could he possibly be worth $900 million more than you?"
I said, "Let's assume he's worth nothing (only from the standpoint of dollars)--I'm worth minus $900 million."
This was an interesting period of time, because as I told the story I realized in my own mind that what I was saying was true. I also began to realize that I had better get back to work!
And after lots of insight into his multi-faceted greatness (he could have been a great golf coach!) we get this:
By 1993 I began to feel more like Chavez than like Taylor. My personal debt of $975 million had been reduced to $115 million, and I had two years to finish cleaning it up. There was no way to deny that things were going really great. Piece by piece, deal by deal, a beautiful picture was beginning to emerge. What my people and I had already achieved was astonishing.
Those are mere hints, but Trump describes a massive restructuring of the debt in the Trump empire:
My side of the deal looked like this: First, the banks would float me $65 million to keep my head above water. Second, no single bank could lay claim against me for five years (until June 30, 1995). Third, all interest and principal on loans would be deferred until that time. It was a win-win situation for all. I was able to buy some time in hopes that the casino or the real estate markets would rebound. And the banks were able to collateralize their unsecured debt and consolidate the rest.
Somewhere in their, presumably their side of the deal, were personal guarantees or something that led to Trump having what he viewed as $900 million or so in negative net worth; since he later says he paid down his "personal debt of $975 million" it appears that he borrowed a lot of money to cover losses and eventually paid that debt back.
From the Times: Twitter credited the Trump campaign for digging this out of the Times archives from 1995:
After the collapse of the real estate market of the 1980's, Mr. Trump's company was left holding some $8.8 billion in debt, causing his personal net worth to drop to a low of about $1 billion in the red by 1991.
But since then, his fortunes have changed. He continues to pursue the trademark trophy-style projects he is known for, such as a hotel and condominium project on the southwest corner of Central Park that is expected to open by late 1996.
Indeed, about an hour before the luncheon, Mr. Trump and representatives from a Hong Kong development firm huddled over drawings and models for their planned Riverside South development, a 17-building project at the site of the old Pennsylvania Railroad yard on the West Side.
In addition to his real estate ventures, revenues are strong throughout the casino business, where Mr. Trump is one of the most noteworthy operators, owning three gaming establishments in Atlantic City. "The market is quite vibrant," said N. Bruce Turner, a gaming analyst at Solomon Brothers. "It has lifted Donald Trump's vibrancy. Has he come back along with the market? No question."
The piece also includes this mini-gotcha, my emphasis:
In a flattering speech, Lieut. Gov. Betsy McCaughey called Mr. Trump "the comeback kid." Charles A. Gargano, who as chairman of the Empire State Development Corporation is himself considered one of the new powers of the state, joked about a Perot-Trump presidential ticket. "He would be the most loved Vice President since Spiro T. Agnew," he said. Mr. Gargano, who heads the state's economic development efforts, added, "Thank you for your tax dollars."
Trump's businesses pay all sorts pf payroll and property taxes so that may not be a direct reference to Trump's personal income tax.