Donald Trump claims that no one was harmed when he lied about the value of his assets on statements he made to lenders, because loans were paid off with interest.

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New York Times columnist, Peter Coy takes this claim far more seriously than he should.

The key point that Coy misses is that lenders base the interest rate they charge on the financial condition of their borrower. To see this point, suppose that you want to take out a mortgage but you are unemployed, have no assets, and already have vast amounts of debt. When you file your application, you tell the bank that you have a job with a 7-figure salary, have $5 million in the bank, and no debt.

Ten years later, you sell the home, and repay the mortgage, after having made all your mortgage payments on time. Was the bank harmed?

Well, if you had been truthful with the bank, they would have charged you a much higher interest rate, if they had chosen to make the loan at all. In effect, the bank was being subjected to much greater risk than it realized. It would have charged for this risk, if it had realized it was taking it.

By lying, Trump was able to get his loans at a lower interest rate than if he had been truthful. This likely saved him many millions in interest payments, at least assuming that lenders took him seriously.

In his deposition, Trump seemed to maintain that lenders know everything he says is a lie. That is perhaps true, but the forms he signed did not indicate that. Perhaps everyone should know that everything Trump says is a lie, but it seems that many people are not yet in on the joke.   

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