Over the weekend, the
Richmonder blog
broke what looked like a whopper of a story: that Republican
vice-presidential hopeful Paul Ryan had lined his pockets from
information he had obtained from a now-legendary meeting that took place
on September 18, 2008. On that day, Fed Chairman Ben Bernanke and
then-Treasury Secretary Hank Paulson broke the news to congressional
leaders that they would have to approve a bailout to avert a complete
meltdown of the financial system.
America was lurching toward catastrophe. But some folks were apparently thinking about their stock portfolios.
Checking
through Ryan’s financial disclosure reports, the Richmonder discovered
that Ryan had sold the stocks of several major banks that day, while
purchasing – surprise! – stock in Paulson’s old firm Goldman Sachs. The
story quickly circulated through the media.
The Romney campaign
rapidly issued denials, based on three separate -- and clearly false --
claims: 1) the trades were not individual stock trades, but trades made
as part of an index that trades big blocs of stocks according to preset
formulas; 2) the meeting took place in the evening, after markets were
closed, so the meeting could not have played a role in Ryan’s trading
decisions; and 3) the stocks traded within a trust over which Ryan had
no direct authority.
In many quarters, acceptance of the denials
came almost as fast as the news of the original report. Benjy Sarlin of
Talking Points Memo
issued a report
“debunking” the Richmonder story, stating that “the rumor, which spread
rapidly across the Internet, doesn’t hold up to scrutiny.” Matt
Yglesias over at Slate, who had first credited the story,
backtracked, apologizing that he had been too “credulous” in accepting the Richmonder report.
Look again.
First
of all, the Romney campaign’s claim that the transactions were index
trades is not consistent with what’s in the original disclosure reports.
AlterNet discussed the controversy with money and politics expert
Thomas Ferguson, who has written extensively on the bailout. He
explained, “Ryan did own some index-based securities, but they stand out
in the summaries. They are different from the many trades Ryan was
making in individual stocks. It is perfectly obvious that he sold shares
in Wachovia, Citigroup and J. P. Morgan on September 18 and he bought
shares in Paulson’s old firm, Goldman Sachs, on the same day. If these
were index trades, what’s on the form is nonsense.”
While it’s not
possible to pinpoint exactly what Ryan knew and when he knew it, the
whole episode becomes more disturbing the deeper you look into it.
Citing accounts from congressional circles
,
Ferguson explains that Paulson had been told by the White House not to
discuss the darkening situation with Congress. But sometime between 2:30
and 3pm on September 18, Paulson finally spoke with then-Speaker of the
House Nancy Pelosi. He told her that a very bad situation had
developed, and that it could involve something much worse than the
failure of a giant bank, possibly even a broad collapse of the whole
economy.
Pelosi immediately demanded that Paulson come over and brief
congressional leaders. He agreed. Ferguson reports that his sources say
the meeting did indeed begin after markets closed. But he also notes
that word of the meeting circulated to the leaders
well before markets closed at 4pm.
Since
Ryan is a Republican, he may well have gotten word from the White House
about the gravity of the situation even earlier. If you knew that Hank
Paulson and Ben Bernanke were coming to brief you as stock markets fell
around the world, that’s really all you needed to know to do the trades
in Ryan’s portfolio.
If you swallow the idea that Ryan just
happened to buy Goldman stock that day -- a day he just happened to have
a meeting with Hank Paulson, the firm’s former CEO, well, then I have
some unicorns I’d like to introduce you to.
Ferguson scoffs at the
notion: “There’s a lot we don’t know about the famous waiver that
Paulson is said eventually to have gotten to talk to his old firm. When I
asked about it under a Freedom of Information request, virtually
everything I got back was blacked out. But I’ll tell you this. It was
not exactly an Einsteinian inspiration to guess that Paulson’s old firm
might be a good bet if things were so bad that Hank Paulson was coming
to the Hill.”
Sometimes you win, sometimes you lose. But if you’re a member of Congress, the odds are curiously in your favor. As I
reported on AlterNet several months ago,
in-depth research undertaken in 2004 considered to be the baseline work
in the field revealed that from 1993-1998, US senators were beating the
market by 12 percentage points a year on average. Corporate insiders
only beat the market by a measly 5 percent. Typical households, in
contrast, underperformed by 1.4 percent.
And as to the Romney
campaign’s claim that Ryan was not legally in control of his
investments, let’s just say that this idea gives the notion of the
“Invisible Hand” new meaning.
What’s most disturbing is the notion
of a man like Paul Ryan focusing so heavily on his portfolio while his
country was in peril. Ryan’s surely a guy who would answer the phone at
3am – provided it's his stockbroker calling.
No comments:
Post a Comment