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Lynn Parramore: Revealed – Romney Campaign’s Attempts to Deny Paul Ryan’s Insider Trading Don’t Add Up

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Yves here. As readers may know, Republican vice presidential nominee Paul Ryan engaged stock trades in September 2008 that look to be based on inside information, specifically, discussions Treasury Secretary Hank Paulson had with Congress about the increasingly desperate condition of the financial system. This post explains why the Republican rebuttals are not very persuasive. What is intriguing is that a Twitterstorm emerged over this article as some writers who are not part of the Republican messaging apparatus joined in attacking the scrutiny of Ryan’s trades.

Folks, this isn’t that hard to understand. Even if Ryan only unloaded some bank stocks he had and bought some Goldman shares, and it was indeed in response to the word he got from privileged channels, guess what, it’s likely that it would be considered to be insider trading. When I was a kid, “insider trading” was more narrowly defined, as in information coming from an “insider,” meaning someone who has a duty of care to the company, like a board member, executive, or agent. The SEC has taken a much more expansive of what it considers inside information to be over the years (including some that are overreaching, for instance, its recent failed case against traders who used information that was broadcast over the “squawk box” system of other firms). One might surmise that the overly zealous debunkers are embarrassed because they got it wrong or unsure which way the wind is blowing and waiting to see if the story gets traction.

By Lynn Parramore, a contributing editor at Alternet. Cross posted from Alternet.

Team Romney wants you to believe Ryan didn’t really profit from privileged information. Don’t buy it.

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.

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45 comments

  1. Mark P.

    But it’s legal when a congressional representative does it, isn’t it?

    Pros & Cons –

    http://insidertrading.procon.org/view.answers.php?questionID=001031

    Where the debate stands –

    Peter Schweizer, a fellow at the conservative Hoover Institution, whose work ’60 Minutes’ independently verified.

    ‘”This is a venture opportunity,” Schweizer told ’60 Minutes.’ “This is an opportunity to leverage your position in public service and use that position to enrich yourself, your friends, and your family.”‘

    http://articles.businessinsider.com/2011-11-14/politics/30396448_1_stock-market-market-moving-information-trades

  2. psychohistorian

    Thanks for the posting on this. It will be interesting to see how this unfolds. How can it be any worse than Romney not releasing tax records?

    We are so far down the rabbit hole that moral lapses like this are coming to be expected in our “leaders”.

    The game is more important than the players if you are a puppet.

  3. kxmoore

    maybe pelosi can bring this news to the floor of the house….oh wait, she did it too. i don’t know what’s more sickening… politicians or partisan :”journalists” who selectively report.

    1. YankeeFrank

      Did she? Links? Reports? And of course, its possible she did. The whole rotten stinking corrupt corpse that is Congress needs to be cremated and began anew.

    2. evodevo

      Wait, what? Are you talking about the Visa thing? the 60 minutes poorly researched “both sides do it” smear? Wherein she and her husband bought Visa stock in the spring of ’08 and congress subsequently passed two bills HOSTILE to credit card companies? THAT “insider trading”?
      Or what?

  4. The Gizmo51

    The most efficient way to control the world is to control the most powerful nation in the world. Regime change isn’t good enough without total control of the new regime. The way to do it is to first convince the population that your regime is the best in the world by infiltrating the government through “free elections”. Do this by controlling the voters starting with minorities and a large percentage of the population with little political power such as women. By controlling the voting population you can control the outcome. One way is by attacking the government as being too strong (big) and that it must be weakened (smaller). (Birth of the tea party) Convince the voters you need “starve the beast” decimating its power. You do this by convincing voters of its exceptionalism by “taking back” their nation led by culturally superior whites and the easily manipulated minority “leaders”. Only by becoming the government can you destroy it from within and replace it with the power of the military and its new leadership. You now have the perfect recipe for world dominance and the full power of the republinos.

  5. Nonanon

    Even if he did it, it still isn’t illegal, according to Senate rules.

    One set of rules for the oligarchy, and another for the rest of us.

  6. DP

    Of course the members of the Congress beat the stock market indices by 12% a year while those of us in the proletariat underperform the indices. Just more confirmation that they’re the best and brightest.

    I’m wondering when the Teatards are going to start applying their “he’s never held a real job in the private sector” critique of Obama to fellow career politician Paul Ryan.

    1. Observer

      Paul Ryan rode a giant wiener while in college. I mean he drove the Oscar Meyer Wiener Mobile. That was his private sector job. In the public sector, he hands out free copies of “Atlas Shrugged” to aides as required reading. For he is rich and therefore he is good. Ayn Rand and an entrail sandwich, anyone?

    2. Ms G

      Now if enough working people who had 401(k)s during the period when the markets underperformed by 1.4 percent while Congress outperformed by 12% were to listen and register to this information . . .

  7. Tom

    It was dishonorable for him to have to sold his banking sector stocks before the crash. But, if I were a supporter of his, I would get over it. It would have barely distracted him from his other responsibilities and there’s nothing he could have done in the mean time other than wait helplessly for the crash. This would just tell me he’s another self-interested politician.

    The fact that he also bought Goldman Sachs stock is much worse. It indicates he (and for that matter the rest of Congress) knew something corrupt and inappropriate occurred and decided to profit off of it, when he should have used his position to speak out against it.

    As an aside, I think I remember a speech in which Ryan voiced loosely-worded support for Glass-Steagall. Did I make that up?

  8. John

    Is it possible Paulson let individuals around him, including Ryan,know that a large bail-out was in the works specifically for Goldman Sachs and the other largest banks??

  9. ep3

    this sounds like a waste to me Yves. People grasping for straws against romney/ryan. The fact that their plan to quickly destroy medicare & SS (versus obama’s slow tooth pulling) hasn’t disturbed the rabble, this is an attempt to find something else to throw at the wall and see if it sticks. If something serious was actually going to happen, then it would and it would be attempted to get swept under the rug. But he’s such a loved “washington outsider” and “chart expert”, all the usual will come running to save him.

    1. Ms G

      Well, unfortunately since Robama and Obomney have exactly the same agenda (destroy SS and Medicare, Disemploy and Impoverish the 99.9%), both sides are forced into an increasingly thin sliver of muck to throw at each other.

      So, since neither can say about the other that they want to destroy America’s middle and lower classes to smithereens (which would actually MATTER to most voters), all that is left is junk like “insider trading”, and then the familiar progression of (1) didn’t pay social security on the nanny, and (the “nuclear option”) (2) he slept with someone not his wife, preferably a minor or someone of the same sex, or (turbo nuclear option), (3) same as (2) but involving an animal.

  10. mitchw

    Were these after hours trades? If Dems can tie this into a broader narrative about Ryan taking care of himself and leaving the rest the tender mercies of the market, then maybe there’s something here. Otherwise, maybe a few people will get angry enough to send in a check to Chicago.

      1. mitchw

        I think a lot of the inflammatory rhetoric in this campaign is aimed at raising money as much as swaying votes.

  11. overpopover

    Meanwhile, Pelosi, who was informed before Ryan, decided to eat her losses like a good progressive. Hah!!!

  12. Lambert Strether

    I think this is the nut graf:

    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.

    Put in that frame, I can accept that the many hypotheticals in the post — “While it’s not possible to pinpoint exactly what Ryan knew and when he knew it,” “he may well have gotten word from,” “If you swallow the idea,” “gives the notion of the ‘Invisible Hand’ new meaning,” “Ryan’s surely a guy” — add up to a case.

    Unfortunately, while “it would be irresponsible not to speculate,” the one thing that we do know for certain — “they all do it,” as a person on the street might summarize Parramore’s evidence above — is a truth that neither legacy party can speak.

  13. monday1929

    Is it really any different than Lincoln day-trading Cotton futures, George Washington doing leveraged buy-outs of musket-ball makers, or Kennedy stocking up on Cuban cigars?

    1. Ms G

      Doesn’t seem like any difference at all. Reinforces Lambert’s Truth-That-Will-Not-Be-Uttered concept. They all do it and they’ve been doing it since the beginning.

      It is amusing though to think back to Lincoln trading cotton futures while the great unwashed or the great yankee washed were mesmerized by his Other Persona — you know, end slavery and all that.

      1. monday1929

        Before this shows up on Fox news, I should clarify that I was being sarcastic. Lincoln was not, repeat not, a day trader.

  14. MLS

    I think these are pretty hollow claims. Looking at the trades, Ryan appeared to rotate out of weaker financials (including JPM, which is as connected to the gov’t as anyone, so that’s a clue) on 9/18 into GS, which is considered a blue chip financial stock because of their strong balance sheet and trading “capabilities” (not making a commentary on that here). This is not an unsound strategy IF you are going to continue holding stocks – move up in quality and/or market cap, and hardly an indication of insider knowledge. But if Ryan was really trading on inside information, why own any financial stocks at all? It’s the financial system that is imploding, after all. Because GS was going to profit from the decline in housing? That was no sure thing since if the banking system collapses, what counterparties are left to pay them? And if he think GS is going to profit from all this, why would he sell any shares in October, November and December (at at prices below the 9/18 price – a curious way to “profit” from insider knowledge)?

    Further, if he’s got inside info, why on God’s green earth would he only trim his Citigroup holding and then buy more of it a month later? That makes no sense since Citi was the biggest bag of sh#t in that whole thing. He should have sold the whole thing.

    Finally, it’s not as if on 9/18/2008 nobody knew the financial system was having problems. Merrill had just been sold to BAC on 9/14, the Reserve Fund broke the buck on 9/16 and AIG had been taken over the day before. September 18 was also the day of the infamous run on money markets where the Fed noticed $550 billion was drawn out of money market funds in a few hours, something that would surely spook a person invested in bank stocks. There’s no inside information with any of that.

    I can’t say why the Romney campaign explained things they way they did, except that they don’t really know what they’re talking about and/or they are trying to craft a response that has substance since the real reasons probably don’t have enough “meat” to put the story to rest. There’s plenty to criticize Ryan about, but this seems like a whole lot of nothing.

    1. Yves Smith Post author

      You are missing or choosing to obscure the point.

      The issue is the Sept 18 trade. It didn’t matter if he was a crappy trader. If it was in response to the news he got by virtue of being in Congress, the SEC’s new expansive view of insider trading would consider it to be an inside trade.

      And Congress was not being updated on specific banks, like the state of Citi. I know people who were trying to market time the plunges during the crisis, and they’d play the financials because they were the most volatile. If you were trying to do that, you’d go after the worse garbage barges (or use the levered financial ETFs).

      1. MLS

        I neglected to mention that I 100% agree that if Ryan DID make the trade in response to information he got by virtue of being in Congress or meetings with Treasury, then it is insider trading (which was not a crime at the time if you’re in Congress, but clearly unethical and pretty sleazy).

        My point was that by looking at the trades, there’s no evidence that he was acting on inside info.

        To your point Yves, if Congress wasn’t being updated on specific banks, then Ryan would not/should not have had any inside info on specific companies, which is consistent with his decision to keep some Citigroup. He didn’t yet know it was a massive stinkbomb, but any insider would have known (unless you think the only inside information exchanged was about Goldman, but even then it’s not hard to extrapolate that if GS is the long, everyone else is the short). He also kept some shares in Wachovia, JPM, and GE, all of which were under trendous pressure and would have been obvious sale candidates for anyone with inside info. He trimmed those positions and apparently moved at least some of the funds to GS, which was perceived to be a safer institution. There’s no “there”, there.

        Best as I can tell, it’s assumed that any inside information Ryan got regarding GS was in reference to their short positions on the subprime market, but those were positions they held long before 2008. Here’s two articles from 2007 noting GS was short subprime:

        http://www.guardian.co.uk/business/2007/dec/21/goldmansachs.useconomy
        http://www.dailyreckoning.com.au/goldman-sachs-2/2007/10/19/

        otherwise, what inside information did Ryan receive with regards to Goldman? It’s not like the stock set the world on fire, declining from ~$120 to $55 by November. Meanwhile Ryan sold some of his shares in successive months all at lower prices. If you think GS is going to profit from the demise of others (and they had already), why are you selling shares? You can’t even wait until the next quarterly earnings report to find out? And again, holding shares that are declining over 50% is a curious way to make money from insider trading.

    2. Ms G

      Sir, the nub of the inside information was that a backstop was coming (that’s in re your point of “why buy stocks of banks that would tank”) and that GS was somehow on the inside track with the architecture of that backstop.

      In my foily mode, I believe it would be irrational not to suppose that Paulson served as an early-info conduit to his former colleagues at GS and that from there, GS shared this valuable information with “special clients” (that’s what they get paid the big bucks for, after all).

      Finally, GS held large short positions on crappy-mortgage bonds. Would it be unreasonable to suppose that this information was not included in whatever whisperings occurred sub rosa?

  15. joebhed

    Wow !

    I thought the headline said: “Lynn Parramore Revealed”.
    Then I thought – this must be HUFFPO.
    Then I put on my glasses.

    And I realized its just another story about some greedy, lying, politician wealth-seeker following the advice of his mentor.

    Which reminds me of the line from that old Fugs song -
    “the muddy Elephant wading through the sea, leaves no tracks…”
    Apropos, somehow.

    But, nice try, Lynn.

  16. ranckandfile

    Is Lynn Parramore unaware of the existence of index-based separately-managed accounts? Just because Ryan made trades in individual stocks doesn’t preclude the possibility that the trades were done in an index-based account.

    Also, this would be consistent with Ryan selling some stocks to harvest tax losses, while buying GS to retain financial sector exposure.

    This post seems extremely weak in its argument, which is probably why most journalists aren’t pursuing the story.

    1. MLS

      The thought of index-based SMA’s occurred to me too, but no index ever rebalances that frequently or in such a haphazard fashion. The “index” defense just never made sense. It’s possible it was an SMA with the Russell 1000 (for example) as the benchmark, but since that explanation was never offered up, I doubt that was the case. The people accusing Ryan of insider trading have yet to deal with the “he had no control over the funds” angle either.

      Tax loss selling is certainly possible, but of course impossible to prove without more info.

      1. ranckandfile

        Per TPM: “The Romney campaign said Ryan had nothing to do with the trades in the first place. They were part of a Russell 1000 index fund that automatically traded stocks as part of a pre-set formula.” (Link: http://bit.ly/QGXRkz) So, contra your assertion, that explanation is exactly what was offered up. They do call it a “fund”, which is incorrect, but they are saying that it was based on the R1000.

        1. MLS

          Sorry, I was going way too fast, let me try again because my last comment was really unclear.

          Saying the trades were part of a Russell rebalancing doesn’t make sense because no index rebalances that haphazardly. I meant to say that it could have been part of an ACTIVE SMA that tracks the Russell, but deviates intentionally to try and beat the index, but they specifically said “index” which quite a bit different than “active”, so that is not an explanation they offered up.

          1. ranckandfile

            Tax-advantaged SMAs attempt to replicate the index, but beat the index after tax…if you look at the timing on the trades, they are spaced out such that the trades wouldn’t be subject to “wash-sale” rules, which looks to me like the trading patterns I saw when I worked for a firm that used a lot of index-based SMA products.

            Also, if it were an SMA, that would also address the “trading authority” issue, since end clients typically can’t do non-discretionary trades in an SMA.

          2. MLS

            excellent points, I had not considered them. Perhaps the SMA/index angle has more to it thanI originally considered.

  17. Hugh

    A couple of points:

    Paulson and Ryan were not two guys caught in a small empty town. We are talking Washington during a crisis of epic proportions. Both Ryan and his staff could have had multiple contacts with the Fed, Treasury, bank lobbyists, and other Congressional offices and staffs. The inside buzz the week that Lehman blew up would have been deafening. So Ryan almost certainly had a whole slew of informants feeding him info.

    The other thing is the nature of these trades. They aren’t portfolio tweaking and they aren’t run for the hills either. They look like a straightforward speculative play. If Ryan had any hand in them directly or indirectly, then this indicates he was very much a hands on investor and that he was using information garnered from his position as a Congressman to make this particular speculative move this way.

    1. MLS

      Hugh: “The other thing is the nature of these trades. They aren’t portfolio tweaking and they aren’t run for the hills either. They look like a straightforward speculative play.”

      What specifically about the trades makes them look like a speculative play? You don’t know what his portfolio looks like, and you don’t know what was happening in other accounts. I agree it’s not a run for the hills, but to Yves’ point, someone who was really speculating would use things like options or even the levered financial ETF. These are piddly trades for under $15k each. Hard to make any real money that way without leverage. Just because he bought and sold a variety of financial stocks during a massive crisis, he was trading on insider knowledge? Logic would dictate that someone with real insider knowledge of how bad it was would be selling everything they own, especially financial stocks. They got creamed after that date, you don’t think he wanted to avoid the losses?

      The issue here is the 9/18 buy of GS, and the charge is that Ryan bought the shares using inside information. So what information did he learn from his meeting with Treasury that was both nonpublic and material? The entire world already knew that 1) Goldman had insiders in Washington, especially Paulson 2) The financial system was in a world of trouble and Goldman had a better balance sheet and was better positioned than their peers, and 3) Goldman had been/was short subprime.

      So I ask again: what information was passed to him that he traded on? The stock sure didn’t behave as if Goldman was in some advantageous position as it was cut in half within 2 months. And interestingly, he bought the stock on 9/18 around $125 and sold blocks of it each of the next 3 months in succession, all at lower prices. If you have information that you believe to be credible, why would you sell any shares, particularly at a loss? You would buy more, no?

      There’s just nothing about these trades that suggest insider knowledge.

  18. Hugh

    Ryan became Chairman of the House Budget Committee in 2007. So he and his staff had unique access to Paulson and Treasury. It seems a little bizarre to think that all disappeared on September 15th.

    What is odd about his stock trades is that if the sky is falling, you would expect him to head for a cave. If he is oblivious, then you would expect him to do nothing. That he made these trades in such a consequential week indicates something different, that he had a good idea of where the sky was going to fall and where it wasn’t.

    This brings us to Goldman. Goldman had the dubious distinction of needing to be bailed out not once but twice in that week, first on the weekend of September 13-14 as part of the AIG deal and again the following Sunday September 21 when the Fed gave it bank holding company status. I don’t know how much of these interventions, done or in the works, was known to Ryan but at the time publicly at least, Goldman looked like it might be the last investment bank to go but that it was on its way out, hence the need for the conversion in name only of GS into a bank holding company with access to the Fed facilities just 3 days after Ryan’s trades. So if Goldman looked so shaky to the market, why did Ryan buy it at that point? Unless he knew that Paulson wasn’t just rooting for Goldman but that he was taking active steps to save it. Remember the reason Paulson, Bernanke, and Geithner supposedly let Lehman fail was bailout fatigue. Yet apparently Ryan was betting for some reason on this fatigue not extending to Goldman.

    That Ryan later sold his Goldman shares at a loss has really nothing to do with why he bought them in the first place.

    Also a note about Citi. On October 14, 2008, Paulson announced $250 billion of TARP funds were to go to the banks, of which Citi’s cut was $25 billion. By this time in October, it was clear that the government was going to force Citi into liquidation and that it was instead going to prop it up. So a good reason to sell in September when it looked like Citi was going down the drain and a good reason to buy it the following month.

    1. MLS

      Hugh: “What is odd about his stock trades is that if the sky is falling, you would expect him to head for a cave.”

      precisely my point – why hold anything if the world is ending? The sky was falling everywhere and there were plenty of negative headlines that week including the realization that several hundred million dollars had been withdrawn from money market funds that very day. This is not really consistent with operating on inside info.

      Hugh: “Goldman had the dubious distinction of needing to be bailed out not once but twice in that week, first on the weekend of September 13-14 as part of the AIG deal and again the following Sunday September 21 when the Fed gave it bank holding company status.”

      absolutely true, but Goldman’s part in the AIG deal was already known by then, and the Fed made the decision to grant Goldman and Morgan BHC status, not Treasury. We also don’t know when that decision was made – if you’re going to save GS and MS with that move, why wait until the weekend to announce it? Bad news gets announced on Sundays, good news get anounced right away, a pattern that was repeated over and over at that time. If you want to make the assumption that Paulson knew what the Fed was doing (not a huge leap) it doesn’t matter because such information is not material to the stock price. Being a BHC opened the Fed window for GS and MS, but it didn’t change any of the dynamics around them – their peers on Wall Street, BHC and otherwise, were failing and functionally insolvent. GS stock was down 7% on Monday following the announcement.

      Hugh: “I don’t know how much of these interventions, done or in the works, was known to Ryan but at the time publicly at least, Goldman looked like it might be the last investment bank to go but that it was on its way out, hence the need for the conversion in name only of GS into a bank holding company with access to the Fed facilities just 3 days after Ryan’s trades. So if Goldman looked so shaky to the market, why did Ryan buy it at that point?”

      You have actually proved my point already. PUBLICLY, GS looked like the last to go. That is, everyone in the world knew that they were the strongest of the Wall Street firms. There’s no inside info in that. Why buy if GS looks so shaky? Because it’s still the best house in a bad neighborhood, and you’re buying their balance sheet exposure. Look at the alternatives: BAC and Citi were knee deep in mortgage originations, Merrill and Morgan were eyeball deep in investing in them, but GS was short subprime and had been for over a year. Kind of a compelling reasons to buy, no?

      Hugh: “Paulson wasn’t just rooting for Goldman but that he was taking active steps to save it. Remember the reason Paulson, Bernanke, and Geithner supposedly let Lehman fail was bailout fatigue. Yet apparently Ryan was betting for some reason on this fatigue not extending to Goldman.”

      What active steps was Paulson taking? Convincing the Fed to grant GS and MS BHC? Not material and the stock and market reaction tells you that. The bailout fatigue comment is a huge reach and you don’t know that’s what Ryan was betting on (maybe it was, or maybe it was a hunch that the Feds would do something eventually). You need a lot more than that to levy an insider trading charge. Everyone around them was in worse shape, it’s not inconceivable that he understood that (as many people did) without inside information.

  19. David D.

    What I’d like to know is what Ryan’s role was in relation to the Credit downgrade of the United States from its AAA rating. This has huge long term ramifications for the country.
    I am not to surprised that Ryan would use insider trading to enrich himself. What has devolved among Ayn Randians like Ryan is that anything goes as long as it makes you money. Ethics be damned, especially as long as it is in the government, since in their view, the government shouldn’t exist.

    1. MLS

      I don’t understand your comment, what do you mean by Ryan’s role in relation to the credit downgrade of the U.S.? Not sure what you’re implying there.

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