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boutons_deux
08-15-2012, 10:42 AM
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.

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.

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.

http://www.alternet.org/news-amp-politics/revealed-romney-campaigns-attempts-deny-paul-ryans-insider-trading-dont-add?akid=9217.187590._8bnaX&rd=1&src=newsletter693416&t=1

of course, back then, insider trading by Congress was "legal" and it took a lot of time to make it somewhat illegal with STOCK (apparently, lobbyists can deal with insider info)

Winehole23
08-15-2012, 10:49 AM
DNC approved site TPM bats down the rumor;

http://2012.talkingpointsmemo.com/2012/08/paul-ryan-insider-trading-rumor-quickly-debunked.php

Winehole23
08-15-2012, 10:52 AM
Okay, so Ryan wasn't guilty of insider trading. But his spokesperson was clearly dissembling about the nature of the trades. Why, though? DeLong's comments section offers a sound hypothesis about the trading strategy at play:
It is very obvious what was going on. This was tax-loss harvesting, designed to avoid the 30 day wash sale rule. All the sales came 30 days or more after purchases and everytime something was sold, a correlated asset was bought. Rebalancing the index??? That is hilarious.
Another explains why Ryan's tax-loss harvesting was focused on the financial stocks - to catch an anticipated sector rebound while taking advantage of the losses for tax purposes. Keeping the financial stocks in a holding pattern, if you will. Here's the finer grain of sleuthing from DeLong's reader:
I've got a different theory. I'm willing to believe that these were arms-length trades executed by his advisers, but I think he's being deliberately disingenuous about what they were up to. This strikes me as a trading scheme devised to take advantage of the tax law, by harvesting losses.

Here's what happened. Starting on June 25 of 2007, his disclosure forms show that 'RHIP' - presumably, Ryan-Hutter Investment Partnership - purchased individual stocks in eight extremely large-cap firms. It's an idiosyncratic group, weighted toward financials, but there may have been some sort of underlying logic. He added a ninth, Wachovia, in August - and made some additional purchases as the year went on. And in 2007, there's no rapid-fire trading in and out of these stocks. It's straightforward buy-and-hold.

That changes in 2008, as the financial crisis sets in. It's not clear exactly how much money Ryan had tied up in these purchases - they were all initially in the $1k-15k range, so somewhere between $9k and $135k, which is pretty much useless. But remember, financials were plunging. He's taking a bath. On the other hand, as we went through the crisis, lots of folks expected us to hit a floor and rebound.
On reasonable strategy, under those circumstances, is to maintain the same overall level of exposure to the sector, but to ensure that you've always registered the maximum losses.... So once a month, you look at your holdings. If your stock in a particular company is down, you sell it, and buy shares in another firm, locking in the losses while maintaining your chance of enjoying any recovery. If it's up, or stagnant, you hold for another month to see what happens - or maybe even buy some more.

If you match up the dates of Ryan's purchases and sales with stock prices, that's precisely what you see. He always bought high and sold low. It's part of what makes the insider-trading charge absurd. No one's that unlucky; Ryan was deliberately registering losses on these sales. That seems strange. But if you're trying to stay in a sector to catch an eventual rebound, and want to maximize your losses for future taxes, it makes a fair degree of sense. And sure enough, once 2009 rolls around and the markets achieve a degree of stability, the strange sales suddenly stop.

So why doesn't his spokesperson just say that? Why the strange explanation involving indexes and partnerships and algorithms? My guess is that Ryan recognizes that the truth here would be awkward. "Well, in 2008, a family partnership in which I hold a 20% non-controlling interest executed a series of trades designed to minimize my future tax liabilities. I was loss-harvesting to shield my future income. That's what you're seeing on these forms."

Things that seem normal to the tiny fraction of Americans with family trusts and tax attorneys are likely to strike the average voter as immoral, unethical, or dishonest - even when they're perfectly legal. Mitt Romney has already discovered this, much to his chagrin. Ryan would far rather put out a smokescreen related to the Russell 1000 and wait for reporters to realize that there wasn't any insider trading, than explain forthrightly what this was actually all about.
Pure cynicism on the parts of Romney and Ryan. But very consistent with the larger disdain for voters' intelligence and intergrity.http://andrewsullivan.thedailybeast.com/2012/08/was-ryan-involved-in-insider-trading-ctd-still-writing.html

Winehole23
08-15-2012, 11:06 AM
Why, though? DeLong's comments section offers a sound hypothesis about the trading strategy at play:
It is very obvious what was going on. This was tax-loss harvesting, designed to avoid the 30 day wash sale rule. All the sales came 30 days or more after purchases and everytime something was sold, a correlated asset was bought. Rebalancing the index??? That is hilarious.
ibid

Winehole23
08-15-2012, 11:08 AM
...

CosmicCowboy
08-15-2012, 01:46 PM
No one intentionally loses money to maximize tax deductions.

Winehole23
08-15-2012, 02:08 PM
then what was Ryan doing?

CosmicCowboy
08-15-2012, 02:24 PM
:lmao

You are proposing that he intentionally lost money for tax deductions?

:lmao:lmao:lmao


You can only use losses on stock sales to offset capital gain income (from selling profitable stock) and to offset up to $3000 in ordinary income in one year. You can carry the losses forward but the cap is still $3000 a year.

It makes NO sense to intentionally lose money in the stock market for tax benefits.

If the taxpayer is in the 27% bracket that means he turns a $2000 loss on stock to offset taxes owed on $2000 ordinary income into a $540 reduction in taxes owed.

Why the fuck would someone do this intentionally?

Winehole23
08-16-2012, 01:46 AM
You are proposing that he intentionally lost money for tax deductions?Nope. That's someone else's conjecture. I can't make much sense of what Ryan did.

How do you suss it?

Winehole23
08-16-2012, 01:47 AM
He's a bad investor? Didn't know what he was doing?