In Ryan's defense, he's probably just a dumb investor
I think it's still an open question, but so far I'm not seeing evidence that Paul Ryan engaged in insider trading
in September 2008 amidst
the economic collapse. It's worth exploring more, but don't worry, even if it turns out Ryan didn't cross any lines, Brad DeLong makes a solid case
that Ryan nonetheless engaged in a breathtakingly foolish investment strategy.
The question is whether six financial transactions executed by Ryan on Sept. 18, 2008 reflect insider trading or just dumb investing. Each transaction involved a company in the financial services sector and the total value of the trades was as much as $90,000 or as little as $6,000. Ryan bought shares in Goldman Sachs and sold shares in Wachovia, Citigroup, G.E., J.P. Morgan Chase and State Street.
The claim that the transactions represent insider trading depends on the assertion that Ryan attended a meeting earlier in the day with then-Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke. At this meeting he is alleged to have been told which banks were in trouble and which weren't.
One obvious question about this theory is whether or not such a meeting ever took place. From brief research this afternoon, I did identify a meeting that took place on the evening of Sept. 18, 2008, involving Paulson, Bernanke and congressional Republicans. Ryan was probably at that meeting, but it would have taken place after trading hours. There was another meeting with Paulson, Bernanke and bipartisan leadership on September 16, 2008, but that meeting was two days before the alleged insider trading.
Bottom line: At least so far, I have only seen assertions that there was a meeting on Sept. 18 after which Ryan would have executed insider trades. Without concrete evidence that such a meeting took place, the theory doesn't seem to hold up.
Meanwhile, Brad DeLong offers a compelling explanation for the trades.
Did Paul Ryan run from his Paulson-Bernanke briefing to his phone to call his broker and trade on inside information? I doubt it. It is certainly not a potential conflict of interest or the appearance of a conflict of interest but rather an actual conflict of interest for a Congressman receiving Fed and Treasury information on the health of banks to be buying and selling individual bank stocks. But late-mid-month--the 16, 17, 18, 20--is a "normal" time for Ryan to be trading (38% of trading days are in that 17% of the month) and for Ryan to switch out of some banks into another (usually Goldman Sachs) was a common thing for him to do: once every two months.
The impression I get from these 27 transactions in individual bank stocks in 12 months, 17 of which involve not net injections or withdrawals but rather switches between banks, is of a guy who simply does not know what he is doing.
Basically, says DeLong, it appears as though Ryan believed he knew better than the market which banks were doing well, and which banks weren't, so he bought and dumped bank stocks with great velocity. And this strategy is a very stupid one:
At the level at which part-timer Paul Ryan plays this game--Oh! Goldman is undervalued relative to Citigroup on January 22! Oh! Citigroup is undervalued relative to Goldman on February 22! Oh! Goldman is undervalued relative to Citigroup on June 16! Oh! Goldman is undervalued relative to Citigroup on September 18! Oh! Goldman is overvalued relative to Citigroup on October 20!--he can no more win than Reagan-era ex-Secretary William Bennett could win as he dropped $7 million over the years in Las Vegas. An intelligent man takes the advice of the computer in the movie "Wargames": "A very interesting game. The only way to win is not to play."
As DeLong says, we do not want a vice president stupid enough to believe that this sort of investment strategy works. Given the foolishness of Ryan's budget plans, it certainly is possible that Ryan is that dumb. Of course, there's always the chance that Ryan was in fact engaging in some sort of insider trading scheme. On the face of it, that doesn't seem likely, but it's not like we'd want that kind of guy in the White House either.
12:03 PM PT: David Dayen sees it like DeLong as well.
12:05 PM PT: Adam Bonin points out that Ryan was a 20 percent partner in the entity making the trades and may not have even made them himself.