Hilarious - Congress Shorted Market Too

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This gave me a kick. Turn the tables.

Congress Members Bet on Fall in Stocks

Some members of Congress made risky bets with their own money that U.S. stocks or bonds would fall during the financial crisis, a Wall Street Journal analysis of congressional disclosures shows.

Senators have criticized Goldman Sachs Group Inc. for profiting from the housing collapse. And Congress is considering legislation to curb Wall Street risk-taking, including the use of financial instruments known as derivatives and of leverage, or methods that amplify returns.
Betting on a Bear Market

According to The Journal's analysis of congressional disclosures, investment accounts of 13 members of Congress or their spouses show bearish bets made in 2008 via exchange-traded funds—portfolios that trade like stocks and mirror an index. These funds were leveraged; they used derivatives and other techniques to magnify the daily moves of the index they track.

There's no evidence the legislators and their spouses used privileged information or failed to follow rules on disclosure. Congressional rules permit lawmakers and their families to invest in—or bet against—publicly held companies they oversee through committee assignments, as well as broader markets or indices. While some made money, others lost.

Some of these legislators have publicly criticized practices such as short-selling, or betting on a security to decline. In February, Sen. Johnny Isakson (R., Ga.) argued on the Senate floor that "we don't need those speculating in the marketplace to take unfair advantage of the values of equities that are owned by Americans all over this country for the sake of making a buck on a short sale."

On Oct. 8 and 9, 2008—as the Federal Reserve was bailing out American International Group Inc.—an account Sen. Isakson held invested more than $30,000 in ProShares UltraShort 7-10 Year Treasury and UltraShort 20+ Year Treasury, the records show. These are "leveraged short" funds, designed to gain $2 for each $1 drop in the daily value of U.S. Treasury bonds.

Sen. Isakson said his account is professionally managed by Morgan Stanley Smith Barney and he has no control over it. "They make those decisions and I report what they do," Mr. Isakson said. "I put money away in my career so I can hopefully retire one day."

Sen. Isakson said, "Short selling has a role to play in the market." He said he supports legislation to limit it but wouldn't prohibit it.

Such trading involving members of Congress or spouses "doesn't look real great when the economy is tanking and people are blaming the government," said former Rep. Joel Hefley (R., Colo.), once head of the House Ethics Committee. Still, he said, "You can't have people not using their best judgment on their investment portfolio."

According to The Journal's analysis of the disclosures, collected by the Center for Responsive Politics, few members of Congress made more than a dozen securities trades in 2008. Typical trades were for a few hundred or a few thousand dollars.

While some lawmakers trade for their own accounts, others delegate trading to a spouse, stockbroker or financial adviser. A few legislators keep their money in blind trusts and don't know how it's invested.

Jonathan Gillibrand, husband of New York Democratic Sen. Kirsten Gillibrand, made more than 250 transactions in options in his E*Trade account in 2008, when his wife was in the House, according to disclosures.

Almost all the trades were in put options, which convey the right to sell a stock or other instrument at a given price until a given date. At least 34 times, Mr. Gillibrand bought puts on stocks of home builders, including Beazer Homes USA Inc., Hovnanian Enterprises Inc., Meritage Homes Corp. and Ryland Group Inc. These were bets the builder stocks would fall; if they did, the puts' value would rise.

Mr. Gillibrand also bought call options on ProShares UltraShort Real Estate. Although call options are bullish bets, this trade, too, was a bet against the property market, because the ProShares fund is designed to rise $2 for each $1 fall in real-estate stocks. His profit or loss couldn't be determined.

Sen. Gillibrand, in an April 22 news release on White House financial-regulatory proposals, praised the effort to "rein in excessive risk and leverage in the pursuit of short-term profits."

"The senator was referring to activity by some institutions that were leveraging in excess of 20 to one, using taxpayer money on extremely risky short-term bets rather than long-term strategies that benefit the broader economy," said spokesman Matt Canter. Any comparison of those remarks with her husband's trading "is wrong," he said, adding that the senator "was not involved in his trading." Her office declined to make Mr. Gillibrand available for comment.

As previously reported by The Journal, in 2008 Rep. Spencer Bachus (R., Ala.) made roughly four dozen trades in shares of ProShares UltraShort QQQ and its options, according to disclosure records. This fund is designed to go up twice as much as the Nasdaq 100 stock index goes down.

Rep. Bachus makes his own trades through a Fidelity account. He is the ranking Republican on the House Financial Services Committee, which has legislative oversight over the capital markets.

"I don't trade on margin"—money borrowed from a broker to raise potential returns—Rep. Bachus said in an email, "and don't consider my investments leveraged to any risky extent." He added: "Never have I traded on nonpublic information, nor do I trade in financial stocks."

Rep. Bachus made roughly $28,000 on his trades in options and leveraged ETFs in 2008, according to a Journal analysis, a figure he called "essentially correct."

On July 14, 2008, Rep. Bachus said in a letter to Financial Services Committee Chairman Barney Frank that it was "quite apparent" the challenges facing mortgage companies Fannie Mae and Freddie Mac were caused partly by "short-seller activities." A spokesman for Rep. Bachus didn't respond to requests for comment on the letter.

Rep. Shelley Berkley (D., Nev.), a member of the House Ways and Means Committee, has been a critic of Wall Street. In a statement on the House floor Feb. 23, she said: "Representing Las Vegas, let me assure you, no casino on the planet behaves as irresponsibly and recklessly as Wall Street does. Wall Street ought to be ashamed, and take a lesson from the casino industry."

An account held by her husband, Lawrence Lehrner, shows 57 trades in 2008 in ETFs designed to gain $2 for each $1 drop in the value of a market index, the disclosures show. Between July 25 and July 29, 2008—four months after Bear Stearns Cos. fell—records show four trades in and out of ProShares UltraShort Financial fund.

On Sept. 16, 2008, the day after Lehman Brothers filed for bankruptcy, the account added ProShares UltraShort S&P 500, a fund that thrives when blue-chip stocks tumble.

It was sold over the next two days at a 5% profit, according to disclosures. The account earned a modest net profit of a little over $700 on the trades in leveraged funds in 2008, based on The Journal's analysis of trading records.

"All trades were done by a licensed money manager without any input from my husband or me," Rep. Berkley said. "This is exactly the way many people handle whatever monies they may have in the stock market. I know in our case, he operated wholly within the existing regulations." Her office declined to make her husband's money manager available for comment.

Comments (24)

 
May 4, 2010 - 9:18am

I agree with you Djalminha. The problem with this is that there aren't many ways to distinguish who actually short-short themselves and who used a money manager. They were probably all hypocrites and told the managers to short the s**t out of the market when Lehman fell.

 
May 4, 2010 - 9:41am

I find it extremely hard to believe money managers would do something as speculative as short a market or index without their clients' knowledge and consent. Pollies are mostly slimy pricks who would say anything for a vote. Stories like this not only show them up as hypocrites but also demonstrate that they are far more financially savvy than stage-managed kangaroo courts for public consumption like Goldman-gate would have you believe.

 
May 4, 2010 - 10:17am

You guys are really fucking dumb.

There is nothing wrong with congressional law makers short selling stocks.

For one, they are doing it with their own personal money and they are not counting on someone else making them whole if their risky bets sour. Secondly, they are not being trusted to provide investment advice to third parties. Accordingly, their short positions are not in stark contrast to a bill of goods they're selling their clients. Their criticism of GS et al is that these firms were marketing and selling securities and advice touting the merits of taking a long position, while they themselves believed these securities/advice was complete horse shit and were taking huge short positions. This is not was congressional members did. I'm not taking a position on the whole GS fraud debate.

I'm stating the facts of what Congress is giving them shit about, and what they themselves are doing.

You guys are pathetically stupid, as dumb (or even dumber) as the populous douche bags protesting Goldman Sachs. At least they are school teachers and secretaries, you retards claim to have some superior/more sophisticated understanding of the issues.

Array
 
May 4, 2010 - 10:38am

./

-------------------------------------------------------- "I do not think there is any other quality so essential to success of any kind as the quality of perseverance. It overcom
 
May 4, 2010 - 10:49am

^^^Yeah, because the Goldman hearing was the first time US politicians have ever harangued short sellers.

If it's me you're referring to as a 'retard', I would suggest you read my post again as you have obviously misunderstood my point. I wasn't attempting to draw a parallel between short selling in PA dealing and CDO syndication in any way, shape or form.

I couldn't give two shits what pollies do with their money but when their public remarks contradict their private actions they appear to be two-faced. Their short positions ARE in stark contrast with their public utterances over the last couple years.

Excellent name calling though, really strengthens your argument.

 
May 4, 2010 - 10:55am

Read the fucking article dummy. This isn’t just about GS - Some members of congress are also speaking out against short sales & market speculation while doing it themselves. These people are hypocrites. Nice try though.

I have no problem with someone shorting the market. I do have a problem if they subsequently spew bullshit anti-speculation rhetoric.

“Some of these legislators have publicly criticized practices such as short-selling, or betting on a security to decline. In February, Sen. Johnny Isakson (R., Ga.) argued on the Senate floor that "we don't need those speculating in the marketplace to take unfair advantage of the values of equities that are owned by Americans all over this country for the sake of making a buck on a short sale."
On Oct. 8 and 9, 2008—as the Federal Reserve was bailing out American International Group Inc.—an account Sen. Isakson held invested more than $30,000 in ProShares UltraShort 7-10 Year Treasury and UltraShort 20+ Year Treasury, the records show. These are "leveraged short" funds, designed to gain $2 for each $1 drop in the daily value of U.S. Treasury bonds.“

“Rep. Shelley Berkley (D., Nev.), a member of the House Ways and Means Committee, has been a critic of Wall Street. In a statement on the House floor Feb. 23, she said: "Representing Las Vegas, let me assure you, no casino on the planet behaves as irresponsibly and recklessly as Wall Street does. Wall Street ought to be ashamed, and take a lesson from the casino industry."
An account held by her husband, Lawrence Lehrner, shows 57 trades in 2008 in ETFs designed to gain $2 for each $1 drop in the value of a market index, the disclosures show. Between July 25 and July 29, 2008—four months after Bear Stearns Cos. fell—records show four trades in and out of ProShares UltraShort Financial fund. “

 
May 4, 2010 - 12:13pm

Buyside <span><a href=https://www.e-junkie.com/ecom/gb.php?ii=1145861&amp;c=cart&amp;aff=44880&amp;ejc=2&amp;cl=175031 rel=nofollow>CFA</a></span>:

“Rep. Shelley Berkley (D., Nev.), a member of the House Ways and Means Committee, has been a critic of Wall Street. In a statement on the House floor Feb. 23, she said: "Representing Las Vegas, let me assure you, no casino on the planet behaves as irresponsibly and recklessly as Wall Street does. Wall Street ought to be ashamed, and take a lesson from the casino industry."
An account held by her husband, Lawrence Lehrner, shows 57 trades in 2008 in ETFs designed to gain $2 for each $1 drop in the value of a market index, the disclosures show. Between July 25 and July 29, 2008—four months after Bear Stearns Cos. fell—records show four trades in and out of ProShares UltraShort Financial fund. “

What does this quote have to do with short sales and how does it make her a hypocrite?

Array
 
May 4, 2010 - 12:14pm

Im in no way shape or form for politicians or their bullshit rhetoric or their criticism of Wall St. But I am equally against stupidity.

Array
 
May 4, 2010 - 2:00pm

Then you should be against your own stupidity. The article (wrote by the WSJ NOT the OP) mentions Goldman ONE time in the beginning just to set the tone and you go off on a tangent explaining what the "GS scandal" is. Thanks for dropping your incredible knowledge on us. I can't tell you how many times I've heard politicians criticize short selling and all the article was trying to do was to show the contradictions being made, albeit some of the examples didn't make sense. If you can't read between the lines, which I guess you couldn't, then your the one that's really fucking dumb.

 
May 4, 2010 - 3:13pm

dumbyoungbum:
Then you should be against your own stupidity. The article (wrote by the WSJ NOT the OP) mentions Goldman ONE time in the beginning just to set the tone and you go off on a tangent explaining what the "GS scandal" is. Thanks for dropping your incredible knowledge on us. I can't tell you how many times I've heard politicians criticize short selling and all the article was trying to do was to show the contradictions being made, albeit some of the examples didn't make sense. If you can't read between the lines, which I guess you couldn't, then your the one that's really fucking dumb.

I think your user name suits you well. I wasn't talking about the OP douche bag, I was talking about all the butt fuckers like yourself jizzing yourself over how sensational this article is. If you've heard these politicians talk against short selling so much, do you care to share the quotes from the congressmen cited has having short sold stocks? I'm admittedly not as familiar with congress members viewpoints, enlighten me, since you're breadth of knowledge is far broader than this WSJ's journalists (not hard to believe).

The media sensationalizes completely useless "news" such as this, whether its about Wall Street or Congress, and fat stupid populous imbeciles jump all over it. There is nothing compelling about this. Yeah, maybe if Maxine Waters or some of these other big mouths were shorting single name equities (like Lehman, Bear, etc...) during the financial meltdown in their own personally managed brokerage accounts, that revelation may have some teeth and compelling implications. But this is donkey pre-cum at best.

The piece fails to make any compelling argument or connections. You are a fucking moron. If politicians using short-selling have so vehemently opposed short-selling, why was the WSJ unable to have any firm examples?

Sen. Isakson's quote was the most apparent example and he's paying someone else to manage his account. And thats the strongest example that is made. I would argue that if he's so opposed to such practices he should have made sure his money managers didn't employ any such strategies in managing his money.

Gillibrand's husband traded options, he wasn't short selling. Buying puts is not a market moving trade (aside from signaling) as opposed to shorting a stock where you're increasing the supply of such stock. And even that point is completely moot because Gillibrand NEVER made any statements opposing short selling. She said "Wall streets risky short-term bets need to be reigned in." What does that have to do with short-selling?

Rep. Bachus also hasn't made any statements opposing short-sales. He said challanges faced by Freddie and Fannie were partly caused by short-sellers... ok, and? If he writes challenges faced in the Gulf of Mexico are partly caused by oil spills, he opposed the oil wells in the Gulf Coast?

Rep Shelly Berkley also did not make any statements about short sales according to the piece. The fact that her husband, a surgeon, traded short positions, has absolutely no implications of hypocrisy. In addition to that, all of those trades were made by a money manager who had no input from the couple.

And the leverage argument is ABSOLUTELY MOTHER FUCKING stupid. All of you kiddies jizzing your pants over this article are ridiculous. A 2x levered ETF is NOT the same as a 15x, 20x, 30x levered trading book... which is what the investment banks were doing pre-financial crisis.

Array
 
May 4, 2010 - 2:52pm

I'd like to see if they shorted GM. Then Levin would come down on their asses. "How could you bet against this company when you are trying to sell it to the American people?!"

looking for that pick-me-up to power through an all-nighter?
 
May 4, 2010 - 3:46pm

Should we be surprised? Typical DC hypocrisy. I don't know how Congress can criticize Wall Street for shorting or leverage when they keep voting for spending bills that bury our generation in debt and approve their own pay increases.

"Give me guys that are poor, smart, and hungry. And no feelings." - Michael Douglas as Gordon Gekko in "Wall Street"
 
May 4, 2010 - 4:34pm

Batrick Pateman:
Marcus, as much as i agree with you, you could make an effort in the way you propagate your message.
you dumb fucking cock sucker....

lol..j/k

No kidding. Marcus, I think you're right on this topic, but the way you communicate shit on here makes you look as immature as the "kiddies" you yell at from your e-pedestal.

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