Hil­lary’s as­sets

The Washington Times Weekly - - Editorials -

Dur­ing last month’s de­bate among Demo­cratic pres­i­den­tial can­di­dates, NBC’s Brian Wil­liams, the mod­er­a­tor, asked Hil­lary Clin­ton, “How is Amer­ica a bet­ter place be­cause of all th­ese bur­geon­ing hedge funds?” He was re­fer­ring to the loosely reg­u­lated in­vest­ment ve­hi­cles that fre­quently gen­er­ate mas­sive re­turns for their wealthy in­vestors by us­ing debt to lever­age huge bets on move­ments in the com­mod­ity fu­tures mar­ket and many other fi­nan­cial are­nas. Con­sid­er­ing her ex­tra­or­di­nary suc­cess dur­ing 1978 and 1979, when, as a novice trader, she turned a $1,000 in­vest­ment into a $100,000 profit in the highly risky cat­tle-fu­tures mar­ket, Mrs. Clin­ton was the right per­son to ask about hedge funds.

To­day, hedge funds make up a su­per­sized ver­sion of the spec­u­la­tive mar­kets where Mrs. Clin­ton toiled well be­fore the on­set of the 1980s “decade of greed.” In­deed, her $100,000 profit, equiv­a­lent to nearly $300,000 to­day, was about four times the salary her hus­band earned as Arkansas at­tor­ney gen­eral. Nev­er­the­less, in May 1993, nearly a year be­fore the pub­lic learned of Mrs. Clin­ton’s suc­cess in cat­tle fu­tures, she self-righ­teously de­clared dur­ing her com­mence­ment ad­dress at the Univer­sity of Michi­gan: “Through­out the 1980s, we heard too much about in­di­vid­ual gain, about the ethos of self­ish­ness and greed.”

In re­spond­ing to Mr. Wil­liams’ ques­tion at the de­bate, Mrs. Clin­ton was right to say that “Amer­ica is a great place be­cause we have an en­tre­pre­neur­ial econ­omy.” Then she added, “[o]ne of the other rea­sons we’re a great coun­try is be­cause we’ve learned over the years how to reg­u­late that so no­body gets an un­fair ad­van- tage.” This, from the politi­cian whose cat­tle-fu­tures score was clouded by all sorts of cir­cum­stances scream­ing “un­fair ad­van­tage.” For ex­am­ple, in a mar­ket where 75 per­cent of par­tic­i­pants, ex­pe­ri­enced and in­ex­pe­ri­enced alike, gen­er­ally lose money and where bro­kers have the abil­ity to “al­lo­cate” the win­nings among their cus­tomers, the Wall Street Jour­nal re- ported that Mrs. Clin­ton’s com­modi­ties bro­ker was dis­ci­plined for ques­tion­able trad­ing prac­tices be­fore and af­ter ex­e­cut­ing her ex­traor­di­nar­ily prof­itable trades.

Mrs. Clin­ton ini­tially ex­plained her suc­cess by claim­ing to have done all her own re­search study­ing the Wall Street Jour­nal. Then she ad­mit­ted that Jim Blair, the out­side coun­sel for Tyson Foods, ad­vised her and placed most of her trades. Mr. Blair helped her open her trad­ing ac­count in mid-Oc­to­ber 1978. That was three weeks be­fore her hus­band rode to cer­tain vic­tory (63 per­cent of the vote) in his race for Arkansas gov­er­nor, a po­si­tion from which he would en­force the state’s en­vi­ron­men­tal poli­cies af­fect­ing chicken waste and ap­point nu­mer­ous reg­u­la­tory of­fi­cials over­see­ing Tyson.

The odds of a re­tail trader ex­e­cut­ing the in­tra­day trans­ac­tions that gen­er­ated a 530 per­cent overnight re­turn, which Mrs. Clin­ton achieved on her first day, “are about the same as [the odds] of find­ing the Dead Sea Scrolls on the steps of the State House in Lit­tle Rock,” ac­cord­ing to es­ti­mates by Wall Street Jour­nal fi­nan­cial colum­nist Caro­line Baum and com­modi­ties spec­u­la­tor Vic­tor Nieder­hof­fer in their dev­as­tat­ing ac­count (Feb. 20, 1995; Na­tional Re­view) of Mrs. Clin­ton’s trad­ing ac­tiv­ity.

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