Hillary Clinton cattle futures controversy

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Hillary Clinton
First Lady of the United States
U.S. Senator from New York
  • Tenure
U.S. Secretary of State
2008 presidential campaign
2016 presidential campaign
Organizations

In 1978 and 1979,

Attorney General of Arkansas
.

Background and Clinton's trading

Clinton had no experience in such financial instruments.

Governor of Arkansas was modest and Clinton later said she had been interested in building a financial cushion for the future.[4][5] The Clintons' combined income in 1978 from the governorship and Rose Law Firm amounted to $51,173,[6] equivalent to $239,100 in 2023. James Blair was a friend, lawyer, outside counsel to Tyson Foods, Arkansas' largest employer, and had been doing so well trading commodities futures that he encouraged friends and family to enter the market too.[7][4][5] Blair in turn traded through, and relied upon cattle markets expertise from broker Robert L. "Red" Bone of Refco, a former Tyson executive. In October 1978, when Bill Clinton was Attorney General and on the verge of being elected Governor,[2]
Clinton opened a trading account, although Blair made most of the trades.

By January 1979, Clinton was up $26,000;

margin calls were made by Refco against her.[5] Near the end of her trading, Blair correctly predicted a market downturn and sold short, giving her a $40,000 gain in one afternoon.[5] In July 1979,[2] once she became pregnant with Chelsea Clinton, "I lost my nerve for gambling [and] walked away from the table $100,000 ahead."[4] She briefly traded sugar futures contracts and other non-cattle commodities in October 1979, but more conservatively, through Stephens Inc.[5][8] During this period she made about $6,500 in gains, which she failed to pay taxes on at the time, consequently later paying some $14,600 in federal and state tax penalties in the 1990s.[8][9] Once her daughter was born in February 1980, she moved all her commodities gains into U.S. Treasury Bonds.[5]

Media scrutiny

The profits made during the cattle trading first came to public light in a March 18, 1994 report by

State Dining Room of the White House, to address questions on both matters; it was broadcast live by CBS, NBC, ABC, and CNN.[12] In it she said she had done the trading, but often relying upon the advice of Blair, and having him place orders for her; she said she did not believe she had received preferential treatment in the process.[12] She also downplayed the dangers of such trading: "I didn't think it was that big a risk. [Blair] and the people he was talking with knew what they were doing."[7]

Likelihood of results

Various publications sought to analyze the likelihood of Clinton's successful results. Clinton made her money by betting mostly on a market downturn at a time when cattle prices actually doubled.

IRS chief counsel’s Commodities Industry Specialization Team expressed skepticism that a novice trader could make such a return.[15] One analysis performed by Auburn University and published in the Journal of Economics and Finance claimed to find that the odds of a return as large as Clinton obtained during the period in question were about one in 31 trillion.[16][17][18]

Merc and Melamed investigations

Chicago Mercantile Exchange records indicated that $40,000 of her profits came from larger trades initiated by James Blair. According to exchange records, Robert "Red" Bone, the commodities broker that facilitated the trades on behalf of Refco, reportedly because Blair was a good client, allowed Clinton to maintain her positions even though she did not have enough money in her account to cover her activity. For example, she was allowed to order 10 cattle futures contracts, normally a $12,000 investment, in her first commodity trade in 1978 although she had only $1,000 in her account at the time.[19] Bone denied any wrongdoing in conjunction with Clinton's trading and said he did not recall ever dealing with Clinton personally.[3][8]

As it happened, during the period of Clinton's trading, Refco was under investigation by the Mercantile Exchange for systematic violations of its margin trading rules and reporting requirements regarding cattle trading.[3][8] In December 1979, the exchange issued a three-year suspension to Bone and a $250,000 fine of Refco (at the time, the largest such penalty imposed by the exchange).[3][8]

After the Clinton trading matter became public,

University of Chicago Graduate School of Business.[20]

Clinton responses

Hillary Clinton's defenders, including

Don Tyson, who had in 1978 endorsed Clinton, in 1980 endorsed Frank D. White, Clinton's opponent in his reelection bid. Tyson denied any knowledge of Blair's trading partnership with Clinton. The New York Times noted, however, that notwithstanding Hillary Clinton's "artful explanation", the commodities trading had ended over a year before the 1980 election and that Tyson had switched sides after Bill Clinton did not lobby the state legislature to increase the weight limit on trucks, although Tyson believed that he had received such a promise from him at the time of the 1978 election.[12][21][22]

Clinton's defenders also stressed that Blair and others stayed in the market longer than Clinton and lost much of what they had previously earned, showing that the risk was real.[4] Indeed, some reports had Blair losing $15 million[23] and Bone was reported as bankrupt.[10]

Official findings

There never was any official governmental investigation into,

futures trading.[7]

References

  1. ^ 1634–1699: McCusker, J. J. (1997). How Much Is That in Real Money? A Historical Price Index for Use as a Deflator of Money Values in the Economy of the United States: Addenda et Corrigenda (PDF). American Antiquarian Society. 1700–1799: McCusker, J. J. (1992). How Much Is That in Real Money? A Historical Price Index for Use as a Deflator of Money Values in the Economy of the United States (PDF). American Antiquarian Society. 1800–present: Federal Reserve Bank of Minneapolis. "Consumer Price Index (estimate) 1800–". Retrieved February 29, 2024.
  2. ^ a b c Claudia Rosett, "Hillary's Bull Market", The Wall Street Journal, October 26, 2000. Accessed July 14, 2007.
  3. ^ a b c d e Mark Hosenball, Rich Thomas, and Eleanor Clift, "Hillary's Adventures In Cattle Futures Land", Newsweek, April 11, 1994. Accessed March 2, 2009.
  4. ^
    ISBN 978-0-7432-2224-2
    . pp. 86–87.
  5. ^
    ISBN 978-0-375-40766-6
    . pp. 134–138.
  6. ^ Chozick, Amy (August 11, 2016). "Stress Over Family Finances Propelled Hillary Clinton Into Corporate World". The New York Times. Retrieved August 13, 2016.
  7. ^
    ISBN 978-0-316-01742-8
    ., pp. 73–76.
  8. ^ a b c d e Bill Montague; Kevin Johnson, "Commodities trading saga: Pieces still missing", USA Today, April 25, 1994. Accessed December 14, 2012.
  9. ^ a b Gwen Ifill, " Hillary Clinton Didn't Report $6,498 Profit In Commodities Account, White House Says", The New York Times, April 12, 1994. Accessed July 15, 2007.
  10. ^ a b Jeff Gerth, " Top Arkansas Lawyer Helped Hillary Clinton Turn Big Profit", The New York Times, March 18, 1994. On March 28, 1994, Securities Week, a McGraw-Hill Companies publication, published an article outlining the repeated regulatory violations committed by her broker, Red Bone, which resulted in greater scrutiny and questions not only about how much money she had made in the markets, but how she had made it. Accessed July 14, 2007.
  11. ^ Bob Herbert, "The Circus That Is Whitewater", The New York Times, March 20, 1994. Accessed April 6, 2008.
  12. ^ a b c Gwen Ifill, "Hillary Clinton Takes Questions on Whitewater", The New York Times, April 23, 1994. Accessed July 15, 2007.
  13. ISBN 9780374138585
    .
  14. ^ BRODER, JOHN M.; FRITZ, SARA (March 31, 1994). "Hillary Clinton's Futures Trades Unusual, Experts Say". Los Angeles Times. Retrieved October 9, 2016.
  15. ^ Brandon, David (April 7, 1994). "The Mystery of Hillary's Trades". Wall Street Journal.
  16. ^ Staff, Vox (April 11, 2015). "The 11 moments that define Hillary Clinton". Vox. Retrieved October 3, 2016.
  17. S2CID 154058488
    .
  18. ISBN 9781478608226
    . Retrieved October 8, 2016.
  19. ^ a b Charles R. Babcock, "Hillary Clinton Futures Trades Detailed", The Washington Post, May 27, 1994. Accessed July 14, 2007.
  20. ^ a b Stephen Engelberg, "New Records Outline Favor for Hillary Clinton on Trades", The New York Times, May 27, 1994. Accessed July 15, 2007.
  21. ^ a b " No One Bribed Anyone in Clinton Trading", Lloyd Cutler (letter to the editor), The New York Times, June 3, 1994. Accessed July 15, 2007.
  22. ^ Kelly, Michael (July 31, 1994). "The President's Past". The New York Times. Retrieved September 30, 2016.
  23. ISBN 0-8050-2804-8
    , p. 233.
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