Hillary Rodham cattle futures controversy
Secretary of State
U.S. Senator from New York
First Lady of the United States
First Lady of Arkansas
In 1978 and 1979, lawyer and First Lady of Arkansas Hillary Rodham engaged in a series of trades of cattle futures contracts. Her initial $1,000 investment had generated nearly $100,000 when she stopped trading after ten months. In 1994, after Hillary Rodham Clinton had become First Lady of the United States, the trading became the subject of considerable controversy regarding the likelihood of such a spectacular rate of return, possible conflict of interest, and allegations of disguised bribery, allegations that Clinton strongly denied.
There never was any official governmental investigation into, or findings about, or charges brought against Clinton.
Trades and first exposure
Rodham had no experience in such financial instruments. Bill Clinton's salary as Arkansas Attorney General and then Governor of Arkansas was modest and Rodham later said she had been interested in building a financial cushion for the future Starting in October 1978, when Bill Clinton was Attorney General and on the verge of being elected Governor, she was guided by James Blair, a friend, lawyer, outside counsel to Tyson Foods, Arkansas' largest employer, and, since 1977, a futures trader who was doing so well he encouraged friends and family to enter the commodity markets as well. Blair in turn traded through, and relied upon cattle markets expertise from, broker Robert L. "Red" Bone of Refco, a former Tyson executive and professional poker player who was a World Series of Poker semifinalist. The Clintons' combined income in 1978 from the governorship and Rose Law Firm amounted to $51,173, equivalent to $185,700 in 2015.
By January 1979, Rodham was up $26,000; but later, she would lose $16,000 in a single trade. At one point she owed in excess of $100,000 to Refco as part of covering losses, but no margin calls were made by Refco against her. On July 17, 1979, she had 115 contracts outstanding with a market value of $3.2 million. A 4 or 5 per cent adverse fluctuation, as occurred once or twice a month, in Clinton’s position would have constituted five times her annual income and five times her net worth. Near the end of the trading, Blair correctly sold short and gave her a $40,000 gain in one afternoon. In July 1979, once she became pregnant with Chelsea Clinton, "I lost my nerve for gambling [and] walked away from the table $100,000 ahead." She briefly traded sugar futures contracts and other non-cattle commodities in October 1979, but more conservatively, through Stephens Inc. 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). Once her daughter was born in February 1980, she moved all her commodities gains into U.S. Treasury Bonds.
The profits made during the cattle trading first came to public light in a March 18, 1994 report by The New York Times, which had been reviewing the Clintons' financial records for two months. It coincided with the beginning of congressional hearings over the Whitewater controversy. Clinton initially told aides that she had made the futures gains by studying the financial news and placing trades herself, but later acknowledged the help of Blair. Media pressure continued to build, and on April 22, 1994, she gave an unusual press conference under a portrait of Abraham Lincoln in the State Dining Room of the White House, to address questions on both matters; it was broadcast live by CBS, NBC, ABC, and CNN. 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. 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." Afterwards she won media praise for the manner in which she conducted herself during this, her first adversarial press conference; Time called her "open, candid, but above all unflappable ... the real message was her attitude and her poise. The confiding tone and relaxed body language ... immediately drew approving reviews."
Likelihood of results
Various publications sought to analyze the likelihood of Rodham's successful results. The editor of the Journal of Futures Markets said in April 1994, "This is like buying ice skates one day and entering the Olympics a day later. She took some extraordinary risks."
Financial writer Edward Chancellor noted in 1999 that Clinton made her money by betting "on the short side at a time when cattle prices doubled."
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, "Red" Bone, the commodities broker that facilitated the trades on behalf of Refco, reportedly because Blair was a good client, allowed Rodham 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. Bone denied any wrongdoing in conjunction with Rodham's trading and said he did not recall ever dealing with Rodham personally.
As it happened, during the period of Rodham's trading, Refco was under investigation by the Mercantile Exchange for systematic violations of its margin trading rules and reporting requirements regarding cattle trading. 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).
After the Rodham trading matter became public, Leo Melamed, a former chairman of the Mercantile Exchange, was brought in by request of the White House to review the trading records. On April 11, 1994, he said that the whole matter was "a tempest in a teapot" and that while her brokers had not required her to provide typical margin cushions, she had not knowingly benefited. On May 26, 1994, after the new records concerning the larger Blair trades came to light, he said "I have no reason to change my original assessment. Mrs. Clinton violated no rules in the course of her transactions." But as to the question of whether she had been allocated profits from larger block trades, he said of the new accounting, "It doesn't suggest that there was allocation, and it doesn't prove there wasn't," an assessment of uncertainty shared by Merton Miller, a Nobel Prize-winning economist at the University of Chicago Graduate School of Business.
Hillary Clinton's defenders, including White House Counsel Lloyd Cutler, maintained throughout that she had made her own decisions, that her own money was constantly at risk, and that she made both winning and losing trades throughout the ten months. Regarding suggestions that Blair had favored Clinton so that Tyson Foods could gain influence with Governor Clinton, they pointed out that CEO Don Tyson had in 1980 endorsed Frank D. White, Clinton's opponent in his reelection bid.
Clinton's defenders also stressed that Blair and others stayed in the market longer than Rodham and lost a good amount of what they had earlier made later that summer and fall, showing that the risk was real. Indeed, some reports had Blair losing $15 million and Bone was reported as bankrupt.
- Claudia Rosett, "Hillary's Bull Market", The Wall Street Journal, October 26, 2000. Accessed July 14, 2007.
- Mark Hosenball, Rich Thomas, and Eleanor Clift, "Hillary's Adventures In Cattle Futures Land", Newsweek, April 11, 1994. Accessed March 2, 2009.
- Clinton, Hillary Rodham (2003). Living History. Simon & Schuster. ISBN 0-7432-2224-5. pp. 86–87.
- Bernstein, Carl (2007). A Woman in Charge: The Life of Hillary Rodham Clinton. Knopf. ISBN 0-375-40766-9. pp. 134–138.
- Gerth, Jeff; Don Van Natta, Jr. (2007). Her Way: The Hopes and Ambitions of Hillary Rodham Clinton. New York: Little, Brown and Company. ISBN 0-316-01742-6., pp. 73–76.
- Jeff Gerth, " Top Arkansas Lawyer Helped Hillary Clinton Turn Big Profit", The New York Times, March 18, 1994. Accessed July 14, 2007.
- Chozick, Amy (2016-08-11). "Stress Over Family Finances Propelled Hillary Clinton Into Corporate World". The New York Times. Retrieved 2016-08-13.
- Baum, Caroline; Niederhoffer, Victor (20 February 1995). "Herd Instincts". National Review. Retrieved 30 September 2016.
- Bill Montague; Kevin Johnson, "Commodities trading saga: Pieces still missing", USA Today, April 25, 1994. Accessed December 14, 2012.
- 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.
- Bob Herbert, "The Circus That Is Whitewater", The New York Times, March 20, 1994. Accessed April 6, 2008.
- Gwen Ifill, "Hillary Clinton Takes Questions on Whitewater", The New York Times, April 23, 1994. Accessed July 15, 2007.
- Michael Duffy, "Open and Unflappable", Time, May 2, 1994. Accessed July 16, 2007.
- Chancellor, Edward (1999). Devil Take The Hindmost: A History Of Financial Speculation. Farrar Straus & Giroux. pp. 251–252.
- Charles R. Babcock, "Hillary Clinton Futures Trades Detailed", The Washington Post, May 27, 1994. Accessed July 14, 2007.
- Stephen Engelberg, "New Records Outline Favor for Hillary Clinton on Trades", The New York Times, May 27, 1994. Accessed July 15, 2007.
- " No One Bribed Anyone in Clinton Trading", Lloyd Cutler (letter to the editor), The New York Times, June 3, 1994. Accessed July 15, 2007.
- Kelly, Michael (31 July 1994). "The President's Past". The New York Times. Retrieved 30 September 2016.
- Roger Morris, Partners in Power: The Clintons and Their America. Henry Holt, 1996. ISBN 0-8050-2804-8, p. 233.