The Secret Behind Romney’s Magical IRA

[Qtec]

link (http://www.bloomberg.com/news/2012-07-15/the-secret-behind-romney-s-magical-ira.html)


<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">The most mysterious of the unexplained mysteries about Mitt Romney’s considerable wealth is how he was able to amass between $21 million and $102 million in his individual retirement account during the 15 years he was at Bain Capital LLC.

How did he do it, given the relatively small amounts that the law permits to be contributed to such a plan on an annual basis? Romney has not explained this conundrum, and seeing as he wants to become president, he would be wise to start talking -- if for no other reason than there might be many Americans who would like to emulate what he did.


This great mystery seems to have troubled others, as well. On July 3, Current TV host Jennifer Granholm, a former Democratic governor of Michigan, invited Edward Kleinbard, a law professor at the University of Southern California, on her show to discuss how Romney could have accomplished this remarkable feat. There were “only two possibilities,” Kleinbard told Granholm. Either “from a little acorn, a mighty oak grew very, very quickly, extraordinarily so,” Kleinbard explained, causing Granholm to interject, “What little acorn could grow to be $101 million? I want to get some of that acorn!”

The other possibility, Kleinbard suggested, was not dissimilar to what Maremont theorized: that Romney contributed limited-partnership interests in Bain’s buyouts to his IRA. <span style='font-size: 14pt'>What was “quite troubling” to Kleinbard is that he suspected Romney may have contributed these interests to his IRA at a fraction of their market value - <u>“pennies on the dollar”</u> -- and well below what he might have charged you or me. When the buyouts became successful, Kleinbard proposed, the pennies on the dollar were suddenly worth real dollars.</span>

“What’s very frustrating to me about all this is that we can only talk in abstractions and generalities because, again, of <span style='font-size: 20pt'>the lack of disclosure</span>,” Kleinbard said. </div></div>

Tricky Mitt.

Q

[LWW]

I'm going to suggest you read your own link.

That being said ... were you upset when Hillary Diane Rodham Clinton turned $100 into $100,000 in 30 days?

We both know you weren't ... the follow up question is why not?

[Soflasnapper]

Well, something like that happened with her, but you got the numbers wrong, and the time it took wrong.

As I recall it, not looking it up, it was $1,000 to $100,000 over about 6 months. That was impossible if done on the level already before your exaggerated memory of saying it was started with 10% of the money and took 1/3rd of the time.

That being said... were you upset when SHE did this?

We both know you were... the follow up question is why this case involving 1,000 times the money doesn't?

Actually, though, there are differences in the cases, as there are also similarities.

Whatever happened with Mitt's case, he knew all about it, and set the IRA holdings in motion (when he probably put artificially underpriced or zero priced assets there). In HRC's case, she gave James Blair trading authority, he did it all, and she wasn't knowledgeable about the techniques.

On the other hand, how James Blair accomplished this impossible return under normal order was probably a crime (by him, not by her). How Romney's holdings grew so large is probably technically entirely legal. So there's that.

[LWW]

The difference is Hilary made a batch of even money bet on futures ... and never lost, even though her broker made an exact same amount of bets on the same days ad never won.

Te odds of that happening for real are essentially nil ... but it's easy for a broker to hide a bribe in ths manner, you just have to ay twice.

Now ... had either of yu read the linked article, the answers you seek are contained therein.

[LWW]

Since I know neither of you ill do it on your own:

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">So how did Romney do it? Of course, we don’t know, but there have been several theories propagated to fill the considerable gap in knowledge left by Romney’s ongoing silence. Mark Maremont, a Pulitzer Prize-winning reporter at the Wall Street Journal (and a former classmate of mine at journalism school), has suggested that -- perfectly legally -- Romney contributed to his IRA using the low-basis, low-value stock he received as a partner at Bain Capital in the various buyouts the firm did while Romney was there.

For instance, after Bain bought Domino’s Pizza in 1998 for $1.1 billion, Bain partners (and the limited partners who went in on the deal) were able to get a slice of the equity of the company. Given the high leverage put into the pizza maker to finance its purchase, it’s a safe bet there was very little equity value at the start, meaning that shares with little book value could be contributed to the IRA.

If Romney put $30,000 worth of Domino’s Pizza stock into his 1998 SEP-IRA, it is conceivable that it would be worth many times that amount when Domino’s went public in 2004. If Romney did the same thing over and over again during the 15 years he was at Bain doing leveraged buyouts, it is conceivable that the $450,000 would increase greatly in value. </div></div>

[Soflasnapper]

The difference is Hilary made a batch of even money bet on futures ... and never lost, even though her broker made an exact same amount of bets on the same days ad never won.

I agree generally, although again, dispute your particulars.

It's not an even money bet (in the end) when you use margin borrowing for your position. For instance, given a 10% payment to control the value of the contract(s) (the rest borrowed), if the value of the contracts goes up 10%, you made 100% of what you had invested (minus the carrying charge for the interest of the margin).

But you are right. What was shown of the trading in HRC's account was repeatedly purchases at the low of the day, and sales at the high of the day, over and over again, which is simply impossible. The broker most likely was doing what he eventually was found guilty of in court (but for different trades, later), trading both sides of trades and then allocating after the fact the winning trades to the benefit of HRC's account, and screwing some other trading accounts with the losing bets.

As for the Romney side of this, that's been obvious also (at least once that explanation was made and I saw it), as ONE POSSIBLE EXPLANATION. That's far from established, as to what happened, but it is one possibility, yes. Legal? Yes, if that's what happened. Which we cannot tell at this time.

[LWW]

I would agree. With all of that, had tat been the way the thread started.

Instead, the OP cut and pasted portionsof the article for the sole purpose of making a one sided argument.

But ... you already knew that.