Nine and a half months into 2020, this “year” has felt like a long, miserable, supremely fucked-up joke of a decade. But if you’re able to, try and think back to February. The Trump administration was a month into telling the public that the coronavirus was nothing to worry about whatsoever, and that Dr. Donald Trump had it covered. “We pretty much shut it down coming in from China,” the president toldSean Hannity on February 2. “The virus is going to be—it’s going to be fine,” he claimedon February 10. “By April, you know in theory when it gets a little warmer, it miraculously goes away,” he said the same day. “The Coronavirus is very much under control in the USA…. Stock Market starting to look very good to me,” he tweeted February 24, offering both public health and financial advice.
Of course, as we’ve known for some time now, not only were the president’s claims extremely false, he knew they were false and lied anyway. “This will be the biggest national security threat you face in your presidency…This is going to be the roughest thing you face,” his national security adviser told him, according to Bob Woodward, on January 28. “This is deadly stuff,” Trump himself told Woodwardon February 7. And while he continued to lie about the pandemic that would go on to kill more than 217,000 people in the U.S. and wreak havoc on the economy—or in his own words “play it down”— new reporting reveals that his administration at least had the good sense to warn its rich buddies about how bad things were really going to get.
The New York Times reports that on February 24, hours before Trump declared on Twitter that the coronavirus was of zero concern and that the stock market was looking hot, senior members of his economic team told wealthy and powerful members who sat on the board of the conservative Hoover Institution that things were much more precarious than the president had claimed. Tomas J. Philipson, for instance, told the group that he couldn’t estimate how badly the virus would affect the American economy, the implication reportedly being that “an outbreak could prove worse than…[the] Trump administration advisers were signaling in public at the time.”
One day later, National Economic Council director Larry Kudlow went on CNBC to insist that the virus was contained in the U.S. “pretty close to airtight,” and then, hours later, told the Hoover board that while it was contained “to date…we just don’t know.” A hedge fund consultant who sat in on both these meetings, William Callanan, drafted a memo describing the sessions, in which he wrote that nearly every government official he heard from, described the virus as “a point of concern, totally unprovoked.” In an email on February 25 to hedge fund manager David Tepper, Callanan further reported that Secretary of State Mike Pompeo and economists from the Council of Economic Advisers had also expressed “a greater degree of alarm about the coronavirus than the administration was saying publicly.” (Philipson confirmed that he had conveyed such a message, as did Kudlow, who claimed “there was never any intent on my part to misinform.”)
The consultant’s assessment quickly spread through parts of the investment world. U.S. stocks were already spiraling because of a warning from a federal public health official that the virus was likely to spread, but traders spotted the immediate significance: The president’s aides appeared to be giving wealthy party donors an early warning of a potentially impactful contagion at a time when Mr. Trump was publicly insisting that the threat was nonexistent.
Interviews with eight people who either received copies of the memo or were briefed on aspects of it as it spread among investors in New York and elsewhere provide a glimpse of how elite traders had access to information from the administration that helped them gain financial advantage during a chaotic three days when global markets were teetering.
…the memo’s overarching message—that a devastating virus outbreak in the United States was increasingly likely to occur, and that government officials were more aware of the threat than they were letting on publicly—proved accurate. To many of the investors who received or heard about the memo, it was the first significant sign of skepticism among Trump administration officials about their ability to contain the virus. It also provided a hint of the fallout that was to come, said one major investor who was briefed on it: the upending of daily life for the entire country. “Short everything,” was the reaction of the investor, using the Wall Street term for betting on the idea that the stock prices of companies would soon fall.
That investor, and another who was briefed on the meetings with the Hoover board, told the Times that the memo “informed their trading that week, in one case adding to existing short positions in a way that amplified his profits.” (Others who read or heard about it proceeded to stock up “on toilet paper and other household essentials.”) One day after the meeting with Kudlow, as the memo spread through various trading firms, U.S. stock markets dropped nearly 300 points from their high the previous week.
Which some might think sounds like insider trading, but according to legal experts who spoke to the Times, doesn’t violate securities laws. No, in this case, it’s simply a matter of the Trump administration being comprised of professional sleazebags who think the public doesn’t need to know about a deadly virus but that its rich buddies should be aware so they can protect their portfolios.
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