[HN Gopher] Many believe it's time to do away with lawmakers mak...
___________________________________________________________________
Many believe it's time to do away with lawmakers making stock
trades
Author : DocFeind
Score : 478 points
Date : 2021-09-24 13:33 UTC (9 hours ago)
(HTM) web link (www.npr.org)
(TXT) w3m dump (www.npr.org)
| mylons wrote:
| this gets brought up every few years. it's basically click bait
| at this point. the only way we see change on this is if the
| corrupt people who can make millions doing almost nothing vote
| against their own financial interests. there could be riots in
| the streets but they still wouldn't restrict their power.
| chapium wrote:
| In the US at least, the courts can check this power. In theory.
| imglorp wrote:
| How about all branches, judicial, executive, and legislative?
| Emoluments and conflict of interest seem equally harmful in all.
| AlbertCory wrote:
| This is strictly about the headline, not the article. Lawmakers
| should, indeed, be required to put all their holdings into a
| blind trust for the duration of their service, at least.
|
| "Many believe" is the sort of garbage phrase that "journalists"
| and their headline writers use nowadays. _It 's purely a way of
| laundering your personal beliefs._ Who are these "many"? Just the
| friends of the journalist?
| literallyaduck wrote:
| Congress should be sequestered while in office and all financial
| activities frozen. If they want to trade again they can start a
| year after they leave office and get out of sequestration. No
| aids, no spouses, and every moment recorded for the public
| record.
| wayoutthere wrote:
| Great! Pretty sure this is not controversial among the voting
| public.
|
| However, the lawmakers will never vote on a law to ban trading on
| non-public knowledge because this kind of insider trading is
| frequently _the reason they're in politics in the first place_.
| We have long since passed the time where community service drove
| public officials to run; it's all about getting rich. Even the
| few true believers like Bernie Sanders can't help themselves from
| dabbling a bit; and he's basically the exception that proves the
| rule.
| mattwad wrote:
| Source for Bernie Sanders?
| athenot wrote:
| At aa high level, if one is involved in shaping policy which can
| then affect stock prices, it's no different than insider trading.
| It's just that it's not limited to a single company.
| ramblenode wrote:
| Before the STOCK Act passed, Congress outperformed the market by
| 20%, with some senior Republican leaders doing as well as 35%
| [0,1].
|
| Before the pandemic began in the US, 4 US Senators were picking
| up medical stocks after closed-door briefings. Investigations
| were opened by the DOJ, but they were all dropped.
|
| [0]
| https://www.theatlantic.com/ideas/archive/2020/03/congress-i...
|
| [1] https://onlinelibrary.wiley.com/doi/10.1111/fire.12180
| Lammy wrote:
| Not just congresspeople: https://www.wsj.com/articles/bezos-
| other-corporate-executive...
|
| "Top executives at U.S.-traded companies sold a total of
| roughly $9.2 billion in shares of their own companies between
| the start of February and the end of [the second week of March
| 2020]"
| ckardat123 wrote:
| If anyone is interested, I've been building dashboards that
| display trades made by U.S. congressmen and estimate their
| returns over time from their trading while in office.
|
| https://www.quiverquant.com/sources/senatetrading
|
| https://www.quiverquant.com/sources/housetrading
|
| One weakness of the performance visualization is that some of
| the most extreme results are from people who have only made one
| or two trades while in office, as their returns are more
| volatile off of those few transactions.
| nielsbot wrote:
| What's the lag time on congressional trade reporting? Too bad
| it's not fast enough for me to make the same trades. (And
| would it be considered insider trading then?)
| vdalal wrote:
| https://housestockwatcher.com/ &
| https://senatetockwatcher.com/
|
| ref: NPR article
| https://www.npr.org/2021/09/21/1039313011/tiktokers-are-
| trad...
| quickthrowman wrote:
| > and estimate their returns over time from their trading
| while in office.
|
| Sorry, but there is no possible way to do this with any sort
| of precision or accuracy with a 45 day lag time on reporting
| trades.
| nzealand wrote:
| The disclosures include the date the trade was made. The
| only ambiguity is the amount invested.
|
| Also, estimate <> precision or accuracy :)
| Emma_Goldman wrote:
| Very cool. It would be good if you could overlay Congress'
| returns with the returns of the market, or a median
| institutional investor, for comparison. Also, to disaggregate
| investments by asset class, active/passive funds, etc., so we
| can really figure out what's going on. Those things make a
| big difference. I realise this is a passion project though,
| and that's probably too much work.
| nzealand wrote:
| Does it measure performance vs the market?
|
| E.g. If I followed Nancy Pelosi's disclosed trades on the day
| that she disclosed them in accordance with her minimum
| allocations, I would outperform S&P 500 by 7.7% pa?
|
| Btw, I think something is wrong with your calculations for
| Derek Kilmer. The poor chap is trading index funds and
| somehow is performing worse than just about anyone else.
| neom wrote:
| Is there a Congress ETF?
| someonewhocar3s wrote:
| Not even a bad idea!
|
| toppost: money is speech in the US. And it makes little sense
| to just force them to earn less. Preventing corporate ties
| otherwise seems more appeasing.
| [deleted]
| nine_zeros wrote:
| Whoa whoa slow down there, what are we, a free market?
|
| That's only for HNWI and hedge funds.
| dragontamer wrote:
| Free markets do not necessarily mean that everyone has
| equal access to information. We've got market regulations
| so that less sophisticated retail investors have a chance
| against the more sophisticated / secretive groups with more
| money / knowledge / power than us.
|
| A laissez-faire market would encourage secrets as a means
| to protect ones own capital. To force some people to give
| up secrets (ie: regulations against insider trading) is
| itself, a regulation, that already moves us away from truly
| free markets.
|
| Which is a good thing. I think a laissez-faire market is
| naive. There's benefits to free markets, but also
| downsides. We as a society should try to build systems
| where we get the benefits of free markets, but place
| regulations on the behaviors that cause societal harm.
|
| These rules and regulations we as a society follow (and
| ideally enforce) have problems. But the way to fix things
| is to improve the rules so that they're fairer and more
| comprehensive. Maybe some rules are too hard to be enforced
| and should be tossed away (even if in a hypothetical
| perfect world, they'd be net-beneficial... if its too hard
| to implement or enforce, then there's no point in
| practice).
|
| "Insider Trading among Congressmen" is more of the latter
| IMO. We all would like it if Congressmen played by the same
| rules we did. But in practice: how would we even write a
| law that hampers this behavior from Congressmen? Who will
| keep track of which stocks Congressmen are trading, and
| which committees they are a part of?
|
| If we can't enforce the rule, then the rule doesn't exist
| (even if we write down the law into our code or even the
| Constitution, without enforcement, the law is meaningless)
| zo1 wrote:
| One thing we don't alwayd consider is that the free
| market always adjusts. So trading and the stock market
| without insider trading regulations may not look anything
| like what we have now. It may not even exist.
|
| E.g. If I knew it to be trivial to manipulate stocks and
| gain from it using insider knowledge I'd be a lot less
| inclined to participate or put my capital into such a
| machine. For all we know some weird market may form
| around such knowledge.
| imtringued wrote:
| I thought about it for a long time and every time I see
| people talk about a free market they just mean less
| government intervention forgetting that we live in
| nature. Nature leaks into markets and what we get is a
| market of the "strong" until people notice that physical
| power and financial power are not the same and a
| revolution occurs.
| nine_zeros wrote:
| It doesn't have to be laissez-faire.
|
| Laws only have to be applied fairly. In this case,
| congress cannot hide their purchases for months before
| disclosure. They are a representative of the people or
| their state. The people must know immediately about their
| backdoor dealings.
|
| Immediate release will cause some gamification of the
| market. But it will also attract strong monitors on bad
| faith congresspeople.
| dragontamer wrote:
| > Laws only have to be applied fairly.
|
| Any "insider trading" law is about insider disclosure
| __BEFORE__ you purchase and/or sell your stock options.
|
| The idea is: if (Insert CEO here) sells $50-million worth
| of stocks, we give the retail investors a chance to sell
| _BEFORE_ the big guy does. The CEO has to announce _far_
| in advance, so that we have a chance to think "Wait,
| maybe this CEO is full of crap. Maybe I should sell too."
| (or not: maybe the CEO just wants a new party yacht. But
| giving people the information and opportunity to decide
| for themselves is what the insider trading laws are all
| about).
|
| It doesn't matter if Congressmen disclose 1-day or
| 1-month after-the-fact. They've already benefited from
| the insider trade and its too late for the retail
| investor to benefit. Any investor who purchases after-
| the-fact just pumps up the stock price (making the
| Congressmen richer). And on the flip side: the
| Congressmen sells at a higher price than retailers who
| get "in late" to the game.
|
| For insider trading laws to have teeth, we must push for
| disclosure ahead of time. But what stocks "count" as a
| Congressman's insider trade? Maybe any and all stocks
| count.
|
| --------
|
| At which point: our goal should be to push for 3-month
| disclosures from all Congressmen, for all publicly traded
| securities (stocks, commodities, etc. etc.). You see?
| This proposal has teeth. This has practical effect. Ex:
| no Congressman can ever buy, or sell, a security, without
| filing a disclosure at least 3 months ahead of the buy
| and/or sell date.
|
| This "disclose sooner" idea does nothing. You gotta think
| about what you want out of a law before you start writing
| it.
|
| Note: This is also a horribly "non-free" law. We force
| Congressmen to act by different rules than the rest of
| us. That's fine and good. Its an acknowledgement that
| they have more money, knowledge, and power than us. Its
| an acknowledgement that we need to level the playing
| field against them... even if we have to use non-free /
| highly selective laws that "discriminate against
| Congressmen".
| dsr_ wrote:
| "But in practice: how would we even write a law that
| hampers this behavior from Congressmen? Who will keep
| track of which stocks Congressmen are trading, and which
| committees they are a part of?"
|
| That's pretty easy, actually.
|
| Congresscritters are Federal employees. They already fill
| out lots of forms for salary and healthcare and expense
| reimbursement... so you add:
|
| 1. a Form 3 equivalent to register all the interests that
| they hold on day one, with a list of brokerages that they
| have accounts at. An accurate form would be a requirement
| to collect any salary or reimbursement.
|
| 2. an authorization sending copies of all trades to an
| forensic accounting office, perhaps under the auspices of
| the IRS. Again, don't fill this out means not collecting
| your salary.
|
| 3. a warning that all trades while you are a
| Congresscritter must be made with a 10b5-1 plan or be
| pre-emptively considered insider trading
|
| There we go. While we're at it, extend this to all the
| positions appointed by the executive branch and confirmed
| by the Senate.
| CrazyPyroLinux wrote:
| Effectively, yes - it's a combination of "regulatory capture"
| and "campaign contributions"
| kilroy123 wrote:
| No, the problem is the disclosures come out way too late.
| There isn't a way to track and move with the market in real-
| time.
| neom wrote:
| You're right. I'm an idiot, should have considered that.
| sp_nster wrote:
| Good stuff. I'd be interested in sorting that by stock to see
| what stocks they (including their spouses/sig-oth) all are
| purchasing.
| max46 wrote:
| I don't think the stocks liquidations at the beginning of the
| pandemic is a good example of this. shit was hitting the fan
| and cities were closing down before most of the "insider
| trading" happened. If the information they used to make their
| trades was on the front page of every newspaper, it's not
| insider trading.
|
| I think the conflict of interest alone should be enough to ban
| them and their close relatives from trading individual stocks
| CrazyPyroLinux wrote:
| Instead of doing away with stock trades, the better approach
| would be to do away with "lawmakers."
| camjohnson26 wrote:
| Particularly bad violations have been the Fed presidents making
| multimillion dollar trades with personal accounts, and Nancy
| Pelosi's husband apparently directly trading on privileged
| information.
|
| https://www.cnbc.com/2021/09/16/fed-chief-powell-orders-ethi...
|
| https://fortune.com/2021/07/08/house-speaker-nancy-pelosi-hu...
| [deleted]
| tusslewake wrote:
| If it's reasonable to assume that someone like a Fed president
| is aware of the perils of market timing, of information
| asymmetries, of the disadvantage that an individual investor
| has against institutional funds, etc.--is there any plausible
| explanation for his trading individual stocks outside of being
| in possession of some kind of insider information that gives
| him an edge on the market?
|
| Surely he can't just claim that he doesn't know what he's
| doing.
|
| And could a Fed president be in a position to have _legal_
| insider information that gives him an edge on trading
| individual stocks, or is any insider info that he could trade
| on illegal to do so by definition?
| koheripbal wrote:
| Your sources do not say that they traded based upon insider
| info.
|
| In the case of the Fed, they only questioned whether they
| should be allowed to own individual stocks at all.
|
| ....and the selling of tech by NP's husband. That doesn't mean
| he sold because he had specific info that was secret. The
| article does not even make that allegation. Tech has gone up a
| lot - selling some is not unreasonable.
| bastardoperator wrote:
| It's widespread, republicans seem to be doing it more though
|
| https://www.nytimes.com/2020/12/02/us/politics/david-perdue-...
|
| https://www.cnbc.com/2021/01/19/doj-will-not-charge-sen-rich...
|
| https://www.washingtonpost.com/politics/2021/08/11/rand-paul...
|
| https://tulsaworld.com/news/u-s-sen-jim-inhofe-responds-afte...
| leesalminen wrote:
| Bernie Sanders is worth $3 million and has never worked
| outside of politics in his entire life.
|
| Maybe that seems like not a lot to the SV types, but it's
| far, far more than what most people I know have to show for a
| lifetime of actually hard work.
|
| https://finance.yahoo.com/news/rich-bernie-
| sanders-210000864...
| sdfjksbdf wrote:
| It's from selling books. What is your point?
| nzrf wrote:
| Let's say Bernie is saver. He could have easily a massed 3
| million by his age. This if he had started at younger age
| let's say 20. Compounding interest is a pretty powerful
| force over years . Bernie is not quite a young guy and has
| been working his entire life.
|
| 3 million isn't exactly a lot of you live within your means
| and save.
| jakeinspace wrote:
| 1: That's not a real source, it just cites
| celebretynetworth.com. 2: Any particular reason to single
| him out, considering he's one of the oldest and lowest-net-
| worth senators? I'd say $3 million is a fairly
| understandable net worth for an 80 year old who's been in
| congress 30 years, and held public office for 40. His wife
| is also fairly successful.
| magu0 wrote:
| Okay, but what does this have to do with trading stocks on
| inside knowledge?
|
| As far as I've heard, that money is from salary and book
| sales.
| caymanjim wrote:
| Senators get paid pretty well, have great benefits, and
| lots of reimbursed expenses. Sanders is also older than
| dirt and still hasn't retired despite his age. I can't
| believe he's only worth $3 million.
| twobitshifter wrote:
| Of all the senators to look at you pick sanders? Senators
| are paid $174k a year and Sanders wears hand knit mittens.
| This story goes into his wealth.
|
| https://www.politico.com/magazine/story/2019/05/24/bernie-
| sa...
|
| >Bernie Sanders one day left City Hall and found a ticket
| on the windshield of his rusty Volkswagen Dasher. The
| offense: This was the mayor's spot, and, surely, a cop had
| thought, this was not the mayor's car. But it was. It
| matched perfectly with both Sanders' image as a scrappy
| advocate of the little guy and his own shaky financial
| reality. It was the beginning of the 1980s, and he was
| approaching 40, a single father of a not-quite-teenage son,
| renting a sparse second-floor apartment and having a hard
| time keeping up with his bills. "Not only," he wrote on his
| yellow, coffee-splotched legal pads kept in archives at the
| University of Vermont, "do I not pay bills every
| month--'What, every month?'--I am unable to ..." His
| scribbles in barely legible cursive in the margins read
| like reminders and afterthoughts: "gas," "light," "water."
|
| He was, said Bruce Seifer, a friend of Sanders, an economic
| aide in his administration and one of many people who know
| him who told me this, "frugal." Seifer paused and
| considered the right way to put it. "That's a nice way of
| saying he's a cheap son of a bitch."
| DavidPeiffer wrote:
| He's also 80 and still working. $310/month invested over 60
| years is about $3 million at 7% annual growth.
|
| Or assume he had nothing until being elected to the senate
| in 2007, then started putting 60k/year into an S&P 500
| index fund.
|
| That also gets you to about $3 million.
| mgkimsal wrote:
| I mostly take your point(s), and really... $3m is not a
| large amount for someone who's worked and been moderately
| diligent about finances. You don't need to have insider
| knowledge or bend the rules to have saved $3m over 60
| years. BUT... $310/month back in 1950 _was_ a lot of
| 'savable' income for most working people. Most
| manufacturing workers in mid 1950s were earning under
| $2.50/hr - even assuming some overtime, monthly earning
| might be $500.
| DavidPeiffer wrote:
| Totally understand, and I was doing a bit of hand waving
| in the original comment. 7% is around the inflation
| adjusted, long term S&P 500 return, meaning $310/month
| would need to be adjusted for inflation over that
| timeframe.
|
| Converting 2020 dollars (because times are weird right
| now) to 1960, it comes to about $35.50/month. On
| $500/month income, that's a 7% savings rate.
| mgkimsal wrote:
| AHA - makes far more sense now. That pesky old 'adjusted
| for inflation'.
| andrew_ wrote:
| Is there a word for ignorance based on tribalism? Legitimate
| question; I'd like to add it to my vocabulary, and it would
| perfectly describe the parent comment.
| rajin444 wrote:
| Politics.
| spaetzleesser wrote:
| Especially American politics. It seems to be a very
| american phenomenon for voters to find bad things only on
| the "other" side and totally ignore the same thing on
| "their" side.
| camjohnson26 wrote:
| I'm not sure if your comment was meant to be ironic but
| it is.
| camjohnson26 wrote:
| I wouldn't make it a Republican/Democrat thing since that's
| guaranteed to start a flame war, Pelosi's husband is the
| highest profile culprit but as you said corruption is
| widespread.
| lastofthemojito wrote:
| Pelosi's husband isn't a lawmaker himself though ... which
| makes me wonder, if there was a ban on lawmakers (and their
| spouses) actively trading, I wonder if we'd see divorces of
| convenience. "Oh sure, my ex-husband (and now boyfriend)
| trades stocks, but that's none of the public's business".
| Gotta think people who have an edge that can help them get
| rich(er) will do anything within the letter of the law to
| keep that edge, rather than you know, comply with the
| spirit of the law.
| Consultant32452 wrote:
| Courts are pretty good at not letting people get away
| with these sorts of "loopholes." Judges tend not to
| interpret the law like an autistic person.
| camjohnson26 wrote:
| My company got acquired by a big 4 accounting firm and
| the rules for independence are pretty strict. Some people
| left after the acquisition because they were living with
| a partner, unmarried, who would be required to sell
| stocks under the independence rules.
| tooltalk wrote:
| Not sure why Rand Paul is in your list, or how it
| demonstrates your point that repubs are doing it more. IIRC
| Paul's problem was that the disclosure filing was late, not
| that he, or his wife, abused his position to make that one
| ~$10K trade for Gilead, the maker of Remdesivir, the only
| stock trade during his 10-years in the Senate.
| 8b16380d wrote:
| They are just reported on more. This problem is party
| agnostic.
| javier10e6 wrote:
| It might read unrelated yet, term limits is the only concrete way
| to limit the damage of a corrupt lawmaker.
| naveen99 wrote:
| If I were supreme, I'd make all publicly traded trades public.
| Publish the identities of the trading counterparties along with
| the volume and price of the trade. I mean these markets are
| supposed to be public. You get better price discovery and less
| stealing from insider information... to know your counterparty is
| like rule number 1 in any business. Somehow in the ambiguously
| public, public markets, it's private.
| themanmaran wrote:
| Outright banning trades will only obscure congressional trading
| (shell corps, friends/family, etc.)
|
| I would prefer a public registry listing all congressional
| trades. I know this is legally available data, but very difficult
| to access.
| flatiron wrote:
| They should be allowed to go in something like an S&P 500 index
| fund. But personally I have blackout dates trading my own
| company stock why don't they have any restrictions?
| throwawayboise wrote:
| I'd go further and say they should be forced to put all
| assets other than their primary home into a blind trust for
| the duration of their time in office and 12 months
| afterwards.
|
| Might reduce people from making a career out of being a
| politician, but that would be a good thing. Too many cases of
| middle-class representatives and senators leaving office
| decades later as multi-millionaires.
|
| Politics should be something people do out of a sense of
| service, not to become wealthy.
| nearbuy wrote:
| Investing in an index fund might even incentivize them to
| ensure the economy as a whole does well.
| dtech wrote:
| Incentivizing that large public companies do well, not
| quite the same.
| cpeterso wrote:
| Then make it a total market index fund with small, mid-
| size, and large companies.
| dmckeon wrote:
| Make it 10 to 20 blind funds, each with one very broad
| theoretical goal: "if the country does well, the fund
| does well" and with different managers, management
| styles, investment strategies. The funds do not disclose
| their specific holdings publicly, but do report them to
| regulators.
|
| Elected officials transfer all their equity assets into
| one or more funds before taking office and get shares in
| the fund.
|
| When they leave office, they can receive the current cash
| value of their shares, without any capital gains tax, or
| can get their original contributions back, if the fund
| still holds them.
|
| If the country did well, the fund did well, and so do
| those who were elected. Optionally, make this available
| to all government employees at the federal, state, and
| local levels, and generally to individual investors.
| tehjoker wrote:
| The family owned restaurant down the block is definitely
| listed on the stock exchange.
| kuratkull wrote:
| Equally weighted ETFs exist. Those would give a lot more
| exposure to smaller companies.
| darkwizard42 wrote:
| To be fair, it might incentivize them to prioritize overall
| stock growth over the more pressing issues of the populace.
| Mixed bag on that one I think
| gruez wrote:
| > Outright banning trades will only obscure congressional
| trading (shell corps, friends/family, etc.)
|
| >I would prefer a public registry listing all congressional
| trades
|
| Wouldn't your proposal obscure congressional trading as well,
| because they want to preserve their alpha by not publishing
| their trades?
| camjohnson26 wrote:
| The argument can be made that insider trading isn't actually
| a bad thing as long as it's legal, precisely because allowing
| that information to trickle into the markets destroys alpha.
| Anyone who thinks hedge funds aren't constantly trading on
| insider information has their head in the sand.
|
| Of course then you have problems where people with private
| information are incentivized to leak that information, which
| is bad for national security and other areas where secrecy is
| needed, but we already have laws protecting that information
| without adding insider trading to them.
|
| It would need to be studied and to my knowledge no one has
| done that work yet, but I haven't seen anyone establish why
| insider trading is a net bad for society, other than
| intuitive reasoning.
| pirate787 wrote:
| Germany has more permissive insider trading laws, and
| public participation in German capital markets is much
| lower. Insider trading laws inspire confidence in the
| market for non-insiders, the average public.
| sentinel wrote:
| Permissive insider trading laws and public participation
| in German capital markets may not necessarily be
| correlated. There can be other reasons why Germans choose
| not to participate.
|
| But, I do agree that (at least) an attempt to make
| insider trades more transparent does help inspires
| confidence.
| arc-in-space wrote:
| Indeed. The prevailing mood in this thread is a sort of
| mutual understanding that insider trading is obviously bad,
| and the only point worth debating is how to regulate it in
| this particular instance. Instead, I feel like we should
| back up a couple steps and seriously investigate the
| assumption that insider trading is at all detrimental.
|
| I fear we're still deep in the "somebody, somewhere, might
| be making a profit" bog.
| nv-vn wrote:
| Well they only publish trades ~30 days later. There's no real
| chance of front-running a politician and for all you know
| they could've closed their position before the 30 day period
| ended. Plus, if people follow them into the trade (i.e.
| people buy because Pelosi bought) that only moves the price
| in the politician's favor. It's not like politicians are
| running crazy strategies that you can figure out from their
| trades, so I can't really imagine it creating any incentive
| to hide trades
| HWR_14 wrote:
| Once their trades are done, publishing them should only
| increase their alpha. I mean, Buffet's purchases can move the
| price before he's done buying stock, but congresspeople don't
| move that much cash.
| koheripbal wrote:
| No, it would be the opposite. If people think they have
| access to privileged information then they will follow their
| trades, making them profitable even if they are bad trades.
|
| First movers always win.
| user3939382 wrote:
| We already have a regulatory framework for managing those
| issues that was built to deal with insider trading.
| edgyquant wrote:
| For obvious reasons we can't allow the executive to persecute
| the legislature with something as difficult to prove as
| insider trading. It could be used by a tyrant to push through
| legislation in theory.
| strangemonad wrote:
| It should follow similar rules to other professions with
| privileged information like most accountants need to follow
| whywhywhywhy wrote:
| I'm completely fine with politicians being paid significantly
| more if them, their partners and their relatives faced serious
| prison time is they did the sort of insider trading that is
| considered completely normal and weirdly they're allowed to do
| but it's illegal if the lowly plebs do it.
|
| End of the day these people are paid very little on paper for the
| amount of pressure and responsibility yet if you follow their
| finances they're all building fortunes. Same should apply to
| funneling money into charities/businesses/"programs" where their
| relatives are on the boards.
|
| They're in such a privileged position I don't consider any of
| this unreasonable.
| realce wrote:
| Here here! I think we need to deeply reexamine how much we pay
| officials. Senators/Governors should probably get triple their
| current pay with severe penalties for any financial fraud.
|
| This was one of the better Andrew Yang points too. Reps have
| very little financial incentive to do the "right thing" and we
| could help them realign that incentive by just paying them
| more.
| logicchains wrote:
| > Here here! I think we need to deeply reexamine how much we
| pay officials. Senators/Governors should probably get triple
| their current pay with severe penalties for any financial
| fraud.
|
| Singapore is an example of why this doesn't work. It pays the
| prime minister $5 million/year, in theory to prevent
| corruption. However he got around this by making his wife CEO
| of Temasek, Singapore's national investment company which
| everybody is mandated to invest in via the central provident
| fund. And it's all perfectly on the books and legal, because
| the PM creates the law, in spite of the fact that in any
| other context it'd be considered corruption.
| pirate787 wrote:
| On the other hand, Singapore judges are well paid and their
| courts are considered among the most honest in the world.
| InitialLastName wrote:
| I don't know that Singapore (effectively a single-party
| state whose PM has dictatorship levels of power) is the
| best example of how this works in a republic (or sub-
| republic) with separated powers.
| yunohn wrote:
| Every major democracy is effectively a two party system.
| Further, both parties are usually quite corrupt, despite
| claiming to be the opposite of the other.
| InitialLastName wrote:
| Even granted that, in a (n>1)-party system there is the
| capacity for electoral repercussions for individuals who
| demonstrate extraordinary corruption (as in the situation
| we are discussing here). In a single-party unitary
| system, there isn't even that possibility.
| b3morales wrote:
| U.S. Reps and Senators have an annual salary of around
| $180,000*, which is in the order of twice the national median
| income. Why do you think they need to be paid more?
|
| ---
|
| *They also have a baked-in-statute annual cost of living
| adjustment, which is more than we can say for the vast majority
| of people in the country. Though they have voted not to take it
| for the last decade. (If they had, I believe the current salary
| would be upwards of $200K.)
| sheepybloke wrote:
| While this is true, I'm sure there are a lot of costs that
| eat that up pretty quickly. For example, you have to
| essentially have two places of residence, one in your
| constituency and one in DC. There are costs for family,
| travel, and other expenses that are personal and can't (or
| shouldn't) be charge through the government. I don't fully
| understand what they can and can't charge, but that gets
| chewed up pretty quickly if you break it down.
| LaMarseillaise wrote:
| The average compensation for a member of the board of
| directors at an S&P 500 company is ~$300,000/year. Goldman
| Sachs pays ~$600,000/year. Senators and Representatives are
| paid $174,000/year.
|
| I consider decision-making for the United States far more
| important than that of any one company in the S&P 500.
| Therefore, to be competitive, members of Congress should be
| paid at least twice what they are paid now.
|
| Source: https://www.reuters.com/article/us-compensation-
| directors-in...
| bradlys wrote:
| Maybe we should be considering the other types of positions
| they could've been entering. Consider the backgrounds of many
| of these people - they're not high school graduates.
| s1artibartfast wrote:
| >U.S. Reps and Senators have an annual salary of around
| $180,000*, which is in the order of twice the national median
| income. Why do you think they need to be paid more?
|
| This is less than a fresh college grad working at FAANG or
| Big Law.
|
| Google starts around 190 [1], and big law starts at 205k [2]
|
| I think this comes down to what incentives we want in place.
| Do we only want smart people who are willing to sacrifice
| income for public service. Maybe that is the case and this is
| irrelevant.
|
| https://www.levels.fyi/?compare=Google,Facebook,Microsoft&tr.
| ..
|
| https://abovethelaw.com/2021/06/paul-weiss-raise-2021/
| pirate787 wrote:
| Actually what you get are rich people who don't need the
| low salary.
| kristjansson wrote:
| Conversely, why does it make sense that the people we ask to
| make decisions governing the disposition of literally
| trillions of dollars get paid as much as a 24 year old
| starting at Sidley?
| dragonwriter wrote:
| > U.S. Reps and Senators have an annual salary of $180,000
|
| $174,000, except for the Speaker of the House ($223,500) and
| the President Pro Tem of the Senate and the Majority and
| Minority leaders in both houses (all $193,400).
|
| > which is in the order of twice the national median income.
|
| Its almost 5 times the median personal income ($36K), and
| almost 3 times the median household income ($62K).
| b3morales wrote:
| Thanks, I guess I was misremembering the household income
| as being in the 70s.
| BryanBeshore wrote:
| The Nancy Pelosi family office is one investment vehicle I'd like
| to invest in.
| azemetre wrote:
| Just buy ITM leaps, it's what her husband typically does (leaps
| in Tesla, Disney, Roblox last time I looked).
| whatever1 wrote:
| If we did not force every single wannabe pensioner to play in the
| stock market casino, we would not care about the players count
| cards or have bribed the croupier.
|
| But here we are. In a casino. Us the dumb speculators against the
| skilled players.
| JasonFruit wrote:
| I'd be interested to know how often Congressional stock trades
| have been used to reason about classified information, _i.e._ a
| number of senators invest in a certain stock, implying that a
| suspected but classified decision went a certain way.
| [deleted]
| kchoudhu wrote:
| Just define a small universe of allowable ETFs and options on
| those ETFs and be done with it.
|
| This is not hard.
| jedberg wrote:
| When an insider wants to sell stock, they are required to file a
| form announcing their intentions ahead of time, giving the market
| a chance to front-run them and/or react to their sales.
|
| Since Congresspeople are the ultimate insiders, they should be
| required to file the same forms, so that the American public can
| analyze and front-run them.
|
| Not just Congresspeople, but anyone who works in the Government
| with access to secret information, especially secret financial
| reports.
| _wldu wrote:
| We should also do away with the steak dinners, golf trips and
| other 'perks' that lobbyists/vendors give them in exchange for
| votes.
| koheripbal wrote:
| So meetings can not take place over a meal? ...or are you
| specifically saying they can only order certain dishes?
|
| Maybe we should force all meetings with politicians to take
| place on the floor of a mcdonalds. No chairs - that would be
| too fancy.
| _wldu wrote:
| Right. And no 'working' conferences on tropical island
| resorts with 5,000 dollar per night rooms.
| 34679 wrote:
| Have you never split a check before?
| intrepidhero wrote:
| Rank and file civil servants have very strict rules around
| what they can and cannot accept from a vendor. Same for
| investing actually, the rules around who can in invest in
| what depend on their decision making responsibilities. I'm
| baffled why we don't hold elected officials to the same
| standards.
| cameronhowe wrote:
| Of courses they can, you just have to pay for your own meal.
|
| What are you trying to achieve with your sarcasm?
|
| If you have a job you can probably have a look at your ethics
| or anti corruption guidelines for a good idea of what is
| appropriate.
| Kranar wrote:
| It's already illegal for lobbyists to pay for dinners or
| meals of any kind, including at a McDonald's.
| [deleted]
| andrewla wrote:
| You are under the impression, I think, that this is something
| that happens. It does not -- this is already illegal (all the
| things you mentioned) and against ethics rules in both houses.
|
| Lobbyists, for the most part, wield power not because of the
| money they give to politicians, but because of the votes that
| they implicitly command from the constituents on behalf of whom
| they are operating. They also command considerable power
| because they have research organizations that are better funded
| than congressional staff allocations for doing things like
| authoring bills.
|
| Way more fishy is the revolving door when politicians leave
| office; that is done openly and without shame. Somewhat fishy
| are implicit bribes (like buying 1000s of copies of a
| politician's book), and sometimes preferential terms on loans,
| or employing family members (or buying their art for ridiculous
| prices).
|
| But lobbyists and vendors are already very tightly locked down
| -- the things you are talking about simply do not exist;
| politicians and special interest groups have found better ways
| of buying votes.
| ArchStanton wrote:
| I have no problem with lawmakers making stock trades, but you can
| certainly argue that it is immediately made public. To be fair,
| there are probably edge conditions where a congressman has direct
| control over the financial realities of a publicly related
| company.
|
| I think the more heinous cases are lawmakers becoming lobbyists
| and (worse) lawmakers making huge bucks on public speaking which
| is a very thinly veiled bit of influence peddling. Believe me,
| the Clintons didn't get paid $153M to give short speeches.
| (https://www.cnn.com/2016/02/05/politics/hillary-clinton-bill...
| )
|
| I suppose when you get down to it, as government becomes more
| powerful it becomes more gameable.
| bencollier49 wrote:
| Came here to say the same thing. Trades by lawmakers should be
| instantaneously public.
| 93po wrote:
| They'd just use shell corporations or friends/family in that
| case. The only people who would still trade under their name
| have nothing to hide to begin with and aren't the problem
| we're trying to solve.
| bjourne wrote:
| When discussing doping in sports people are generally receptive
| to the following argument: Athletes will do everything they can
| to dope because the benefits far outweighs the drawbacks. It is
| probable that many of the world's top athletes are doped.
|
| However, when discussing financial trading people are generally
| not receptive to the following argument: Stock traders will do
| everything they can to exploit inside information because the
| benefits far outweighs the drawbacks. It is probable that those
| who consistently outperform indexes exploit inside information.
|
| Why the discrepancy? Do people believe that successful stock
| traders in general are more honest and law-abiding than top
| athletes?
| t-3 wrote:
| > Why the discrepancy? Do people believe that successful stock
| traders in general are more honest and law-abiding than top
| athletes?
|
| It's probably more to due with your audience than "people in
| general". The type of people who can/will discuss financial
| markets tend to be invested in financial markets, and thus _do
| not want to understand_. If you have your sense of self-worth
| (in more ways than one), tied up in the numbers in your
| brokerage account, would you readily accept the idea that your
| heros and "investment mentors" are cheats and liars?
|
| How many amateur athletes would believe that professionals are
| all doping relative the broader population that is not so
| invested in sports?
| s1artibartfast wrote:
| My understanding is that doping in sports is largely a solved
| problem at this point. I believe I have to submit biological
| samples witch are preserved indefinitely. Provides a
| significant barrier because future Technologies 10 allow
| retrospective analysis. Sure there are tons of athletes that
| modify and enhance their performance up to the Limit of
| acceptability, but I think there are the Wild West of doping is
| a thing of the past.
| kristjansson wrote:
| Of all the ways for a congressperson to transform her access and
| power into personal wealth, trading on inside information is
| close to socially optimal. It's basically victimless (unlike
| graft), doesn't necessarily[1] distort incentives toward good
| policy or law (unlike accepting bribes), and doesn't impose a
| direct cost on taxpayers (like increasing salaries).
|
| If we can't foreclose all of the avenues from power and access to
| wealth, we should let them have the least harmful one and clamp
| down on the others. Hell, we should give them a million on margin
| and at the start of their term.
|
| Note that the simple solution of 'less venal congresspeople' is
| outside feasible region.
|
| [1] obviously concentrated positions could distort policy
| choices, but they could be prevented from holding more than x% in
| one name for more than y quarters of disclosure.
| Pxtl wrote:
| Honestly, pay them more. In every major country, if they're
| running orgs that have multi-hundred-billion-dollar budgets per
| year, and you have a few hundred of these people, you can pay
| them well-enough that sneaking around isn't really profitable.
|
| It would not be unreasonable to allocate 0.1% of your budget to
| compensating the people who control the budget, in exchange for
| them abandoning their conflict-of-interest positions.
| jakelazaroff wrote:
| Why would they not just do both, though?
| koheripbal wrote:
| Because there's a diminishing return to collecting more and
| more money.
|
| Believe it or not, most rich people stop trying so hard once
| they hit a certain level.
| barbazoo wrote:
| I'm not sure their greed can ever be satisfied.
|
| How about electing people with a functioning moral compass
| instead of these muppets clearly only looking out for
| themselves. Oh wait, that's not possible, then you'd have to
| vote "for the other side" every now and then.
| njx wrote:
| This is it. Greed has no boundaries!
|
| ++ "electing people with a functioning moral compass"
| atlgator wrote:
| Unfortunately they get around the laws by having their spouse or
| financial advisor manage the portfolio.
| bern4444 wrote:
| Trading activity should be limited for federal employees at that
| level in a similar manner that trading is limited for bank
| employees and their families. They should be allowed to trade
| index funds, etfs, mutual funds etc, but perhaps not individual
| stocks.
|
| Or perhaps there should be a bi-annual or quarterly trading
| period where they're allowed to trade individual stocks.
|
| Should they be allowed to also trade derivatives (Options,
| futures etc)? I think so but with similar restrictions.
|
| Perhaps also they should get a raise. Senators and house members
| make ~175,000. Having to pay for two houses/apartments. It seems
| a bit low for their relative importance. Perhaps a higher salary
| would mean they rely less on Wall St too
| wanderindev wrote:
| Congressional representatives should 100% be held bare minimum
| to the standard that bank employees are if not more.
|
| As per raises, they haven't received one since 2009 and I think
| it'd definitely make sense to peg that to inflation.
|
| In general though, they're securing a pension via this job
| which even though it's not their full salary it will set them
| up for retirement better than the average investing would.
| dragonwriter wrote:
| > As per raises, they haven't received one since 2009 and I
| think it'd definitely make sense to peg that to inflation.
|
| I think it would make more sense to peg it to the lower of a
| set multiple of each per capita GDP and median after-tax-
| benefits adult individual income, with th multiples set so
| that they both work out equal the current pay now.
|
| Rewarding Congress for driving up average consumer prices
| when they are paid far enough above median income to start
| that their spending basket is different is...perhaps not well
| considered.
|
| But any peg has a problem that ultimately, whoever is
| measuring the thing to which pay is pegged is accountable to
| Congress, so the result is to make the measure less
| trustworthy by tying Congressional pay to it. Forcing
| Congress to vote on their pay changes _and_ face election
| after they do so and before they go into effect, as the last-
| ratified-amendment of the Bill of Rights requires, is not
| only Constitutionally-mandatory, but a very good idea.
| rrivers wrote:
| This moral outrage seems very convenient given the impending
| market crash. I wonder how many politicians will come forward
| announcing the liquidation of their portfolios in good faith to
| the public, conveniently ahead of the major dip.
| WaitWaitWha wrote:
| term limits
|
| I think term limits would hamper development of long term
| relationships with lobbyists, and similar and in turn reduce the
| occurrence of these trades.
| merrywhether wrote:
| Or give lobbyists more power over the revolving cast of
| lawmakers who each want to cash in during their short window of
| opportunity.
| WaitWaitWha wrote:
| Apologies, but I am unclear if you are facetious or serious.
| (not native English writer.) Can you explain what you mean?
| merrywhether wrote:
| Sure, sorry for being a little curt.
|
| It's possible that were politicians only in seat for a
| short period, some of them would succumb to the incentive
| to "make the most of it" personally. Since this would leave
| lobbyists as the most "senior" people on Capitol Hill with
| the most experience managing these interactions, they'd be
| able to optimize for providing lucrative payouts to these
| short-timer politicians.
|
| I'm not saying this is guaranteed, just that there are
| incentives toward that outcome and also that experience
| gives power in "repeated game" scenarios. A converse
| example of this is the lifetime appointment for judges,
| ensuring them stability to help minimize the appeal of
| maximizing short-term gains.
| delecti wrote:
| If a lawmaker knows they'll only be in office for a limited
| period of time, there's potentially incentive to behave
| extra dishonestly to maximize how much they can profit.
|
| Additionally, however you feel about established lawmakers,
| the current multi-term career lawmakers are very familiar
| with the process of making laws. If there's a higher
| proportion of new lawmakers, then the people most familiar
| with the process of making laws would be the lobbyists.
| That could result in them having a larger influence on the
| whole process.
|
| The balance is that newer lawmakers are potentially less
| corrupted from decades in the system. It's not easy to say
| what the net result would be.
| Causality1 wrote:
| Holding any elected position should come with a lifetime ban
| against holding stock in any publicly traded company, full stop.
| Congressman, president, sheriff, county commissioner, I don't
| care. Either you're a public servant or you aren't. My position
| in the government wasn't even an elected one and I still believe
| the oath I took is fundamentally incompatible with holding stock.
| s1artibartfast wrote:
| >My position in the government wasn't even an elected one and I
| still believe the oath I took is fundamentally incompatible
| with holding stock.
|
| This is interesting, can you expand on why you feel this was at
| odds with public interest?
| Causality1 wrote:
| Two different ways, in my opinion. The most direct way was
| the part about serving the people of the United States. I
| can't do that in a neutral way while actively manipulating
| the economy, even slightly. The more indirect way is the oath
| to bear true faith and allegiance to the Constitution. To me
| "true faith" means much more than following the letter of the
| law. By and large, companies big enough to IPO are amoral
| money machines that do all they can to bypass the laws
| regulating their behavior and ignore the rights of American
| citizens, and even getting caught is just a line item on
| their legal budget. I can't participate in a system like that
| while bearing _true faith_ to my country and Constitution.
| deelowe wrote:
| That's terribly easy to get around. The rich don't operate as
| sole proprietorships. Instead, it's a family business with
| money held in trusts and word of mouth contracts. "Falling out
| of favor with the family" is a euphemism for violating some
| form of an agreement. And when you hold public office, there
| are plenty options to deal with dissenters.
|
| Placing restrictions on what investments a person holding
| public office can hold is a very naive solution. Instead,
| acting on material nonpublic information is what should be
| against the law.
| barrenko wrote:
| Really, all of our political problems were more or less solved
| in ancient Rome.
| pwthornton wrote:
| A lifetime ban seems a bit extreme. I can see a ban on
| activities while in office and perhaps a little after, but a
| lifetime is a long time in the stock market.
|
| US officials should be investing in broad market index funds.
| It would allow them to still reap the benefits of owning stocks
| without the conflicts of interests. They should be betting on
| America, not individual companies.
|
| And without insider knowledge, they would have basically no
| chance of beating -- or even competing -- with index funds long
| term.
| fspacef wrote:
| This really makes common sense, why should lawmakers who have
| access to privileged information be allowed to execute stock
| trades. This only beuilds more resentment from the common man.
| misiti3780 wrote:
| I think the easiest solution is they should not be allow to buy
| individual stocks + options. Only indexes.
| gabella wrote:
| As for me, shares are very convenient for a certain category of
| the population. And also profitable.
| mrtweetyhack wrote:
| at least that under-the-table stuff still works
| brandonmenc wrote:
| Good luck with that.
|
| This will be impossible to enforce. The wealthiest lawmakers will
| get around it, and the middle class lawmakers will be saddled
| with the burden of shuffling their entire investment portfolio
| around. It's unreasonable in practice.
|
| (imo, everything is "insider trading" if you squint hard enough.
| Another losing battle.)
|
| Impose term limits or stfu.
| ravedave5 wrote:
| There are so many loop holes. I mean then they just make a
| company that does stock trades for them and tell that company
| what to trade. Or their spouse does the trades instead of them.
| Pxtl wrote:
| Yeah, the spousal loophole is a hard one. Having an elected
| position restricting a spouse isn't right, but the fact that
| money can flow freely within a marriage basically annihilates
| any restrictions.
|
| Other non-marital transactions can be controlled - that's the
| basis of half the tax system in every country. The moment money
| leaves a household or arrives in a household, there are laws
| about the transaction. But within a household? All bets are
| off.
| ctennis1 wrote:
| Not really - I work for a company in the financial space and
| my spouse is restricted on any trading they can do just like
| I am.
| Pxtl wrote:
| Today I Learned... of course, the distinction might be that
| firing an elected official is far more complicated than
| firing a hired fintech guy.
| alkonaut wrote:
| "Make a company"? You mean they would own it? That's obviously
| the same thing. That would be as illegal as owning any other
| stock.
|
| Spouses trading is as simple to monitor as it is for all other
| insider trading.
|
| But more importantly: if there was a ban, or even a
| _recommendation_ against it, and the media did its job, then
| being caught making peronal financial gain from your political
| office would make you unelectable. The strange thing about US
| politics is that it 's not just accepted but expected. This is
| the cultural change that's needed.
|
| Whether or not there are legal loopholes shouldn't matter so
| much. Politicians are scrutinized by media and judged by the
| public. Courts aren't even required.
| pwillia7 wrote:
| *purposeful loopholes
| throwaway894345 wrote:
| I don't think it's "purposeful" as much as the fact that the
| fundamental fungibility of money makes it very hard to write
| legislation that covers a reasonable amount of loopholes. Or
| rather, while purposeful loopholes could exist, it's very
| hard to prevent legislators trading stocks even if there were
| no deliberate loopholes.
| pwillia7 wrote:
| Almost every other facet of the law rests somewhat on
| 'common sense' and what 'reasonable people would do'
|
| I don't see why the laws couldn't be like that, but I take
| your point.
| throwaway894345 wrote:
| Without getting into abstract legal philosophy, I think
| we can agree that this is effectively about insider
| trading (literally we're talking about trading on inside
| information) and insider trading is notoriously difficult
| to prosecute. Personally I think it's worth creating a
| law like our insider trading laws, with big punitive
| sentences to dissuade congresspeople from taking the
| risk. But I don't expect it to significantly outperform
| extant insider trading legislation.
| andrewla wrote:
| Regulation is a poor substitute for criminal prosecution. Law
| enforcement at the Federal level needs to investigate and
| prosecute cases where members of Congress have even apparently
| abused their position for personal profit.
|
| Banning stock trading will just push things into more indirect
| methods; giving law enforcement the power to enforce the law
| means that the very fact that they attempted to use indirect
| methods are an indicator of consciousness of guilt.
| Denvercoder9 wrote:
| You can only prosecute after it has been made illegal, though.
| andrewla wrote:
| It is illegal [1]. The phrasing is very broad:
|
| > (a)Except as permitted by subsection (b) hereof, whoever
| ... participates personally and substantially as a Government
| officer or employee ... in a judicial or other proceeding ...
| in which, to his knowledge, he ... has a financial interest--
| Shall be subject to the penalties set forth in section 216 of
| this title.
|
| All that is lacking is the willingness of law enforcement
| (and the executive branch) to take action.
|
| [1] https://www.law.cornell.edu/uscode/text/18/208
| Denvercoder9 wrote:
| I'm no lawyer, but I would read that quote as only
| prohibiting the participation in proceedings when you have
| a financial interest in the subject matter, but not the
| other way around: using the knowledge you gained from
| participating in proceedings to create financial gain
| afterwards.
| giantg2 wrote:
| It's the most blatant example of insider trading. Company
| insiders might have inside access to a single company. Lawmakers
| have access to inside information that can affect the entire
| industry or market.
|
| It's a perfect example of how we do have class stratification in
| society and that rule of law and equality are laughably distant
| ideas in a sea of hypocrisy.
| seventytwo wrote:
| Good point. Maybe all that's needed is for better prosecution
| of insider trading for these guys?
|
| Of course the problem is the power they have to resist or
| meddle in any prosecution efforts... that's always the problem
| with holding the powerful to account, I guess.
| giantg2 wrote:
| The biggest issue in enforcement efforts is not that they can
| meddle, it's that they are "one of us". They are insiders of
| the system and other insiders don't want to arrest or
| prosecute them because there are ulterior motives. One is
| that if they start arresting and prosecuting insiders for
| something like this, that may remove the longstanding customs
| that protect themselves from similar things. There's also the
| idea of upholding the offices they hold. For example,
| complaints against judges are so secret that they will not
| disclose information related to them even if they contain
| exculpatory information and you subpoena them. Why? Because
| _secrecy is necessary to preserve the public 's trust in the
| system_. If anything, that secrecy and reasoning should make
| any rational person question the integrity of the system.
| There are also plenty of stories of high profile politicians
| blatantly ignoring any number of laws and putting people in
| danger (driving violations are extremely common).
| TomGullen wrote:
| I'd be more concerned that if a law maker had a million of
| Tesla stock and Tesla lobbied them, it would take someone with
| concrete morals to not factor in their potential gains. Humans
| are not great at making decisions without considering their own
| incentives - you can trick yourself and your subconscious can
| sway you.
| mox1 wrote:
| Ohh, you mean like the current Democratic leader of the House
| of Representatives?
|
| https://finance.yahoo.com/news/nancy-pelosi-buys-tesla-
| calls...
| caseysoftware wrote:
| It gets even more complicated than that..
|
| When they bought that Tesla stock, was it _just_ because they
| thought Tesla was a great investment opportunity or was it
| because they believe in a renewable energy economy? If it was
| an ideological investment too, then they may make decisions
| to support the industry (and therefore their investments)
| naturally without any nudging. The lobbying /campaign
| contributions are just gravy at that point.
|
| I lean towards NPR saying "mutual funds or nothing" but it
| doesn't address the fact that they could still leak sensitive
| information and/or help out a family member, friend, etc, etc
| jbverschoor wrote:
| Morals, or a different risk/reward ratio
| giantg2 wrote:
| The people with the best morals/ethics understand the
| subconscious part and remove themself from the situation by
| not holding individual stocks in that capacity. As a society,
| I would hope we could do a similar thing and legislate it as
| a requirement.
| pmcollins wrote:
| it's orders of magnitude worse than mere profiting from inside
| knowledge. these people make policy for the entire country and
| they have conflicts of interest.
| pclmulqdq wrote:
| I think the cleanest law here is to change the law to clarify
| that non-public information gained by public servants and
| representatives that can have an affect on a stock's price
| should be treated as "material non-public information." Then
| the SEC can do their jobs like they do with other insider
| traders.
|
| Remember that ONLY elected congresspeople are exempt from rules
| like that. Other public servants are not. This is one of the
| biggest signals that the US is an oligarchy and not a
| democracy.
| pirate787 wrote:
| > "This is one of the biggest signals that the US is an
| oligarchy and not a democracy."
|
| The constitutional doctrine of separation of powers generally
| limits regulatory law enforcement by the executive against
| the legislative branch. This is actually a signal of
| constitutionally limited government-- this is a design
| feature.
| pclmulqdq wrote:
| Judges also have strict rules about what they can and can't
| trade. So do congressional aides, and the capitol police
| (both part of the legislative branch). It's only members of
| congress who don't.
| colpabar wrote:
| This feels like a stretch. I really doubt anyone who
| designed the constitution intended to give lawmakers the
| ability to trade on insider information obtained through
| their position legally.
| refurb wrote:
| No, but they intended to limit the Presidents ability to
| create new regulations that could put legislators in
| jail.
| giantg2 wrote:
| Except the legislature gave the executive branch the
| power to create and enforce those regulations. Not to
| mention the type of abuse the restriction is aimed at
| preventing would still be allowed to take place against
| regular citizens (classic examples are ATF definitions
| changing randomly and even conflicting with statute or
| other regulations).
| refurb wrote:
| Yes, it gave the executive branch those powers but
| exempted itself.
|
| And with good reason - can you imagine if a sitting
| president created a new regulation that conveniently put
| his congressional opponents in prison?
| giantg2 wrote:
| Do you have a link to that?
|
| Can you imagine a world where the president can do the
| same to ordinary people? On the whole, regulatory
| agencies lack the checks and balances that our system is
| supposedly built on.
|
| https://www.heritage.org/courts/report/who-will-regulate-
| the...
| sillyquiet wrote:
| Yeah, and this means the regulation of shady activity on
| the part of the legislature falls to the legislative body
| itself. And I get the philosophy behind it, but it's the
| figurative fox guarding the henhouse here. This is why any
| legislature proposed by the few principled figures in
| Congress that proposes to curb corrupt practices like this
| in the legislature is usually dead on arrival.
| mindslight wrote:
| You're going to have to reference some court decisions to
| clarify your point. We're not talking about the executive
| regulating the legislature itself, but rather enforcing
| general laws against individuals in their personal capacity
| while those individuals happen to be part of the
| legislature.
|
| Your argument is akin to saying that members of congress
| cannot be prosecuted for murder through the usual channels,
| because that would be the executive interfering with the
| legislature.
|
| Furthermore, how is the legislature not able to bind itself
| to have its members be subject to law enforcement by the
| executive branch?
| seanhunter wrote:
| Other countries have no problem prosecuting lawmakers for
| insider trading.
| giantg2 wrote:
| I'd go a step further and restrict them to index funds. Even
| just holding a stock could affect their judgement. So they
| might not trade it to their benefit, but they might make the
| wrong policy decision for the country.
| pclmulqdq wrote:
| You can do a lot more with index funds than you think. For
| example, you can buy sector index funds to get exposure to
| more limited stocks, and going further, you can actually
| construct linear combinations of index funds to gain
| exposure to single stocks. Maybe if you restrict them to
| only S&P 500 index funds then you could stop them from
| trading like this. I would rather they just be barred from
| trading on insider information regardless of the trading
| vehicle.
| SkyMarshal wrote:
| _> I 'd go a step further and restrict them to index
| funds._
|
| Or alternatively, restrict them to govt debt only. Make
| sure they have direct skin-in-the-game for the debt they're
| responsible for managing.
| giantg2 wrote:
| Hahaha that's awesome. I bet they would abuse that too
| though
| pledess wrote:
| The NPR article says "pushing a bill that would require
| members to divest individual stocks within six months of
| taking office and limit their investments to mutual funds."
| This new distinction (investment opportunities for members
| of Congress are different than investment opportunities for
| other Americans) creates a new conflict of interest for
| lawmakers who then must choose whether to invest in mutual
| funds instead of non-stock-related asset classes.
| https://www.cnbc.com/2021/09/16/democratic-plan-would-
| close-... suggests that the Senate may soon consider a less
| favorable tax treatment of the use of in-kind redemptions
| by mutual funds. If senators perceive that their own stock
| investments will be limited to mutual funds or other funds
| (i.e., not individual stocks), then they may have a greater
| incentive to vote against this tax-law change, regardless
| of whether the change is good public policy.
| s1artibartfast wrote:
| Insider information is notoriously difficult to identify and
| prosecute, so while this is an important aspect, I dont think
| it is a complete solution. We would have to understand what
| the SEC baseline is for catching insider trades.
|
| The easiest and most robust solution is a blind trust.
| BirdPlusPlus wrote:
| Federal lawmakers aren't capable of NOT insider trading.
| antattack wrote:
| Just when was it that many thought it was a good idea?
| Traubenfuchs wrote:
| And their partners, parents, children, friends?
|
| This problem looks unsolvable to me.
| darig wrote:
| Corrupt politicians and their partners, parents, children, and
| friends could all be publicly beheaded in a group at the
| slightest whiff of impropriety.
|
| Sell tickets.
| s_Hogg wrote:
| Maybe with that attitude :)
|
| Part of solving the problem is legislation, part of it is
| cultural. If you don't have both, then sure, it's too hard.
| gooseus wrote:
| I think the biggest part is enforcement, which is confounded
| by the fact that many of these politicians can pull strings
| for and against the people who are supposed to do the
| enforcement.
|
| Is anyone at the SEC really going to use resources to piss
| off a congressperson by investigating whether their nephew's
| father-in-law used insider information when they made a
| certain trade?
|
| Not if they have other cases they can spend their resources
| on which won't potentially hinder their own careers.
| Apocryphon wrote:
| They prevent the family of employees of companies that host
| contests and sweepstakes from participating, don't they?
| giantg2 wrote:
| And the SEC monitors people's family if they work in a
| regulated role.
| mschuster91 wrote:
| That's more a "we're free to claw back the prize if we
| discover you ignored it" rule than anything else effective.
| throwawayay02 wrote:
| We already have a definition for a politically exposed person.
| toomuchtodo wrote:
| I work in financial services (mostly) as a consultant. All of
| my trades, and those of my partner, are monitored. The SEC has
| a data science team (Market Abuse Unit's Analysis and Detection
| Center) that specifically looks for insider trading using
| market data and generates leads for their enforcement division.
| The goal is to not "solve", but to disincentivize the casual
| offender and punish harshly the determined when detected.
|
| Humorously, my trades and capital market activities are more
| regulated than Congressional representatives who have direct
| access to MNPI (material non public information), which I do
| not have access to. As this NPR piece alludes to, we should fix
| that.
| gadders wrote:
| Where I work, people in the front office can't trade in
| single stocks either. Funds only.
| alkonaut wrote:
| This is what insider trading laws do already. It's not a
| perfectly solved problem but it _is_ problem with an existing
| solution.
| Andrew_nenakhov wrote:
| > This problem looks unsolvable to me.
|
| Elect only people with no living relatives, and execute them
| after term's end.
|
| I vaguely remember some fantasy novel I've read many decades
| ago with this premise... The Goblin tower?
| BLKNSLVR wrote:
| Plato's Republic[0] specified rules to minimise corruption
| opportunities. That's what comes to mind anyway.
|
| Excerpt from [0]:
|
| _Socrates points out the human tendency to be corrupted by
| power leads down the road to timocracy, oligarchy, democracy
| and tyranny. From this, he concludes that ruling should be
| left to philosophers, who are the most just and therefore
| least susceptible to corruption. This "good city" is depicted
| as being governed by philosopher-kings; disinterested persons
| who rule not for their personal enjoyment but for the good of
| the city-state (polis). The philosophers have seen the
| "Forms" and therefore know what is good. They understand the
| corrupting effect of greed and own no property and receive no
| salary. They also live in sober communism, eating and
| sleeping together._
|
| [0]: https://en.m.wikipedia.org/wiki/Republic_(Plato)
| elzbardico wrote:
| You can just imprison their relatives for the duration of the
| mandate. And them keep them and their relatives imprisoned
| for another two years after the mandate is over. There's no
| need to kill anyone.
| rsynnott wrote:
| Quite a lot of historical nations had most civil
| administration operated by eunuchs, for exactly this reason.
| Obviously not foolproof, as eunuchs have friends and family,
| and probably not practical to implement today, of course :)
| kube-system wrote:
| Sounds like a good way to elect leaders that have no
| disincentive for staring a thermonuclear war.
| Andrew_nenakhov wrote:
| Ok, provision A: in the event of the thermonuclear war, the
| elected leader should be taken to a protected bunker, where
| he should be killed in the _slowest and most painful way_.
| kube-system wrote:
| ...assuming they're not already dead by then.
| rsynnott wrote:
| I mean, this isn't a new problem. If the kid of the CEO of
| BigCorp Ltd buys shares in MediumCorp Pty and then BigCorp buys
| MediumCorp the next day, the regulators will absolutely take an
| interest in that.
| varelse wrote:
| Au contraire it's trivial. Or are politicians somehow
| invulnerable to the same things engineers are?
|
| https://www.sec.gov/litigation/complaints/comp7lr17243.htm
| rgrieselhuber wrote:
| If only we had some sort of technology to monitor social
| networks and large amounts of data...
| koheripbal wrote:
| There is no technology that monitors trades of friends or
| family outside the US banking system.
|
| Why else are there thousands of companies based in the Cayman
| Islands? It is to obscure the identity of the traders.
| gadders wrote:
| This is the case in banks, and where I work they're also not
| allowed to trade single stocks - funds, etfs etc only. If banks
| can manage, so can politicians.
| ctvo wrote:
| When you turn it into a binary "we need to stop them from
| absolutely sharing any privileged information" or all is lost,
| it's an unsolvable problem.
|
| Alternatively a few achievable steps could make a large
| improvement:
|
| - Force them to put everything into a trust that they don't
| have direct control over for the duration of their term vs.
| allowing them to make trades and disclosing it eventually.
|
| - Have _enforced laws_ on sharing information, and actually
| send people to jail a few times a year.
|
| Skew the risk / reward. Let people think on if they want to go
| to prison.
| BLKNSLVR wrote:
| If Kaiser Soze would have killed them, then their trades should
| also be restricted.
| HelixEndeavor wrote:
| 100%. Didn't politicians make a ton of privileged stock bets when
| they knew COVID was coming here?
| kory wrote:
| Banning stock trading for lawmakers in any form will even moreso
| restrict these positions to very wealthy people.
|
| If you're worth several million, stock trading restrictions don't
| change much. If you aren't, they could be a big deciding factor
| in the quality of your housing or retirement.
| unethical_ban wrote:
| I didn't RTFM, but I imagine the difference would be between
| "sending my investment money to a trusted, independent broker
| to be put into index funds" and "personally trading stocks over
| which I have legislative responsibilities".
| harryh wrote:
| I don't think anyone is talking about banning lawmakers from
| investing in broad market indexes and the like. They're talking
| about banning buying and selling individual stocks because that
| opens the door to trading on non-public information they
| receive as government officials.
|
| For the vast majority of people this kind of passive index
| based investing is actually what will lead to the best returns
| overall. So I don't think your conclusion that this sort of
| change would restrict public office to very wealthy people is
| correct.
| ScottMann wrote:
| If you want to avoid accusations of impropriety you need to avoid
| the appearance that malfeasance has taken place.
|
| In other words, don't create an environment where illegal
| activity is inevitable. If it looks like you did something
| questionable or wrong there will be people willing to challenge
| the behavior.
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