At this point it's pretty much common knowledge that legislators engage in insider trading using nonpublic, oftentimes classified information and intelligence gathered on the taxpayer dime routinely and with no fear of political or legal repercussions. They're not particularly motivated to close this loophole either, for reasons which should be obvious.
This should be a much bigger issue, IMO. We the People need to make them understand this blatant self dealing will not be tolerated.
> They're not particularly motivated to close this loophole either, for reasons which should be obvious.
Agreed, but the ban on federal officials owning individual stocks is actually gaining momentum and I think has a good chance of passing, though what happens in November may change that.
Certainly hope it passes! Though with a high enough security clearance I'd imagine you could make a killing just going long/short on index funds, so I don't know how effective this would be at curbing the behavior.
What we really need is all assets of elected officials held in blind trust, bar none, no exceptions, I think. Though I'm no hedge fund wizard and I'm sure there's a loophole to exploit there as well.
Why the age cap? Is there a evidence that elderly are statistically more likely to be corrupt than the young? Or perhaps you think we (I'm 66) have suffered significant cognitive decline?
I think there's a few reasonable reasons. I think 65 might be too low, I'd probably go with 70, but one reason is just to make room for new legislators which is good both to get new ideas & perspectives in from time to time, and also to ensure our government isn't excessively skewed towards the perspectives of older people. The average age of a senator is 64.3 years[1]– the average age!
Average age of US citizens is 38.8 years. I don't think this needs to be exactly the same & I think it's good for senators to skew older as wisdom accrues with age, but this doesn't simply mean "older is better."
Mostly I think it would be good to build the next generation of leaders periodically. Senate seats are and congress are zero-sum, the next person can't get into that seat until someone else gets out, and those "years as a legislator" are important to operate effectively.
The US at the federal level has other mandatory retirement ages, where the most similar role affected is the Foreign Service, but also pilots, air traffic control, and law enforcement. Many states have mandatory retirement ages for judges. One can easily argue that the risks if a senator undergoes cognitive decline are potentially just as serious as if a diplomat or judge has the same problem.
I’d argue that Lord Acton was correct when he said that power tends to corrupt and that absolute power corrupts absolutely. Age limits are an easy (but slow) way to defeat the loopholes and issues with term limits, and make sure that those exercising power do not end up in that position for too long.
Sure, a 65-year-old age limit would exclude some candidates who get into politics at a later age, or who are uniquely gifted. But there are plenty of examples from across the political spectrum of people who should perhaps move on to write their memoirs instead of running for that nth term.
Don’t target some bigoted stereotype. Target the problem of corruption.
You can as easily argue the opposite: older people can be more conscientious because they have less to gain and less to lose. Who cares more about a payoff: someone who already has their gains and fewer years left, or the hungrier younger person?
I suspect you have based your “fact” on sampling bias - we don’t get good visibility metrics on young corrupted politicians (not so many young politicians, not so much time for them to have been caught making egregious errors). Disclaimer: middle-aged engineer type.
> Who cares more about a payoff: someone who already has their gains and fewer years left, or the hungrier younger person?
How many people in their tweens to 40th have ever filled the roles they were talking about? That's the only timeframe this argument would make sense to me.
I really can't see their comment as bigoted as you claim. There really is a strong selection bias with people filling these roles at that age and them behaving like that.
That's doesn't mean that people in that age braket are always corrupt, but people that have been in these roles for extended periods of time generally are corrupt.
Agree, in almost all times and cultures I have read about or experienced, respecting your elders is a big deal. It is only in the last decade where it seems that attitude has flipped in popular liberal culture.
> Older people are less likely to have to face the long term consequences of their corruption and depravity.
Representatives, whether young or old, never face the consequences of their actions because they exist in a separate system from the rest of society. They have special health care, private schools, and so on.
To cycle in fresh perspectives, and limit the power that can come from decades entrenched in office. People like Pelosi or McConnell are so powerful in part because they have been in office forever, have a network that is both deep and wide, have lots of people who owe them favors, etc. If you set a maximum age plus a lobbying ban, that enforces an end to that at some point.
I'd be in favor of a two-term limit personally, for many of the same reasons. If it's good enough for the President it should be good enough for other offices. I don't think political office should be a lifetime career. It attracts too many power-seeking, controlling personality types. We don't need those people around forever. Too many people in office have no private sector experience at all, yet they are making the rules that the rest of us live by.
They are powerful in part because there are so few of them that the lobbyists can bear hug them. Let the House of Reps again grow with population and there would be too many Reps for lobbyists to control so each individual Rep would have less influence.
We have a census to grow the numbers in the House, but they passed a law to stop that.
"The Number of Representatives shall not exceed one for every thirty Thousand..."
"Representation based on population in the House was one of the most important components of the Federal Constitutional Convention of 1787."
Sears is a private corporation. They can organize how they see fit. The government is an open, public institution built by and for the people. Each decision regarding who can participate in this government must be met with the utmost scrutiny.
Because legislators should have at least as much skin in the game of what happens in the future as the average person. Gerontocracy has not led to good outcomes, historically.
And yes, as people age, they do tend to suffer cognitive decline. You may be the exception, but as a rule it's still a factual statement.
By “skin in the game”, do you mean legislators should be allowed to hold & trade securities while in office? Because having insider trading information gives you an edge up, and thus less skin in the game than everyone else.
No, I mean the older you are, the less invested you are in the long term consequences of your actions, personally. An 85 year old senator only needs to care about the consequences of their actions 20 years on in a very abstract, moral sense, as they are very unlikely to have to experience them personally.
Yes. Let's violate the first amendment, that should be fun.
The term "lobbying" is essentially slang.
Lobbying is just the name we give to the act of paying someone to petition the government for a redress of grievances on someone else's behalf. So to ban someone from lobbying for any amount of time is essentially banning them from petitioning the government. Which is forbidden by the Constitution.
It's a way more complicated issue than "ban lobbying".
There are all kinds of existent laws and regulations on former elected officeholders allowed lobbying activities, many of the toothier ones at the state level but there’s still a 2 year cool off at the federal level for congress. They’d run afoul of 1A protections if there was indeed an unfettered right to be paid to lobby on the behalf of others.
I wouldn't impose mandatory retirement age on congressmen, but think there should be a age limit for the presidency and committee chairs. I think this is not particularly controversial.
What people hate but I strongly believe in is that we should pay people a stipend to run for office. And we should pay congressmen and senators more than we do. And give them a full years salary when they leave office. Seriously guys producing webshit for FANNG companies are making more than their congressman.
Going short is always a bad idea. The market can stay irrational longer than you can stay solvent. In other words, you can win at most 100% while you can lose more than 100%, so why make such a bet.
If you knew your spouse is going to announce an interest rate hike the next morning, shorting might be a relatively safe bet. And it's not like an index fund will move more than a few points at a time anyway.
It's not true that you can make at most 100% once you take into account leverage. But I agree with your general point that shorting is much harder than longing
Regarding the security clearance, while you are not technically wrong in theory, in practice things are heavily compartmentalized at an individual human level by "need to know" practices.
It kind of opened my eyes to how much a maze the IC is regarding classifications and data restrictions. We may both have TS clearances, but I may have access to wayyyy more crazy stuff than you do, based on what I am officially working on. However, on paper we may have the same levels of "trust" from the system's perspective.
In this case, though, they were not buying & selling individual stocks. So we would need to ban them from owning any equities, even shares of S&P 500 index funds.
Double blind? Consider e.g. knowledge the Fed is planning on raising interest rates before the public has it. That affects the market as a whole, so they could short sp500 and have a leg up on us regular folks.
The solution is simple. Being in office (or working for the federal government, or any level government for that matter) is a privilege, not a right. If you want to exercise that privilege, then you should have to give up the right to directly trade any stock/fund. Your broker whom you can't divulge any info to then has the same footing as the rest of us.
"(or working for the federal government, or any level government for that matter)"
I don't think this is right. My small town government isn't going to make any money on trading. Even if we contracted with a company big enough to be public, the contract would be too small to make any impact. Also, most in the military or civilian contractor positions have no real insight into the market moving deals. Nor do they generally have the capital to really take advantage.
It's the high level officials and bureaucrats that need to be restricted, not the rank and file.
You could argue the high level officials will find a way around any restrictions anyway, so all you will do is punish the rank and file no matter what.
> Double blind? Consider e.g. knowledge the Fed is planning on raising interest rates before the public has it. That affects the market as a whole, so they could short sp500 and have a leg up on us regular folks.
No, that's not how that would work. You'd treat it the same way that you do with executives owning stock but having insider knowledge. All of their transfers are done on a schedule and changes to the schedule have to be done in advance.
Agreed. You become an official? Congrats, you no longer have direct control of your investments.
Would that be such a downer for people looking to serve in government? Certain special limits seem reasonable to apply to government officials that have special knowledge or other authority.
The best argument I know against this is that it shifts power toward lobbyists and all those awful "deep state" people (you know, career civil servants) everyone suddenly started being worried about a few years ago, and away from elected officials.
Abolishing term limits just encourages politicians to start thinking about "What, after?" sooner.
Not sure that's what we want to incentivize.
Cronyism and back door politics within the government are far from the worst outcomes, especially compared to private industry having more power over government officials.
It also means that the entirety of their last term is basically consequence-free. Currently a voted-out senator is a lame duck for 2 months; a "last term" senator has 6 unaccountable years to do whatever they want.
Let's get rid of qualified immunity and add stronger protections against eminent domain while we're at it. Also, we need to address corrupt judges, we have very few legal mechanisms for that.
I would like to drastically claw it back but I think there are limited circumstances where that immunity should apply.
At the very least, criminal immunity and being required to carry large insurance policies for civil damages. Paid for out of pocket and underwritten based on their job performance/complaints.
Police are people and people make mistakes, this needs to be recognized on some level, but QI as it is now is positively un-American. We're supposed to have checks and balances and recourse for misdeeds. Nobody should be above the law. You literally need circumstances like those surrounding George Floyd to hold police accountable in this country.
2A was supposed to be insurance against nonsense like this.
We have term limits in several places (including California), I think TL proponents should make their case based on how that has worked out rather than pleasant hypotheticals. One downside I've seen is that it promotes a sort of legislative ladder-climbing mentality where ambitious legislators are primarily focused on using their office as a springboard to the next level of political power, and incentivized to propose changes with quite short-term payoffs.
Having the profits owned by another person adds risk from an insider trading scheme. Both risk in terms of information leaking and the "friend or family" simply having control of the money/goods.
This is as good a start at curbing this behavior, as is practical right now.
Honestly, I would be okay with allowing them to continue to own stocks, but all trading activity is published in real time. I honestly think that would be more telling than just making them not own them.
Rather than banning officials from owning individual stocks, just make all trades transparent in real time along with actual beneficial ownership (e.g., if someone owns stocks through an LLC, Trust, etc.).
This would nearly instantly eliminate most of the advantage of insider trading with far less regulatory overhead and the inevitable over- and under-prosecution of crimes. Elon Musk or Mark Cuban or some legislator starts buying batches of options? Everyone already knows and the market can move on it's own.
does it include spouses? Also doesn't prevent them from getting paid for information via other means. Or being promised cushy board positions once they are out of congress
Agreed on Pelosi. But at least you have a pretty vocal contingent of House Dems pushing for it who might get their way; whereas on the GOP side nothing.
In both the House and Senate, Republicans have proposed legislation to close this loophole. It's been Democrat-controlled committees that have prevented these from moving forward. Even Democratic bills have not made it out of committee, despite public pronouncements back in September. This seems like a issue that could get true bi-partisan support, but it will take Democratic leadership to move a bill out of committee at this point in time.
They should either be forced to schedule trades 6-12 months out (during quiet periods where they cannot make public statements), or be forced to publicly disclose their trades in advance. (So NCNY and MTCH or whatever insider trading ETFs exist can let the public arbitrage in front of their insider trades).
I am not from US but I am pretty sure this is a common practice world-wide. Some places worse than others. But I used to work in Stock Exchange a few years back as System Administrator. And we were recommended to take permissions (which used to get approved quickly, within hours) to trade stocks. And all that info was available internally. Obviously, this was a "good to do" process rather than an absolute compulsion but even that small step stopped so many including me to not participate in Trading for my time there.
Small steps can ensure transparency and maybe, just maybe, help with the problem.
>This should be a much bigger issue, IMO. We the People need to make them understand this blatant self dealing will not be tolerated.
Compared to the impact they can have at their job (positive or negative), this just doesn't seem like a big deal to me. Obviously I'd prefer if they didn't do it, but I don't see why it needs to be a bigger issue.
Insider trading causes two problems:
* Undermines faith in, and thus reduces efficacy of, financial markets
* Reduces the overall returns for everyone else a bit
While it becomes a problem when rampant throughout the market, I don't think a few hundred members of congress would collectively have much impact here.
I'm also a little wary of the kind of person who's willing to go into politics and isn't in it for the money. While there are a handful of truly dedicated public servants, most people who aren't in it for the money are either extreme ideologues or power hungry narcissists. I'll take a politician who's mildly financially corrupt over someone who wants to abolish either taxes or private property, and way over one who wants to become a dictator.
This view assumes they actually do their job for the good of the people and also happen to profit off of what they privately learn in doing so. Instead of making decisions based on what can get them the better payout or preservation of their investments.
To make it a programming analogy, to someone who has no clue about coding a yearly bonus to each developer based on lines of code written sounds like a good way to reward the more productive developers. But anyone with a couple days experience realizes how trivial that system would be to game.
A member of congress voting for $10B of useless defense spending because they're heavily invested in the relevant aerospace company isn't committing insider trading.
Perhaps this is unnecessarily pedantic, but what you're describing is a "conflict of interest" problem, not an "insider trading" problem. You can have either problem without the other, and depending on how you crack down on insider trading, it could be completely ineffective at solving the conflict of interest problem.
Insider trading improves the efficacy of financial markets actually, since it allows markets to take non-public information into account. The bigger problem is that it opens up avenues of market manipulation and causes conflicts of interest.
It's the same conflict of interests problem here. Are your politicians acting for the sake of the public, or do they have their own financial interests in mind when putting forth a policy? E.g. if they've made financial commitments in expectation of a policy that will benefit that investment, that can most certainly influence their decision on said policy.
Only if you know which insiders to watch. It's just as likely to set off irrational panics. I think the efficiency argument involves a lot of hindsight bias even though it may be made in good faith.
Insider trading by legislators is also a problem because it could impact how they act in their capacity as public servants. It is not inconceivable that they would then vote based on their financial interest and how they want to game the market, or time critical legislation based on their financial interest.
I think the real threat is the already dire state of American faith in its own governmental system. The issue is not that the congress people are in a position to act on insider information. It's that they're in a position to make moves, then enact policies that make those moves more lucrative.
Consider the extreme: a congress person shorts a stock because they know a downturn is coming, then they enact policies that prolong the downturn and in turn increase their windfall.
I totally agree with the first part of your comment.
I want to add that there's a real possibility that legislation to address this (totally legitimate) issue goes too far and makes it even harder for non-wealthy people to run for public office - I think it's unreasonable for a new congressperson who owns a home and a small amount of an S&P index fund to have to set up a blind trust for their partner's uncle.
That's not really what's implied in this article though. The term "insider trading" means something specific which is being inside a company. For Congress or executive branch employees that would accessing data that would typically be in an SEC filing before it's public. This is also not "self-dealing" which means appropriating official funds for your own purposes.
Reading intelligence reports and selling mutual funds isn't the same thing. Not just on technicality but because there's no room for corruption. Insider corporate information can be exploited against people or even engineered to create opportunities. COVID was going to happen no matter what. And really COVID data wasn't really secret. Congress was having it shoved in their faces but the WHO and CDC were ringing bells in public disclosures for anyone savvy enough to understand.
It's unsavory but it's not really a threat. At least not most of the examples listed in this article. There is likely some genuine corruption going on too. The SC just gave Ted Cruz (and everyone else) a pass to self-deal from his campaign fund.
> The term "insider trading" means something specific which is being inside a company.
I don't think it does. You can hear overhear information from someone in a bar and that is still insider trading. That's how I remember my training from working in fintech at least.
Yes, that's correct you don't need to be an insider yourself only having knowingly received information from an insider. But either way it refers only to companies. Having access to scientific observations is fair game. Legally speaking at least.
The thing is that "we the people" are busy fighting each other over every political issue under the sun. Good luck getting the American people to agree on literally anything.
This is by design of course. "You don't want the gays using your bathrooms!" while they pillage the country.
If HN had a vote budget, I'd use it all on your comment.
Right now my country is having federal elections and everything from bathrooms to what people do in their beds in private is being discussed, except actual plans for education, health and the economy. It's a celebrity shitshow and it seems to have infected most countries.
I think it's hilarious that you felt the need to exaggerate a genuine political conflict, transgender people using the wash facilities of their claimed sex, into the obvious strawman of not wanting homosexuals in bathrooms.
Can't read the article (paywall)... is it discussing senior bureaucrats or legislators?
If Congress, the STOCK act really needs update to have some teeth. Right now, they usually get a $200 fine (which is often waive) for what is effectively insider trading. Make that fine 6 figures and maybe that'll help.
If bureaucrats, I'm not sure why existing insider trading laws wouldn't apply? It seems we just need the DoJ/SEC to do their job.
> the STOCK act really needs update to have some teeth. Right now, they usually get a $200 fine (which is often waive) for what is effectively insider trading
This is not true. There is a fine for not disclosing. For actual insider trading, the FBI has subpoenaed sitting Senators' phones [1].
Fwiw, Kim Kardashian (I know) was fined $1.26 million for pushing crypto, despite only getting paid $250k for the appearance, which is either a lot or a little depending on how you look at it, but fine > payment, so the concept isn't foreign to the SEC.
Don't know about details of the STOCK act, but for general financial crimes there's a lot more than fines they can impose. There's also restitution, forfeiture, and disgorgement. It isn't like violent crimes which can't be undone.
Democrats spiked the legislation that would make it illegal to do it after the elections...and it looks like they will not do well enough to pass it in the next term and will undoubtedly pass nothing in a lame duck. It's a joke.
‘Power concedes nothing without a demand. It never did and it never will. Find out just what any people will quietly submit to and you have found out the exact measure of injustice and wrong which will be imposed upon them…” FD
Legislators should be allowed to trade, but should be considered insiders for any companies affected by legislation they vote on (which would effectively be all of them). They could use things like 10b5-1.
While you’re at it, lobbying should be completely and utterly outlawed, anyone found taking money for political influence should be handed a hefty jail term or worse.
OK, so let's say you strongly believe in the mission of CampaignForFooBarForAll. You've raised money for them, you've been on the marches, you've done the phone tree. But you want to do more.
Someone suggests you head to DC, and start talking to congresscritters (or their aides) about the message of CampaignForFooBarForAll.
You'd love to do this. But you need to pay the rent, and for food, and other regular expenses. Someone in the campaign suggests that they could pay for you to do this for 1 month a year.
Shall we send you to jail?
Let's suppose that you say "yes".
Now consider Jan Lobbier, who works for BigMega Corp. Jan is employed there full time, with various duties. Among them are trips and calls to DC to put the company's position in front of The People Who Matter. This is not Jan's only job, just a part of their job duties. Should Jan go to jail?
What you're suggesting would mean that lobbying could only be done by the financially independent (i.e. can lobby because they don't need to work), and that seems like a bad idea for everyone.
I'm talking about politicians accepting donation money. Not the lobbyist themselves. If politicians didn't accept "donations" they wouldn't have a role.
Politicians receive a salary, that should be enough, if the salary for a congress person isn't high enough, then we can talk about that at the next election, they also might be better at managing the economy and dealing with things like inflation because it would be a harsh reality for them, like it is for everyone else.
The worst part about this is the orders of magnitude negative effects on the Country as a result. Politicians are cheap and they are not paid for no reason.
Normally, the correct answer here would be "through votes", but what do you do when both sides are doing the exact same thing? Voter turn out is getting lower and lower.
Voter turnout where? In the US it's been on a long term upward trend, although it arguably trails rather than leads events. This upcoming midterm election is expected to set a record, possibly matching turnout for presidential election years if current trends hold.
Superpac to direct donations to politicians found not to be engaging in this behavior? Because electorally there appear to be no repercussions at the ballot box, so speaking the only language they really understand, that of the almighty dollar?
The usual method is to vote them out. But, at least in the general election, the desire to vote the bum out is tempered by the need to keep them from gaining power.
That's been happening and I can't say I'm impressed with the results so far. Idealistic reformers are easily manipulated by cynical strategists and there's been a notable uptick in clown candidacies.
I'm not sure you are appreciating the sheer scale of the monster that is being fought, its capabilities, or the lengths that it goes to in order to keep its dominant position.
Yes, punish them with a cushy private-sector job lobbying and/or on some corporate board, that'll teach 'em! This is not a game "we, the people" can win, any more than the pawns can win a chess tournament.
That doesn't really work; there's little to link a defeat with any one specific issue in most cases, and the replacement isn't likely to get in for any one specific issue either.
Why hasn't this basic democratic tool worked for the last 150 years?
Is it because We The People are completely brainwashed by our industrial puppetmasters at this point? The needle moves from voting to education. But how do I educate an entire generation about what they should demand from a government?
Yes, but the subject of the thread is Washington. And we're using American terminology such as We The People. Do I need to emphasize further that I'm talking about the US in particular?
That only works for bad actors in an otherwise good system.
Systemic incentives tend to make idealists into insiders. You can blame people for being human if you want, but you will keep getting the same results.
A lot more people used to speak about this, from all regions of the political grid. It almost seems as if a primary outcome of the Obama administration was to coopt the left into supporting the bureaucratic establishment at all costs, especially if any critique of it could be characterized as populist and icky.
I'd say a lot of today's left got radicalized during the Obama administration as it became apparent that Obama valued pragmatism and continuity rather than risking political dislocation by bringing wars to an abrupt end or major restructuring of financial markets. This might have worked great with a less ideologically driven opposition.
Unfortunately that radicalized sector has often drifted towards a kind of antipolitics because the center-left has been comparatively ineffective and unable to respond adequately to the startling rightward shift of the GOP. The Democrats tend to cling to a rules-based system as the basis of a political mandate while the Republicans have had a strategy of opportunistically rewriting the rules at the first opportunity since at least the Gingrich era. In a way I don't blame them, it keeps working for them and a lot of their voters just aren't as hung up on intellectual consistency/credibility as the Democrats. It's perfectly acceptable for political surrogates on the right to state openly and explicitly that they DGAF about anything other than winning.
I was definitely disappointed in that as well. The whole thing soured me on politics, in general, other than on a metapolitical / observational level.
What has been strange to witness, in my view, is how the left was indeed radicalized during these years but, if anything, they seem to have moved in this weird direction of being part of the machinery of the establishment vs. their historical stance of being decidedly the opposite (at least in my view).
The other weirdness between the left and the right is the pretension that the core of either party are actually going to do anything for their respective bases vs. just continue to do whatever it takes to perpetuate their own power / positions, and yet neither side can see beyond this to find what is likely a great deal of common ground.
In any radical politics there's a dynamic tension between the pure principle-driven action and the pragmatic-systematic option of leveraging the existing political or legal infrastructure, and trying to maintain enough respectability to gain authority without becoming disconnected from your motivating principles.
It's demoralizing from a civic idealism standpoint, but I've found that looking at it from a resource mobilization perspective make it easier - albeit at the price of sometimes feeling cynical or callous.
> That same day, while the stock market remained lofty, Dr. Auchincloss reported selling $15,001 to $50,000 of a stock mutual fund. Days later he sold two more mutual funds and a stock
> Dr. Auchincloss disclosed six sales of mutual funds that day, totaling between $111,006 and $315,000 in value.
And
> The rate cuts hadn’t immediately calmed investors. Stock trading was halted for 15 minutes on the morning of March 16 when the S&P 500 fell 7%, triggering a so-called circuit breaker. The index staggered to the closing bell, down 12%.
> That same day, Ms. Chao, the transportation secretary, made three purchases in stock funds that track the S&P 500 and the U.S. stock market broadly, totaling between $600,003 and $1.2 million, according to her financial disclosures.
Every time I click on one of these articles, I expect to find some individual stock trading related to specific companies on the receiving end of government action. However, when it ends up being vague examples of officials buying and selling broad-market or S&P index funds, it's much harder to see where the "insider trading" angle comes from. Especially when we have examples of officials trading in March, a full month after the viral panic had already spread through even public forums like Twitter.
The line needs to be drawn somewhere, and I'm not convinced that forbidding public officials from buying and selling generic index and mutual funds is really that big of a concern, IMO.
Now if someone can find evidence of government officials buying something like Moderna stock ahead of the FDA approval, then by all means let's prosecute with stiff consequences.
It's not strictly about actual unethical behavior. It's also about not ever creating the appearance of unethical behavior which erodes trust in government institutions. It's half of any ethics course on the job.
My friend who is a lowly public servant is not allowed to hold anything besides index/mutual funds already and has to report any trades of those before they happen.
This is for an individual with no tangible insider info.
Elected officials with significant insider info need to be held to a much higher standard.
(Other Congresspeople didn't support it, and also appear guilty of doing something with privileged knowledge, but I'd like to just focus on one person of note)
As far as I can tell, it did indeed involve individual stock purchases. As the article says:
> According to the FBI, “As a result of Senator Burr’s sales on February 13, 2020, his portfolio went from approximately 83% in equities to approximately 3% in equities.”
So... as far as I can tell, this absolutely has happened. And although Senator Burr and other officials didn't officially get charged, I would very much like to stop this behavior.
When you get elected, you simply give up the ability to own and trade certain things, because you just have too much knowledge and power. Serving your fellow country people should be the bonus reward beyond a salary, not some stock trades.
If you know about an imminent bill that, say, is going to inject fiscal stimulus to the tune of 10 percent of GDP and will reverse those stock market declines and then some, that's a pretty big reason to trade.
I mostly agree, but we only know a fraction of what the officials know. We wouldn't be able to tie purchases/sales to classified information for decades. The simplest solution is to have government officials engage in scheduled, double blind funds. They commit X dollars per month for N months, and they can only change the schedule with due notice of N months.
This is, to my knowledge, largely how executives handle the stock that they own, they have scheduled pre-arranged buys/sales, though with the government it has to be a bit broader (there's no such thing as blackout periods etc, they always have insider information).
I do believe that officials should be allowed to engage in the market given those restrictions. You need options like this to avoid abuse (a system that works well enough will keep most from trying to get around it) and you need options like this because otherwise you make politics a game for the rich (even more than it already is).
This article does an annoying thing where it gives you stats without proper comparison so you can't tell if the numbers are actually out of the ordinary.
> A deputy to top health official Anthony Fauci reported 10 sales of mutual funds and stocks totaling between $157,000 and $480,000 that month.
Impossible to tell if that's suspicious without knowing how much that deputy normally trades.
> officials at another health agency, Health and Human Services, reported 60% more sales of stocks and funds in January than the average over the previous 12 months
A better comparison would be to January 2019 to account for seasonality. Maybe people rebalance/reevaluate their investments at the start of the year.
> Then-Transportation Secretary Elaine Chao purchased more than $600,000 in two stock funds
Again, impossible to tell if that is unusual without comparison. Apparently she is worth 10s of millions of dollars.
> Nearly 400 officials across 50 agencies reported owning stocks in airline, resort, hotel, restaurant and cruise companies in early 2020, the review found.
Okay...?
> [March] was the most active for trading by officials across the federal government, including at HHS
March was the most active for trading, period. Because the markets were melting down. Also, by March the impact was more widely known to the public.
There's more stuff below the fold but this is getting tedious.
Medical officials selling in March 2020 makes, um, sense? The pandemic's potential for destruction was massively clear to medical-professionals by mid-February.
It is easy to believe that those making the trades were acting primarily on information known widely to the public.
Washington State announced its first deaths in late February [1]
It isn't that hard to put two and two together and expect that at least a fraction of skilled medical professionals will react.
I'm a physicist and I was still able to recognize by late Feb/early March that we were headed for trouble. Similarly, just before the Federal government stepped in with stimulus in late March/early-April 2020, as a value-investor, I'd just begun to feel that the markets had fallen enough to begin buying equities again after a multi-year hiatus.
Trading on both signals (imminent pandemic, increasingly-reasonable trailing P/E ratios) will look "exquisite", but required nothing but reading the news and making sober assessments of both situations.
One may also be able to look at the same trading data and find officials who made exquisitely-terrible trades, especially after late-March 2020, where volatile markets created outsized losers and winners.
The problem was that these medical officials were complicit in the economic destruction. They recommended to policymakers that the country take an extreme position on the virus and shutdown nearly everything. Hindsight is 20/20 of course, but now it is becoming clear that such an extreme reaction was not necessary, especially when comparing with countries like Sweden who focused on protecting the elderly and vulnerable and more or less left everyone else alone. So, they made a mistake, and the fact that they also profited from that mistake is where we should be worried.
There are two kinds of problematic trading by members of Congress:
1. Straight-up insider trading. Buying or selling shares in individual stocks based on inside information. This is flagrantly illegal [1].
There are bills seeking to go further, banning the trading of individual stocks by Congressmen [2]. While we have limited evidence of this being a widespread problem, it's a good measure for public trust purposes.
But this article is not about that! It's about:
2. Insider trading on indices. This is also illegal! The FBI subpoenaed a sitting Congressman's phone [3] when investigating concerns around this. But absent an incriminating text or e-mail, it's difficult to convince a jury the sales were made because of insider information versus because they felt like selling that day.
Fortunately, this is an old problem with an old solution: 10b5-1 plans [4]. These are not without issue [5]. But given the power and insider access a sitting Congressman has relative to most public company CEOs, it makes sense to implement. To my knowledge, nobody has suggested a 10b5-1 analogue for public officials.
"We know that they are lying, they know that they are lying, they even know that we know they are lying, we also know that they know we know they are lying too, they of course know that we certainly know they know we know they are lying too as well, but they are still lying. In our country, the lie has become not just moral category, but the pillar industry of this country."
-Aleksandr Solzhenitsyn
Immediate disclosure of all trades (and reasons for the trade) needs to be the absolute minimum we have to push for as a society. Otherwise, all federal officials and their families should be completely banned from owning any kind of publicly available equity whatsoever for the entirety of the term.
It's true. Most of the info they supposedly traded on just wasn't secret. Most people and even most investors probably don't sit around reading CDC and WHO press releases but anyone could have found this info and made the same conclusion.
It might simplify anti-corruption compliance for certain lawmakers, if investments by Congresspersons and other upper officials were required to follow Bogleheads good practice conventions:
"You're permitted investment in one primary home, one vacation home, a 6-month emergency fund, and everything else in a specific asset allocation of index funds (your-age-in-bonds percent US total-market bonds index fund, and the rest divided 4/5 total-US-stock-market and 1/5 total-international-stock-market index funds)."
"This rule will help you to be aligned with citizens' interests in their retirement accounts, while suppressing the unfair advantage of unprecedented clairvoyant genius market-timing that you discovered shortly after gaining office."
When I saw this headline, I assumed it would be an article discussing the military stock trading activity of members of Congress in the week or two prior to to Russia's surprise unilateral decision to invade Ukraine.
This wouldn't be much surprise though, right? The President had been quite vocal of the imminent invasion, it just that a lot of people decided not to believe it.
I mean, you could say the same thing about COVID. The fact that the relevant stock stayed flat & didn't skyrocket until the day of the actual invasion suggests that there was some surprise.
"Unknown to the public".
Not true. People that read the news knew something was up and that they couldn't control the spread. Some smart money was trimming stock positions before the Senators.
Incorrect. Rarely, if ever, does any congress person have any insight or control into detrimental effects that would cause a market wide bear market or correction. If the do, it is even more unlikely the certainty of timing would be an advantage.
> Rarely, if ever, does any congress person have any insight or control into detrimental effects that would cause a market wide bear market or correction
Rarely like a once in a lifetime global pandemic?
Control like the ability to force shut downs of businesses across the country?
I pretty much have to also point out two bigger conspiracies (or at best, unconscious ass-covering, which is still bad) :
- "Masks do not work"
- "The lab leak theory is not to be taken seriously"
Where specialists with a conflict of interest and governments pushed both really hard, against specialist(-without-conflict-of-interest-the-only-one-that-matters) opinion.
The concept of "public service" is being slowly erased. The United States is becoming just like any other country, where people will do anything to get to power to get to the trough - it's the fastest way to get rich.
Obviously has been happening for a long time. but there was some discretion to it. Now it's blatant and shameless.
This is a bipartisan problem and should hopefully unite us in demanding an end to the practice.
A more problematic issue is legalized bribery via campaign contributions -- our representation should improve when officials are not owned by their patrons.
lol. For every person doing it blatantly, there must be more people doing it quietly? Like letting a friend of a friend in another state/country trade on the info? Are there ways to track these trades too?
"His January sales amounted to the largest number of transactions he had reported for a single month since 2018, according to his financial disclosures."
Perhaps we could rephrase this as
"His January sales amounted to more transactions than he had reported for any month in the preceding year."
Or, if the that higher month in 2018 was early on, then "in the preceding n months". And for that matter, what was the dollar volume?
"On March 13, then-President Donald Trump announced a federal partnership with the private sector to increase the nation’s testing capability for Covid, inviting top executives at 10 companies, including Target Corp., Walmart Inc., CVS Pharmacy Inc. and Walgreens Boots Alliance Inc., to the White House for the announcement.
Roughly 300 federal officials reported owning stock in at least one of the 10 companies at the time, their financial disclosures show."
OK, but did they buy that stock the week before?
Full disclosure: I own stock in CVS and Boeing, or maybe I don't. Like many rational and only moderately prosperous Americans, I have investments in mutual funds. I'll save the next statement and see how exquisite my timing has been.
I think the best fix I've heard is that their trades need to be digitally announced immediately (within a few minutes of execution).
There are currently fines for not reporting that often get waived. Even if they did make the fines legit, it becomes very difficult to track & indict them for tipping off friends or non-family members unless it's a very large amount worth many millions.
Though to counter this argument the article mentions a few cases. North Carolina Sen. Richard Burr was not mentioned but he is still being investigated for what seemed like very obvious trading based on knowledge gained & tipping off family members.
Alabama Sen. Tuberville is another good one to watch for trades in my opinion. He's very active. Last year he put out some big tech puts on MSFT that were very OTM (out of the money) for the spring of this year.
Rep. Pelosi is overrated a bit in my opinion but is often the joke of these talks. Her husband Paul (a VC) most likely does all the trading & he seems to have just benefitted from using calls on stocks that are already ITM (in the money) & far dated. He's probably not a good person to use if you're working in tech in my opinion as your job & personal knowledge probably make you overweight in tech risks. Anyone mentioning Pelosi should also probably not be considered knowledgeable on this subject since she's 99% of the noise on it & very little substance.
- Edit -
It should be noted, anyone frequenting investment forums probably made a lot of these Covid trades before the dates many of these senators did. Not defending the senators but also the Covid thing was gaining a lot of traction in January & February. Many senators & reps didn't trade on it until March.
Your president has been in federal positions of power for 50 years. Same for the speaker of Congress and many others. Why is anybody surprised that this is the outcome?
So you want a bunch of people with no experience running the country? How many times in history has that not been a disaster?
Merely being in power for a long time does not create a "swamp", bad ethics does. Bad ethics is known to be enabled by secrecy and inhibited by transparency. The solution needs to address the actual cause, not some unverified assumption, so more transparency is far likelier to actually reduce corruption.
(And the guy who was going to "drain the swamp" was the swampiest guy around. Turns out he fights tooth and nail against any transparency into his affairs. Huh.)
I’m not gonna say that no Democrats do this (because it would be clearly untrue, see Nancy Pelosi). But I do think it’s pretty notable that this year a Democrat Senator proposed a bill to rein this in, and got 15 co-sponsors, all of whom were Democrats.
As far as I can tell, the bill doesn’t seem to have any culture war or partisan poison pills, so it seems pretty odd that a big chunk of the Democrats are co-sponsors (many more may still vote for it if it comes to a vote) and zero Republicans are.
I think this is because Democratic voters are more in tune to these issues than Republican voters. Not because Democratic politicians are intrinsically more honest, they're just responding to voter pressure. Get more Republican voters to recognize these issues and you may see more Republican politicians responding in kind.
My reason to believe this is Democratic politicians weren't addressing these problems until after Democratic voters started to perceive the problem and apply pressure. The point being, politicians won't regulate themselves spontaneously; their feet need to be held to the fire by voters.
Conservatives and Libertarian circles consistently make fun of Nancy Pelosi's blatant insider trading so I wouldn't be so sure. It's basically a meme.
That said, additional legislation is unlikely to fix the issue, I'm sure Nancy will find another way to bypass any kind of checks coming their way (eg. setting up a company wherever in the world and trading through that).
No, legislating this kind of things can just create additional work for the accountants of the powerful but it will never fix the problem.
The only real change can come from removing power from a few hands and decentralise, giving it back to the people.
I think conservatives see it either as a Nancy Pelosi problem, or a general government problem. Either way this doesn't apply pressure to their own Republican politicians. As a "Nancy problem", the incentive for Republican politicians is to let the problem continue because Nancy continuing to be contentious is politically advantageous for the Republican party. In the case of seeing this as a general government problem, their ideology says that the solution is less government. From this angle, Republican politicians still aren't incentivized to address this specific problem.
Yup. However not just because of insider trading...
Governments around the world mandated that (mostly) small businesses have to close and that blue collar work had to halt (due to relying on in-person interaction), all while pumping up the value of equities and real estate through monetary expansion. Then of course the smart money jumps out leaving the middle class holding the bag.
> Governments around the world mandated that (mostly) small businesses have to close
This was really insidious. Small shops selling [widget] were forced to close because the shop was non-essential. But walmart selling [the exact same widget] was allowed to keep doing business because they also sold groceries and were therefore essential.
Could they have forced Walmart to cordon off the non-essential aisles while keeping grocery section open? Could they have taxed walmart more to support the small businesses which were being strangled? Maybe they could have, but of course they didn't.
Not to mention, closing so many stores, forcing curfews, etc... just packed more people into the same store at the same time. Literally the opposite of social distancing.
I used to always shop for groceries at 10pm because the store was mostly empty. The officials near me in their infinite wisdom decided stores have to close by 6 so they were packed all day long...
The businesses you mention, small shops depending on electronic components, continue to suffer. They're last in line in the supply chain shortages, and many are disappearing.
Paying salaries and wages are not a wealth transfer, but a transaction, i.e. I give 8 hours of my day to my employer and receive cash in exchange.
In this context the wealth transfer means devaluing wages and cash while inflating assets. The wage earning class got shafted losing purchasing power while the asset owning class made bank. All through the stroke of a pen, basically overnight.
You say you "live in Washington" without DC suffixed? If so, this is a new trend from transplants - lived there for 20 years and pretty much never heard that from anyone local.
And such a usage contributes to the confusion, in my opinion.
Your experience matches mine, people who live in or near DC say "DC". Sometimes "Washington, DC." Politicians and media say simply "Washington" because it sounds more formal or powerful.
It's kind of like how everybody in Pennsylvania says "PA" in casual conversation. It just rolls off the tongue easier.
I grew up there and live there currently. Everyone I know either says "DC", "the district" or "the city" depending on the context. Never heard anyone say "from Washington" who didn't mean the state.
