Should Members of Congress Play the Stock Market?
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Two Democratic House members are introducing legislation barring members of Congress and their staffs from trading stocks based on inside information they acquire in the course of their duties: (WSJ -$)
Some hasty stitches:
--One would think that members of Congress would be too busy running the country to be able to play the stock market. What reason would they have to trade at all except to exploit material nonpublic information?
--A total trading ban on equities would in no way "impoverish" legislators or their staffs, since they could be allowed to invest in passively managed index funds -- just like we tend to do on Wall Street. Alternatively, they could be permitted to use truly blind trusts (as opposed to the faux blind trusts that Frist essentially directly controlled despite his initial protestations that he did not).
--Neither would the members be "trapped" into riding losing stocks as they declined in price. The same "10b-5 plan" arrangement that corporate insiders can utilize -- where a fixed amount of stock is sold on a regular basis and therefore independent of any inside information or other news -- could be established for Congress.
--Wouldn't it be an inspiring show of patriotism if our elected representatives put their money into Treasury bonds instead of stocks, "for the good of the country"?
If the politicians want to insist that they are "public servants," then let them prove it in this minor, inobtrusive way. Isn't power enough for them without also making a killing in the stock market?
Other thoughts from W$J Blog (times two), Securities Litigation Watch, White Collar Crime Prof Blog, Ideoblog, Financial Rounds, Point of Law Forum.
In addition to banning trading on inside information, the proposal would require that lawmakers and their top aides disclose within 30 days any stock trades. Congressional rules now require lawmakers to disclose their trades once a year.As I noted during the Bill Frist stock scandal, it seems to me that members of Congress should simply be barred from trading corporate securities, period. The rules for Wall Street insiders (such as myself) should be the minimum for those who, like Frist, actually make the laws that can influence stock prices. And those Wall Street rules are far more restrictive than even this new proposal.
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Unlike members of Congress, executive-branch employees already are banned from trading on inside information. Employees of several federal agencies are prohibited from investing in companies that have business before them.
Some hasty stitches:
--One would think that members of Congress would be too busy running the country to be able to play the stock market. What reason would they have to trade at all except to exploit material nonpublic information?
--A total trading ban on equities would in no way "impoverish" legislators or their staffs, since they could be allowed to invest in passively managed index funds -- just like we tend to do on Wall Street. Alternatively, they could be permitted to use truly blind trusts (as opposed to the faux blind trusts that Frist essentially directly controlled despite his initial protestations that he did not).
--Neither would the members be "trapped" into riding losing stocks as they declined in price. The same "10b-5 plan" arrangement that corporate insiders can utilize -- where a fixed amount of stock is sold on a regular basis and therefore independent of any inside information or other news -- could be established for Congress.
--Wouldn't it be an inspiring show of patriotism if our elected representatives put their money into Treasury bonds instead of stocks, "for the good of the country"?
If the politicians want to insist that they are "public servants," then let them prove it in this minor, inobtrusive way. Isn't power enough for them without also making a killing in the stock market?
Other thoughts from W$J Blog (times two), Securities Litigation Watch, White Collar Crime Prof Blog, Ideoblog, Financial Rounds, Point of Law Forum.
Posted by Kip on
30 March 2006
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