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In practice, how would this work? A requirement that they only use index funds? But then wouldn't that bias them to support the companies that are the major mov
by _ea1k 3y ago
In practice, how would this work? A requirement that they only use index funds? But then wouldn't that bias them to support the companies that are the major movers in that index? Indexes are often heavily weighted to a small subset after all.
TBH, it seems like an idea that sounds good on the surface but has practical issues in implementation that would make it irrelevant
- mikrl 3y agoMore reasonable would be a ban on trading, if not ownership. But then again, lawmakers would just advocate positions in favour of their static portfolio. It does seem better than the status quo of ‘extremely lucky’ returns though.
- lotsofpulp 3y agoLegislators are already under the imperative to backstop public equity markets (and hence all the biggest companies) because the most active voters also have a significant amount of their wealth in the public equity markets. And also all the state and local governments are heavily depending on equities to deliver major gains to fulfill their deferred compensation for government employees (otherwise they have to increase taxes to make up for lack of any performance), so the more state and local tax you pay or are able to pay, the more invested you are in backstopping the markets also.
- capital_guy 3y agoThis is a ridiculous take. Imperfect is better than bad. Right now you have the Speaker of the House's husband buying $5million worth of Alphabet call options. That's not a good system.
- koolba 3y ago> Right now you have the Speaker of the House's husband buying $5million worth of Alphabet call options. That’s patently false. Nancy Pelosi is no longer Speaker of the House. The former Speaker of the House’s husband was the one doing all that.
- kjkjadksj 3y agoPlenty of people do that. Asking someone to hang up their hat on their career due to the optics of their spouses career alone is kind of stupid.
- j33zusjuice 3y agoRofl. Please don’t vote.
- _ea1k 3y agoThat just sounds like the politicians fallacy. We must do something, this is something, we must do it! It is absolutely possible for a new imperfect system to be worse than the imperfect system that it replaces.
- ldoughty 3y agoBlind trust would be the most logical solution. You can put $X into the trust, but you never know which companies that money is invested in. When you ask for $Y to be paid out, the manager of the fund sells what they see fit to fulfill the request without the client's involvement/input
- ghaff 3y agoThat's probably the most appropriate solution in at least some cases. Once you get to a certain level of government you may have at least some influence on interest rate changes or otherwise have early knowledge of events that can move the market as a whole. The fact is that there are a lot of jobs that, at a minimum, place a lot of restrictions on the purchases and sale of stock of individual companies. (Many journalists and analysts for example.)
- _ea1k 3y agoDoes this also work for interests in privately held companies, including the ones that said congress person may have had before being elected? Or that they may start while in office? Or are we saying that a person in congress is not allowed to start a business?
- ccppurcell 3y agoHow about they do their jobs, and put off making money in other ways till after their term ends. Maybe they can buy government bonds.
- lesuorac 3y agoOr perhaps the salary of congress critters /etc should be significantly higher than it is. Is the CEO of Tesla (~50B ?) really more impactful than the US president (~400k/yr) ?
- one_level_deep 3y ago[dead]
- marktucker 3y agoWhat amount of money do you think you'd have to pay them in order for them to say "Yeah, that's enough. I'm not going to use my position to my advantage."?
- roflyear 3y agoWell, I dunno, but we should expect them to make executive-level pay, IMO. "The average Chief Financial Officer salary in the United States is $429,392 as of June 26, 2023" seems fair.
- lesuorac 3y agoWell abuse is human nature. But if they're making say ~2M/yr then there's very little reason to go lenient on a company so that they'll give you a retirement job there afterwards. It also means that if somebody wants to bribe you then the bribe has to be rather large as you're both risking that salary and you also certainly don't need that bribe. (Although I do also think the government should stop footing the bill for a lot of the stuff the congress critters do and if you want to spend 1/2 your presidency golfing that comes at your own expense). The salaries of government people has filter down affects though as federal employees cannot make more than the vice president (~261,400).
- giantg2 3y ago[Deleted]
- Invictus0 3y agoCongresspeople do not make $200k per year for life. The vast majority don't even make $200k while they're in office.
- mikeyouse 3y agoRight.. They make $174k/year (except the few leadership roles) which was last increased in 2009 -- so roughly $130k equivalent based on the BLS inflation calculator.. https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=174%2C000.00&year1=202301&year2=200912 https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=174%2C000.00&y... To receive a congressional pension, you need 5 years of service (to be elected to 3 terms), the pension can't exceed 80% of your salary, and is based on the number of years of service.. There are ~280 prior members of congress collecting FERS pensions and the average collected was $41k/year in 2016. (https://sgp.fas.org/crs/misc/RL30631.pdf https://sgp.fas.org/crs/misc/RL30631.pdf)
- respondo2134 3y agoEven if they're buying a lot of a relatively narrow index fund the ability to directly benefit from a specific company would be greatly reduced.
- BurningFrog 3y agoAn incentive to make index funds go up is hard to distinguish from an incentive to make the US economy healthy.
- _ea1k 3y agoIt is when it comes at the expense of small business and new competitors, which are less likely to be in those indexes. Want to compete with legacy auto? Want to compete with Google? Hmm, lets think of all the new regulations that you might have to meet. There are perverse incentives even in that system.
- ng12 3y agoFor the record this is basically the system for finance employees. You can only freely trade open-ended index funds. You can buy individual securities but only after a compliance review and with restrictions against short-term/swing trading. If we believe this to be effective for individuals on Wall Street I'm sure it's a good start for Congress.