4 ms·

Radical proposal: Rather than trying to police leakage of insider information, level the playing field for both politicians and fed employees by creating a do

Radical proposal: Rather than trying to police leakage of insider information, level the playing field for both politicians and fed employees by creating a dozen or so national mutual funds of at least 1,000 equity positions each that intend to model the US economy as a whole. Anyone can invest in them, but all US Federal employees and immediate family members are required to liquidate all other positions and hold only national funds. If the economy and funds do well, all federal folks profit. Distribute fund management among multiple fund management firms.

conformist 3y ago
Unfortunately the stock market is not (reflective of) the economy? It seems reasonable to force them to diversify nonetheless.
leoqa 3y ago
What about state and local gov employees?
ghayes 3y ago
There are significantly better options here, e.g. by moving assets into a blind trust while in office.
- kumarvvr 3y ago
  Do blind trusts really work? I mean, with the amount of corruption, would it not be possible to get all info from the trust and give decisions, one way or the other?
  - kristopolous 3y ago
    I'm a big supporter of a forced liquidation, without tax penalties, of all positions upon winning federal election. That would of course dramatically limit the people who pursue public office to you know, only virtuous people who are willing to selflessly sacrifice themselves for the public good. Those people do exist, we've just configured our electoral system in every way to discourage such admirable behavior. It doesn't have to be full of opportunistic palm greasing scoundrels, we've just set it up that way.
    - dragonwriter 3y ago
      > That would of course dramatically limit the people who pursue public office to you know, only ... people convinced that the graft in office would offset the loss of opportunity from investment gains.
      - kristopolous 3y ago
        There are actually people that aren't self interested in public service, they do exist. You can find them at state parks, libraries, museums and schools even. I've met plenty of scientists for instance, that work at universities, places like MBARI and JPL and for the city/county at lower salaries without stock options for the opportunity of public service. They're real, we just need to get more of them in higher office
        dragonwriter 3y ago
        > There are actually people that aren't self interested in public service, they do exist. Sure, I'm one of them. If you think that for the subset of public service that constitutes "electoral politics", that cutting people out of the opportunity to have investment income while in office is going to restrict office holding to those people, than you are, well, hopeliessly naive. Compared to the status quo, you'll eliminate some good people who would have been happy enough putting their investments in a blind trust and not been acting out of conflicts with their own investments, and you'll eliminate some people for whom the ability to serve their own investments was a deciding factor, but there's all kinds of corrupt interests that don't rely on having investments in ones own name that people pursue in politics.
        chii 3y ago
        > There are actually people that aren't self interested in public service, they do exist. relying on altruism is not what i would call scalable nor stable. The rules of the system should be such that the optimal/desirable behaviour is also the selfish behaviour. If something selfish or damaging is beneficial to the individual at the expense of someone else, then the rules must be changed to even it back out.
reidacdc 3y ago
Even more radical proposal: Make this restriction on senior corporate officers. Your salary can depend on how well the company does, but your investment portfolio depends on the broader market. I mean, as long as we're using investment restrictions for social engineering.
- chii 3y ago
  An even more radical proposal: There's no restrictions on insider trading, except that the disclosure requirement is immediate (upon trade execution) and non-anonymous. AKA, the price of a stock is reflective of the information available - and any insider that tries to take advantage of such information will necessarily reveal it the nano-second they make the trade.
kbenson 3y ago
Wouldn't that just incentive those people to always favor the items in that fund, therefore providing an advantage to anything that makes in on the fund? Given two competitors in a market, what if the existing but inefficient one is in the fund but the new one that is trying to shake thing up and/or do a better job is not? You might see a lot more protectionism, and not just against companies of other nations, but against our own new best companies.
- alooPotato 3y ago
  i think thats the point? better than favoring just a few stocks you have insider info on...
  - fbuslop 3y ago
    It actually would be worse. It would distort the entire market...
  - kbenson 3y ago
    There's a huge difference between the occasional company getting the occasional boost when some individual lawmaker or a small group of them can finagle something good for a company compared to every single lawmaker being aligned and wanting certain companies that they all agree on to succeed over others purely because it's beneficial for them and not necessarily because the market views them as better or the general public benefits. A free market is a system that's based on emergent behavior. As we see time and time again, even the best and most useful and narrowly focused regulations that are beneficial when first implemented need constant review to make sure they aren't later doing more harm than good. Carving out a big chunk of the market as likely to get special behavior regardless of the normal inputs and outputs could outright be disastrous, IMO.
- _ea1k 3y ago
  Yeah, I've always been a little sceptical of plans to limit their holdings. I think in some ways they actually worsen the incentives. If you were limited to GM and Ford, would you want a Tesla or Rivian to exist? If you were limited to K-Mart, would you want Wal-Mart to exist? If you limited to Sears, would you want Lowes, Home Depot, and Best Buy to exist? Basically any restriction that can be imagined would incentive various other bad behaviors that might actively be anticompetitive.
tzs 3y ago
What do you mean by "immediate family"? That usually means spouse, parents, children, and siblings. Sometimes also grandparents and grandchildren. If you mean something like that then your proposal seems overly restrictive. I don't see any point in say the USGS not being able to hire a seismologist they want to hire because the seismologist can't convince his brother to sell his Microsoft stock and his adult daughter to get rid of her Apple stock. Nothing that seismologist would be able to working at USGS is going to influence those stocks, nor is his work going to provide him with any inside information.
- dmckeon 3y ago
  Okay, make that spouse instead, because spousal immunity. Also, make the funds' holdings temporarily blind: a fund does not reveal the entirety of the holdings in its portfolio until 5 years after year-end, and waits 3 months after the closing of a position to reveal that it held XYZ, Inc. during a 37 month period. The idea is not to try to exactly match "the economy" with "the market" or even with "the funds" but to disincentivize politicians making any direct connection between their work and with individual equities, while still being able to benefit from general economic growth.
deleted 3y ago
[deleted]
tootie 3y ago
It's called VTSAX
atrettel 3y ago
I think that much of what you propose is already enacted in practice, at least for many federal employees who are not political appointees, etc. Elected representatives are another matter entirely. Many federal employees do in fact have to limit what securities they can purchase or hold. For example, if I recall correctly, patent examiners cannot hold more than $20,000 in investments for an industry that they examine patents in, and they cannot hold more than $10,000 in stock for any company they may examine patents for. The guidance tells them to prefer index funds that capture the entire market rather than individual companies or sectors. This is explicitly to prevent conflicts of interest. If you are high up enough in these federal positions (without having to be a political appointee), you even have to complete a financial disclosure form (SF-714), and people do check these things for potential conflicts. That said, many federal employees invest heavily in TSP funds, most of which are managed by BlackRock, so your last point about distributing them among multiple fund managers is not true in practice, since I imagine most federal employees have their investments heavily in funds managed by BlackRock.

conformist 3y ago

Unfortunately the stock market is not (reflective of) the economy? It seems reasonable to force them to diversify nonetheless.

leoqa 3y ago

What about state and local gov employees?

ghayes 3y ago

There are significantly better options here, e.g. by moving assets into a blind trust while in office.

kumarvvr 3y ago
Do blind trusts really work? I mean, with the amount of corruption, would it not be possible to get all info from the trust and give decisions, one way or the other?
- kristopolous 3y ago
  I'm a big supporter of a forced liquidation, without tax penalties, of all positions upon winning federal election. That would of course dramatically limit the people who pursue public office to you know, only virtuous people who are willing to selflessly sacrifice themselves for the public good. Those people do exist, we've just configured our electoral system in every way to discourage such admirable behavior. It doesn't have to be full of opportunistic palm greasing scoundrels, we've just set it up that way.
  - dragonwriter 3y ago
    > That would of course dramatically limit the people who pursue public office to you know, only ... people convinced that the graft in office would offset the loss of opportunity from investment gains.
    - kristopolous 3y ago
      There are actually people that aren't self interested in public service, they do exist. You can find them at state parks, libraries, museums and schools even. I've met plenty of scientists for instance, that work at universities, places like MBARI and JPL and for the city/county at lower salaries without stock options for the opportunity of public service. They're real, we just need to get more of them in higher office
      - dragonwriter 3y ago
        > There are actually people that aren't self interested in public service, they do exist. Sure, I'm one of them. If you think that for the subset of public service that constitutes "electoral politics", that cutting people out of the opportunity to have investment income while in office is going to restrict office holding to those people, than you are, well, hopeliessly naive. Compared to the status quo, you'll eliminate some good people who would have been happy enough putting their investments in a blind trust and not been acting out of conflicts with their own investments, and you'll eliminate some people for whom the ability to serve their own investments was a deciding factor, but there's all kinds of corrupt interests that don't rely on having investments in ones own name that people pursue in politics.
      - chii 3y ago
        > There are actually people that aren't self interested in public service, they do exist. relying on altruism is not what i would call scalable nor stable. The rules of the system should be such that the optimal/desirable behaviour is also the selfish behaviour. If something selfish or damaging is beneficial to the individual at the expense of someone else, then the rules must be changed to even it back out.

reidacdc 3y ago

Even more radical proposal: Make this restriction on senior corporate officers. Your salary can depend on how well the company does, but your investment portfolio depends on the broader market. I mean, as long as we're using investment restrictions for social engineering.

chii 3y ago
An even more radical proposal: There's no restrictions on insider trading, except that the disclosure requirement is immediate (upon trade execution) and non-anonymous. AKA, the price of a stock is reflective of the information available - and any insider that tries to take advantage of such information will necessarily reveal it the nano-second they make the trade.

kbenson 3y ago

Wouldn't that just incentive those people to always favor the items in that fund, therefore providing an advantage to anything that makes in on the fund? Given two competitors in a market, what if the existing but inefficient one is in the fund but the new one that is trying to shake thing up and/or do a better job is not? You might see a lot more protectionism, and not just against companies of other nations, but against our own new best companies.

alooPotato 3y ago
i think thats the point? better than favoring just a few stocks you have insider info on...
- fbuslop 3y ago
  It actually would be worse. It would distort the entire market...
- kbenson 3y ago
  There's a huge difference between the occasional company getting the occasional boost when some individual lawmaker or a small group of them can finagle something good for a company compared to every single lawmaker being aligned and wanting certain companies that they all agree on to succeed over others purely because it's beneficial for them and not necessarily because the market views them as better or the general public benefits. A free market is a system that's based on emergent behavior. As we see time and time again, even the best and most useful and narrowly focused regulations that are beneficial when first implemented need constant review to make sure they aren't later doing more harm than good. Carving out a big chunk of the market as likely to get special behavior regardless of the normal inputs and outputs could outright be disastrous, IMO.
_ea1k 3y ago
Yeah, I've always been a little sceptical of plans to limit their holdings. I think in some ways they actually worsen the incentives. If you were limited to GM and Ford, would you want a Tesla or Rivian to exist? If you were limited to K-Mart, would you want Wal-Mart to exist? If you limited to Sears, would you want Lowes, Home Depot, and Best Buy to exist? Basically any restriction that can be imagined would incentive various other bad behaviors that might actively be anticompetitive.

tzs 3y ago

What do you mean by "immediate family"? That usually means spouse, parents, children, and siblings. Sometimes also grandparents and grandchildren. If you mean something like that then your proposal seems overly restrictive. I don't see any point in say the USGS not being able to hire a seismologist they want to hire because the seismologist can't convince his brother to sell his Microsoft stock and his adult daughter to get rid of her Apple stock. Nothing that seismologist would be able to working at USGS is going to influence those stocks, nor is his work going to provide him with any inside information.

dmckeon 3y ago
Okay, make that spouse instead, because spousal immunity. Also, make the funds' holdings temporarily blind: a fund does not reveal the entirety of the holdings in its portfolio until 5 years after year-end, and waits 3 months after the closing of a position to reveal that it held XYZ, Inc. during a 37 month period. The idea is not to try to exactly match "the economy" with "the market" or even with "the funds" but to disincentivize politicians making any direct connection between their work and with individual equities, while still being able to benefit from general economic growth.

deleted 3y ago

[deleted]

tootie 3y ago

It's called VTSAX

atrettel 3y ago

I think that much of what you propose is already enacted in practice, at least for many federal employees who are not political appointees, etc. Elected representatives are another matter entirely. Many federal employees do in fact have to limit what securities they can purchase or hold. For example, if I recall correctly, patent examiners cannot hold more than $20,000 in investments for an industry that they examine patents in, and they cannot hold more than $10,000 in stock for any company they may examine patents for. The guidance tells them to prefer index funds that capture the entire market rather than individual companies or sectors. This is explicitly to prevent conflicts of interest. If you are high up enough in these federal positions (without having to be a political appointee), you even have to complete a financial disclosure form (SF-714), and people do check these things for potential conflicts. That said, many federal employees invest heavily in TSP funds, most of which are managed by BlackRock, so your last point about distributing them among multiple fund managers is not true in practice, since I imagine most federal employees have their investments heavily in funds managed by BlackRock.