Many believe it's time to do away with lawmakers making stock trades | Hacker News Reader

Many believe it's time to do away with lawmakers making stock trades

npr.org

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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

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.

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.

https://housestockwatcher.com/ & https://senatetockwatcher.com/

ref: NPR article https://www.npr.org/2021/09/21/1039313011/tiktokers-are-trad...

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.

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?)

> 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.

The disclosures include the date the trade was made. The only ambiguity is the amount invested.

Also, estimate <> precision or accuracy :)

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

Is there a Congress ETF?

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.

You're right. I'm an idiot, should have considered that.

You could track corporate donations.

Effectively, yes - it's a combination of "regulatory capture" and "campaign contributions"

Whoa whoa slow down there, what are we, a free market?

That's only for HNWI and hedge funds.

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)

"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.

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.

> 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".

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.

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.

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]”

Good stuff. I'd be interested in sorting that by stock to see what stocks they (including their spouses/sig-oth) all are purchasing.

Honestly it was super clear to me by late January or early Feburary 2020 that the pandemic was a big deal. I had no closed door briefings and I have no political connections. I am just a smarter than your average bear critical thinker I guess.

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.

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.

> "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.

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.

No, but they intended to limit the Presidents ability to create new regulations that could put legislators in jail.

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).

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?

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...

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.

Other countries have no problem prosecuting lawmakers for insider trading.

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?

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.

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.

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.

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.

> 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.

Hahaha that's awesome. I bet they would abuse that too though

True, there would have to be some requirement that they keep, say, at least 30% of their net worth invested in govt debt for 10yrs after they leave office. To better incentivize them to manage it for the long term rather than short term.

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.

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.

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.

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

Ohh, you mean like the current Democratic leader of the House of Representatives?

https://finance.yahoo.com/news/nancy-pelosi-buys-tesla-calls...

Morals, or a different risk/reward ratio

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.

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.

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).

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.

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.

> 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.

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.

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.

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.

On the other hand, Singapore judges are well paid and their courts are considered among the most honest in the world.

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.)

> 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).

Thanks, I guess I was misremembering the household income as being in the 70s.

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.

>U.S. Reps and Senators have an annual salary of around $180,000

Literally nothing for the stress and pressure they endure, I'm a designer who doesn't get out of bed before 10:30, at most works hard for 4 hours tops and earns $136,000 which I also think isn't much in 2021. Politicians deserve more but I also want them and their partners or children in solitary confinement for decades if a single one of them insider trades to earn more.

Pay politicians 3 million a year or even more I don't care it's a drop in the bucket compared to the millions they funnel through garbage charities, favors and programs just to skim cream off the top. Pay them an absolute fortune but the second they insider trade or try to skim cream solitary, lethal injection, firing squad I don't care. they're scum.

I don't think this in unreasonable and I'm happy to pay them an extremely competitive salary just for living within these restrictions and auditing their entire linage to make sure they are too.

At this point this is the only way I can envision honest government existing. Think I'm wrong? Google "Nancy Pelosi Husband stock trading" her husband is "earning" more than I'm suggesting just insider trading of her privileged information.

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...

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?

>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/

Actually what you get are rich people who don't need the low salary.

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.

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.

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.

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?

Investing in an index fund might even incentivize them to ensure the economy as a whole does well.

Incentivizing that large public companies do well, not quite the same.

Equally weighted ETFs exist. Those would give a lot more exposure to smaller companies.

I highly doubt ETFs exists or can be made that give exposure to your privately owned "mom & pop" shops, or even larger privately owned companies.

Then make it a total market index fund with small, mid-size, and large companies.

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.

The family owned restaurant down the block is definitely listed on the stock exchange.

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

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.

> 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?

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.

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.

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.

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.

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

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.

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.

It should follow similar rules to other professions with privileged information like most accountants need to follow

We already have a regulatory framework for managing those issues that was built to deal with insider trading.

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.

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.

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...

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.

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?

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...

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.

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.

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.

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.

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.

Politics.

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.

I’m not sure if your comment was meant to be ironic but it is.

They are just reported on more. This problem is party agnostic.

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.

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...

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.

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.

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.

AHA - makes far more sense now. That pesky old 'adjusted for inflation'.

It's from selling books. What is your point?

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.

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.

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.

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.

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.”

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

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.

> 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.

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.

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.

This is it. Greed has no boundaries!

++ "electing people with a functioning moral compass"

Why would they not just do both, though?

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.

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.

You can only prosecute after it has been made illegal, though.

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

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.

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.

We should also do away with the steak dinners, golf trips and other 'perks' that lobbyists/vendors give them in exchange for votes.

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.

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.

It's already illegal for lobbyists to pay for dinners or meals of any kind, including at a McDonald's.

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.

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.

Right. And no 'working' conferences on tropical island resorts with 5,000 dollar per night rooms.

Have you never split a check before?

The Nancy Pelosi family office is one investment vehicle I’d like to invest in.

Just buy ITM leaps, it's what her husband typically does (leaps in Tesla, Disney, Roblox last time I looked).

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?

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.

> 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?

And their partners, parents, children, friends?

This problem looks unsolvable to me.

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.

> 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?

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 :)

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)

Sounds like a good way to elect leaders that have no disincentive for staring a thermonuclear war.

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.

...assuming they're not already dead by then.

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.

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.

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.

They prevent the family of employees of companies that host contests and sweepstakes from participating, don’t they?

That's more a "we're free to claw back the prize if we discover you ignored it" rule than anything else effective.

And the SEC monitors people's family if they work in a regulated role.

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.

Where I work, people in the front office can't trade in single stocks either. Funds only.

This is what insider trading laws do already. It's not a perfectly solved problem but it is problem with an existing solution.

Au contraire it's trivial. Or are politicians somehow invulnerable to the same things engineers are?

https://www.sec.gov/litigation/complaints/comp7lr17243.htm

If only we had some sort of technology to monitor social networks and large amounts of data...

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.

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.

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.

We already have a definition for a politically exposed person.

If Kaiser Soze would have killed them, then their trades should also be restricted.

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.

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.

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.

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.

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?

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.

Really, all of our political problems were more or less solved in ancient Rome.

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.

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.

>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?

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.

Thanks for the response. While I don't agree that stocks and companies are counter to the public good, I understand how someone could feel this way.

How do you personally invest and save if you avoid stocks?

It’s so gross that they do this. When I worked at banks on Wall Street, they all had onerous approval processes for employees to trade. Pre-approvals that lasted for one day only etc. All these rules attempting to prevent insider trading. Amazing that these scummy Fed employees and congressmen don’t have any encumberence like that. So gross.

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.

It might read unrelated yet, term limits is the only concrete way to limit the damage of a corrupt lawmaker.

I think the easiest solution is they should not be allow to buy individual stocks + options. Only indexes.

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.

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.

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.

Federal lawmakers aren't capable of NOT insider trading.

How about all branches, judicial, executive, and legislative? Emoluments and conflict of interest seem equally harmful in all.

I have always thought politicians should take a vow of average wealth. You don't get more money unless we do, too.

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.

In the US at least, the courts can check this power. In theory.

Instead of doing away with stock trades, the better approach would be to do away with "lawmakers."

Unfortunately they get around the laws by having their spouse or financial advisor manage the portfolio.

100%. Didn't politicians make a ton of privileged stock bets when they knew COVID was coming here?

As for me, shares are very convenient for a certain category of the population. And also profitable.

Just define a small universe of allowable ETFs and options on those ETFs and be done with it.

This is not hard.

Just when was it that many thought it was a good idea?

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.

Or give lobbyists more power over the revolving cast of lawmakers who each want to cash in during their short window of opportunity.

Apologies, but I am unclear if you are facetious or serious. (not native English writer.) Can you explain what you mean?

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.

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.

If you write good law you should be able to reap some amount of the financial rewards.

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.

Source for Bernie Sanders?

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.

Came here to say the same thing. Trades by lawmakers should be instantaneously public.

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.

Don’t underestimate the power of default options

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.

"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.

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.

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.

Today I Learned... of course, the distinction might be that firing an elected official is far more complicated than firing a hired fintech guy.

*purposeful loopholes

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.

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.

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.

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.

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.

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".

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