Fed To Ban Policymakers From Owning Individual Stocks (cnbc.com) 68
An anonymous reader quotes a report from CNBC: Responding to a growing controversy over investing practices, the Federal Reserve announced Thursday a wide-ranging ban on officials owning individual stocks and bonds and limits on other activities as well. The ban includes top policymakers such as those who sit on the Federal Open Market Committee, along with senior staff. Future investments will have to be confined to diversified assets such as mutual funds.
Fed officials can no longer have holdings in shares of particular companies, nor can they invest in individual bonds, hold agency securities or derivative contracts. The new rules replace existing regulations that, while somewhat restrictive, still allowed officials such as regional presidents to buy and sell stocks. "These tough new rules raise the bar high in order to assure the public we serve that all of our senior officials maintain a single-minded focus on the public mission of the Federal Reserve," Fed Chairman Jerome Powell said in a statement.
Under the new rules, the officials will have to provide 45 days' notice in advance of buying or selling any securities that are still allowed. They also will be required to hold the securities for at least a year, and they cannot buy or sell funds during "heightened financial market stress," a news release announcing the moves said. "I'm hopeful that swift action will allow us to put this behind us and get us back focused on the job ahead," Atlanta Fed President Raphael Bostic told CNBC during a "Closing Bell" interview.
Fed officials can no longer have holdings in shares of particular companies, nor can they invest in individual bonds, hold agency securities or derivative contracts. The new rules replace existing regulations that, while somewhat restrictive, still allowed officials such as regional presidents to buy and sell stocks. "These tough new rules raise the bar high in order to assure the public we serve that all of our senior officials maintain a single-minded focus on the public mission of the Federal Reserve," Fed Chairman Jerome Powell said in a statement.
Under the new rules, the officials will have to provide 45 days' notice in advance of buying or selling any securities that are still allowed. They also will be required to hold the securities for at least a year, and they cannot buy or sell funds during "heightened financial market stress," a news release announcing the moves said. "I'm hopeful that swift action will allow us to put this behind us and get us back focused on the job ahead," Atlanta Fed President Raphael Bostic told CNBC during a "Closing Bell" interview.
congress (Score:5, Insightful)
Great, now do congress.
Re:congress (Score:5, Funny)
Only Congress can do Congress. Like that would ever happen.
Re:congress (Score:5, Insightful)
returns of $6m/year
Isn't the percentage return more important a number than the raw amount? My understanding is that her and her husband are worth quite a lot of money, but I am unsure how much exactly, if it is even known. If her returns are 5%, they aren't that remarkable, but if they are 20%, they are. Not disagreeing with what you are saying, just curious.
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In fact his magic has been losing its strength for a decade or so. [tradingninvestment.com]
This is counter-intuitive to generations of investors, which makes him useful for carefully-worded insinuations like the one above.
(And it's also entirely p
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You have to remember that a lot of the success Warren Buffett had was based on a single thing. He noticed that the rules limiting insurance companies from doing certain things had a loophole. Then he bought a lot of small such and used that loophole..
Oh, he has also had other successes, but that was the single big one that contributed a huge part of the total.
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Their (current) net worth is estimated at $120 million. $6 million is 5% of that, so nothing too crazy. Assuming the initial portfolio 40 years ago (and no additional deposits) was worth $1 million, you get a CAGR of 13%.
That said it is bad optics for elected officials to have any investments that can be impacted directly by their actions. That goes for Pelosi and Trump equally.
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The Social Security cost of living increase this year is 5.9%, so 5% on investments for 2021 is practically LOSING money. Hell, Mitch McConnell's net worth went up 30% this year, and that's because all of his money is in just one fund, Vanguard 500.
https://www.ssa.gov/oact/cola/... [ssa.gov]
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I’m pretty sure they did better than 5% this year and last year and it did a lot to boost their portfolio overall
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ESPECIALLY Pelosi who recently claimed They're "Just lucky" in regards to their investment success
https://www.usatoday.com/story... [usatoday.com]
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SCOTUS can do Congress ... but someone would have to find grounds to sue and take it that far.
Mind you, conflict of interest that huge *should* be grounds and the various ethics committees *should* have shut them down decades ago...but when you're living among thieves, your perception of stealing is rather different.
Congress (Score:5, Insightful)
How do you expect Congresspeople to be able to afford multiple homes and lakefront cottages on a Congressperson's meager salary? It's their absolute right to not be subject to insider trading statutes!
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Does it matter? It isn't like BBB was saying it is only wrong with Pelosi does it. It is ok to call out extreme examples without calling out all the examples.
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It's their absolute right to not be subject to insider trading statutes!
Congress is subject to insider trading laws: STOCK Act [wikipedia.org].
No member of congress has ever been prosecuted under the act, but there are some investigations in progress: 2020 Congressional insider trading scandal [wikipedia.org].
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Sorry, we have to do congress. Every two years we have the opportunity to vote out every incumbent from the house. Let's stop reelecting these people
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Every two years we have the opportunity to vote out every incumbent from the house.
No you don't. You just think you do.
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What, you only have one name on the ballot?
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What if your state legislature decides your vote doesn't count and overrules the results? Several have recently given themselves that right, just in case.
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Public oversight is a thing, use it or lose it.
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You don't.
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On the contrary. Our collective vote is very powerful, and reflects our feelings (and syndromes, phobias, psychoses) exactly
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The only way you can prove me wrong is to vote the incumbents out and see if they don't leave peaceably. But the numbers prove me right. Less than 2% of Americans vote for an opposition party. With all the names on the ballot, you'll never convince me they don't have a choice.
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The only country in the developed world to have two parties, and who has never, even one time been able to elect even a single third party, but it's the voter's fault?
You should read this, it might open your eyes. [amazon.com]
But you won't.
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I believe only congress can do that.
Unfortunately I suspect rule might stumble into trouble with the Supreme Court which, with a much less conservative bench than present, ruled that money=speech and companies are people. Its not hard to extrapolate that "owning stocks" would therefore qualify as "speech". The judiciary seems to see this kind of thing in semiological terms. A stock in theory is a symbol that stands for money, and money can be a symbol that can represent opinions, at least for those who can
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Yeah, I was about to ask why the same rules shouldn't apply to Congresscritters.
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I heard somewhere that congress is all just a bunch of policymakers.
Not far enough (Score:5, Insightful)
This only applies to the fed? Nice start but all of Congress and Executive branch leadership should be required to use blind trusts.
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Can someone translate this to English?
Section 2634.310(b)(1) is amended by removing the cross-references to “2634.403” and “2634.404” in the first sentence and replacing both cross-references with “2634.402”.
This entire document is meaningless to me.
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You are right but the Fed doesn't have authority over any other agency or branch of government. They can make this rule for themselves, but that's as much as they can do.
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What about the SEC? Last I checked, insider trading was illegal. Congress and the Executive are effectively the ultimate meta-insiders, since they'll know what new legislation is being honestly discussed long before anyone else in the private sector or the newswires. They'll also have a much better idea of how the vote whips are actually progressing.
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The only things that are illegal are those thing congress makes illegal. The SEC, being an executive branch agency, has no right to make laws. They can only enforce existing laws.
Guess what's not illegal when a senator or congressman does it?
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Not looking for new laws here. Just looking for them to enforce existing laws that already cover insider trading. IIRC, anyone that trades with insider knowledge is doing so illegally, whether they work for the company they are trading or they are doing so based on 'good information' obtained from another source that has insider knowledge. Seems to me that being at the helm of government makes for some access to some pretty 'good information'.
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I guess I didn't make it clear. When I wrote "Guess what's not illegal when a senator or congressman does it?" I meant insider trading is not really illegal when congresscritters or senators do it.
They made an exemption in the original insider trading laws, for themselves. Then they passed a new law in 2012 that specifically does make it illegal for them, but the fine is, get this, $200. No other punishment. AND the fine can be waived by house or senate ethics committees. So yeah. New laws are necessary.
Think like a lawyer (Score:3)
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But that would be unethical!
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Sure, you could but the requirement is typically for assets to be held in a blind trust. There are plenty of games you can play with this stuff if you are unethical, but the goal should be to create a reasonable baseline for ethical behavior.
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So what is to keep these policymakers from going to a boutique brokerage that crafts custom mutual funds with a portfolio that "coincidentally" contains the exact stock/bond mix that satisfies the policymaker's "needs" that the policymaker would then "select" as their investment choice?
IANAL and I suspect you aren't either.
Programmers tend to read law like source code and look for potential loopholes the same way they would bugs.
ie, The official isn't allowed to buy and sell specific stocks... but they can find someone who will create a mutual fund to do exactly that.
But that's not how legal loopholes work. Loopholes aren't software bugs as much as they are areas where the intent of the law isn't obvious and you get a mismatch between what people think the law should do and what it actual
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That's what I was thinking. If they want to buy $1M of a stock, they could buy a "fund" with $1M of that stock and 1 share of WMT for $150. Or they could diversify and also get a share of GME for $170.
Just require 10b5-1 plans. (Score:2)
There are already plans which employees have to use to prevent insider trading. Basically, you setup a rules-based system for trading, and any changes don't take effect for 60 days. Usually it only applies to stock in the company you work for, but having it apply to all holdings would leverage existing practice and knowledge, rather than defining a variety of independent new rules.
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There are already plans which employees have to use to prevent insider trading. Basically, you setup a rules-based system for trading, and any changes don't take effect for 60 days. Usually it only applies to stock in the company you work for, but having it apply to all holdings would leverage existing practice and knowledge, rather than defining a variety of independent new rules.
That's not quite how it works, though will vary from company to company. The rules vary depending on your position and access to non-public information and need to meet SEC requirements. Common rules include 30-day (+/-) minimum hold, registration of all brokerage accounts, 7-day IPO purchase restriction, prohibited security list. Employees with regulatory oversight or with access to non-public information have further restrictions that can include requiring pre-clearance for purchase or sale, specific t
This is useless (Score:1)
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Am I the only one that thinks this is useless? You'll just do this stuff through colleagues tips via friends and family like all the insider traders do already anyway. Impossible to trace if you tell your exec buddy and he drops you a hint for your side.
Came here to say pretty much this - I don't understand why you were modded down. There has to be a hell of a lot of insider trading already going on that is never discovered and prosecuted - it would probably be easy for policymakers to engage in it and hide the fact well enough to avoid prosecution. If they really cared about ethics this new ban wouldn't be necessary - it's already very obvious that using their position to game the stock market is unethical.
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Maybe because it's the usual tired "this won't solve all possible edge cases so better do nothing" take.
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At least then they would have to trust family/friends to keep their mouths shut and also pay them money they technically don't owe.
Also, even with insider knowledge the market can be unpredictable. I've known people with insider knowledge who have said sharing it wouldn't help much anyway. They have seen excellent numbers and would expect the market to act favorably yet the stock goes down after the quarterly report. They have also seen bad numbers released and the stock go up because the street expected th
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At least then they would have to trust family/friends to keep their mouths shut and also pay them money they technically don't owe.
Also, even with insider knowledge the market can be unpredictable. I've known people with insider knowledge who have said sharing it wouldn't help much anyway. They have seen excellent numbers and would expect the market to act favorably yet the stock goes down after the quarterly report. They have also seen bad numbers released and the stock go up because the street expected them to be worse.
Then they're either stupid, or failed to take into account context for their information...which is pretty silly given the type of position with access to that info.
More likely, they're trying to politely dissuade you from bothering them for illegal tips and then blaming them when you don't get rich.
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Am I the only one that thinks this is useless?
You'll just do this stuff through colleagues tips via friends and family like all the insider traders do already anyway.
Impossible to trace if you tell your exec buddy and he drops you a hint for your side.
You'd be surprised. Like most crime, lots goes unnoticed - but many criminals are stupid. Stupid criminals get caught. Stupid criminals are greedy. Criminals are rarely as smart as they believes themselves to be and financial records are kept long after someone's forgotten about a tip that funded their new range rover.
TBH most people with access to non-public info prefer having their jobs and avoiding jail vs. giving their neighbor an insider tip. Especially since they can't use the info themselves and t
Good for company founders (Score:1)
Taking a government job is now a tax-effective way to diversify your share portfolio.
Imagine you founded a company, and 99% of your wealth is tied up in those shares, but you can't diversify because you'd lose a big chunk to capital gains tax. So you take a government job, and convert the shares to an ETF. The capital gains are now embedded in the ETF shares, but no tax has to be paid immediately. Which might help attract talented candidates to government jobs.
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... wait what?
There are far better, easier ways for the very wealthy to both diversify and realize income from their portfolio.
Better late than never? (Score:1)
Yeah, so they do this only AFTER the stock market hits all time highs and has run out of juice... Meanwhile, their policies would have not only told them the stock market would keep climbing through unprecedented QE, but the policy makers likely knew which equities they'd be pumping money into. Now release records on how much these officials made during all of this and on which stocks. Transparency now.
Also... FFS this world is going to hell.
Very simple (Score:2)
We already have nice public ETFs. If you want to invest in US stocks, there is VTSAX, if you want international VGTSX, if you want *everything* there is VTI, if you want only socially responsible, environment friendly stocks, there is ESGV. And their returns are easily in the 15% - 20% range.
If you need anything more -- as a public servant -- you are basically greedy, and probably don't deserve to represent the people of this country.
(Ok, there are other alternatives, but the effects are more or less the sa
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If you need anything more -- as a public servant -- you are basically greedy, and probably don't deserve to represent the people of this country.
If one needs anything more as a member of Congress, one is probably violating the STOCK act.
LOL, just "stocks" and "bonds" (Score:2)
Fed policymakers that is. Not policians :( (Score:1)
Data point (Score:2)
now Congress (Score:2)
If only Congress did self-policing as well as our bankers.
Unelected people telling elected people what to do (Score:2)