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Rep. Tom Price, Donald Trump’s nominee to run the Department of Health and Human Services, has been coming under criticism for his stock trading – investing in biotechnology and medical device companies that stood to benefit from policies he supported in Congress.
Price’s defense of his trading is that it was legal, which it probably was, and that in many cases his broker was trading without his knowledge.
The Huffington Post notes that one of his trades would have been illegal “if he received nonpublic information,” which is sort of like noting that driving a car is illegal if it is stolen. As far as we can tell, Price followed the rules.
But the rules are not stringent enough.
At Business Insider, our conflict-of-interest policy says that reporters and editors may not do short-term trading of stocks, nor may we do any trading of stocks in companies that do business in industries we report on. In accordance with this policy, my investments consist entirely of equity index funds and cash.
Why isn’t Congress held to a similar standard on investing? A member of Congress has a lot more ability to influence the value of a public corporation’s stock than I do.
Price’s trades should have been illegal because members of Congress should be generally forbidden from trading individual stocks.
If members of Congress were forbidden from playing the market, the American public would not have to wonder whether they are making policy decisions to benefit their portfolios or making investment decisions based on their knowledge of future legislative actions.
In some cases, lawmakers might enter Congress with existing, difficult-to-liquidate assets that predate their government service; these are harder cases, and we would need a framework for dealing with these situations that does not discourage successful people from serving in government.
But the go-forward investing case is easy. Nobody needs to buy and sell individual stocks on an ongoing basis.
Members of Congress could stick to diversified mutual funds. Assuming they were not benefitting from insider information, sticking to boring funds would probably mean they do better by saving on commissions and fees anyway.