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Fed to ban policymakers from owning individual stocks

cnbc.com

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Re: Fed to ban policymakers from owning individual stocks

#211

Post by landemva »

_3u10 wrote: post #178
jrochkind1 wrote: post #156

If you read past the headline to just the first bullet point, you don't even have to go past there: > The Federal Reserve announced sweeping new rules for its top officials Thursday, banning trading in individual stocks and bonds. The top officials of the Fed. not congress people. The comments thread here is making me wonder if all HN comment threads are made up mostly of posters who haven't read beyond the headline.

This is perfect policy, the Fed affects macros not individual stocks so it sounds like the government is doing something when it’s ensuring that Fed officials are only investing in indexes / macros which is where Fed policies are likely to affect markets the greatest. In startup parlance the fed is the rising tide.

Federal Reserve is not the government, and it's employees are not government workers. The Fed is a private cartel owned by large banks, which the government uses like a contactor to implement the setting of interest rates and purchasing of government debt.

Re: Fed to ban policymakers from owning individual stocks

#212

Post by landemva »

huitzitziltzin wrote: post #194
zzleeper wrote: post #184

Earlier quoted context omitted.

It is instituted. I work at the Fed in a relatively junior role. I can't buy bank stock, or for any practical purposes any financial firm stock (or bonds). I can't buy funds finance-focused mutual funds or any kind. I can't buy stocks of any firm where I have any sort of insider trading, such as contractors. Lastly, there's a window around FOMC meetings where anyone with any sort of insider knowledge is prohibited to…

Fellow economist here… I would have thought this rule would be irrelevant to us! I don’t think most of us think we can beat the market. I hold index funds only. (To be clear: I think this rule is a good idea and should apply to anyone with any serious role there. I’m just a little surprised it’s binding on anyone.) Edit: clicked on your profile. Thanks for writing reghdfe. I use it with some coauthors on a project on…

It is hilarious that well-studied economists understand that it is difficult and unlikely to consistently beat market returns when using any decent size, yet a primary purpose of the Fed is explicitly to manipulate interest rates.

We would get more value, and much cheaper, by simply using a formula for money expansion and the resulting interest rate.

Re: Fed to ban policymakers from owning individual stocks

#214

Post by chii »

dragonwriter wrote: post #62
brodouevencode wrote: post #2

Does anyone think the SEC will take similar actions against elected officials? Given there have been plenty of stories about this happening it seems like it should be up for consideration.

> Does anyone think the SEC will take similar actions against elected officials? No, because the SEC doesn’t have authority to do that. Congress did that, once, but then delayed it becoming effective until finally they decided to repeal it.

it'd be easier to make the trades of congress people (and anyone associated with inside information as part of the gov't) public as soon as they are placed (rather than any delay like today).

I think transparency is enough, because banning trades is too hard, and probably unfair.

Re: Fed to ban policymakers from owning individual stocks

#215

Post by zzleeper »

huitzitziltzin wrote: post #194
zzleeper wrote: post #184

Earlier quoted context omitted.

It is instituted. I work at the Fed in a relatively junior role. I can't buy bank stock, or for any practical purposes any financial firm stock (or bonds). I can't buy funds finance-focused mutual funds or any kind. I can't buy stocks of any firm where I have any sort of insider trading, such as contractors. Lastly, there's a window around FOMC meetings where anyone with any sort of insider knowledge is prohibited to…

Fellow economist here… I would have thought this rule would be irrelevant to us! I don’t think most of us think we can beat the market. I hold index funds only. (To be clear: I think this rule is a good idea and should apply to anyone with any serious role there. I’m just a little surprised it’s binding on anyone.) Edit: clicked on your profile. Thanks for writing reghdfe. I use it with some coauthors on a project on…

TBH 99% or more of what I hold is index funds. I started playing with Robinhood when trying to understand what was going on in the retail market (May 2021). On the other hand, I do think that from time to time you can get an insight that the rest of the market hasn't picked up.

About reghdfe, you are welcome! I wrote it because the server for my PhD thesis was a piece of crap, but it kinda found a life on its own!

Re: Fed to ban policymakers from owning individual stocks

#216

Post by _3u10 »

landemva wrote: post #211
_3u10 wrote: post #178

Earlier quoted context omitted.

This is perfect policy, the Fed affects macros not individual stocks so it sounds like the government is doing something when it’s ensuring that Fed officials are only investing in indexes / macros which is where Fed policies are likely to affect markets the greatest. In startup parlance the fed is the rising tide.

Federal Reserve is not the government, and it's employees are not government workers. The Fed is a private cartel owned by large banks, which the government uses like a contactor to implement the setting of interest rates and purchasing of government debt.

It is part of the government. Its not “owned” by anyone, similar to a non-profit. It was created by the Federal govt.

It’s board of governors are employees of the govt.

Similar to most major corporations the “ownership” is highly nuanced. It’s roughly equivalent to three share classes, the govt has the shares that pay dividends and most of the voting shares. Chartered banks hold some shares that have some voting rights, roughly equivalent to holding shares in a credit union.

In some ways it’s a trust. As the beneficiary is the govt but it appoints a trustee and officially doesn’t own it.

Defacto it’s owned and operated lock stock and barrel by the govt.

Re: Fed to ban policymakers from owning individual stocks

#217

Post by mraudiobook_com »

_3u10 wrote: post #216
landemva wrote: post #211

Earlier quoted context omitted.

Federal Reserve is not the government, and it's employees are not government workers. The Fed is a private cartel owned by large banks, which the government uses like a contactor to implement the setting of interest rates and purchasing of government debt.

It is part of the government. Its not “owned” by anyone, similar to a non-profit. It was created by the Federal govt. It’s board of governors are employees of the govt. Similar to most major corporations the “ownership” is highly nuanced. It’s roughly equivalent to three share classes, the govt has the shares that pay dividends and most of the voting shares. Chartered banks hold some shares that have some voting righ…

Are the share holders ever individuals?

Re: Fed to ban policymakers from owning individual stocks

#218

Post by FormerBandmate »

srcreigh wrote: post #30
errantmind wrote: post #22

Earlier quoted context omitted.

This breaks down when multi-term policy decisions need to be made. This would only push them to kick the can down the road

What if they are paid based on performance in 10 years, after they are out?

Yeah, this is about what I’m thinking. Normal salaries but options for massive payouts if things do well

Re: Fed to ban policymakers from owning individual stocks

#219

Post by batch12 »

jdavis703 wrote: post #207
batch12 wrote: post #186

Earlier quoted context omitted.

Maybe they would be able to better empathize with the vast majority of people they represent.

Why would an ambitious person run for office if the pay is low? We’ve already tried this experiment with government industries like teaching, and then we wonder why American educational policy is loosing global competitiveness.

175k/year isn't low for most of America. Not even half of that is considered low in most areas.

Re: Fed to ban policymakers from owning individual stocks

#220

Post by imtringued »

josho wrote: post #100
louloulou wrote: post #46

Earlier quoted context omitted.

Welcome to the libertarian/small government world view!

Wow, so that actually deters me from libertarian ideals. It sounds like your logic is something like the following: Government is corruptible, so we should have small/weak governments. But, a small gov. doesn't solve the root problem, it just make it easier to corrupt what little power is left. Isn't the real solution to have some group responsible for providing oversight and enforcement to elected officials?

In my opinion small government doesn't make sense because that isn't even a good target to begin with. An effective government may be small or big. The dogmatic insistence on big or small governments often bought by a less effective government which just reinforces existing prejudices.

Those who advocate for small governments tend to remove the best parts first because they are "optional". A lot of tax cuts are financed by cutting government investments which ultimately result in less overall investment in the economy.

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