Those who manage the economy should not be able to profit by trading stocks with the benefit of their privileged position. Restrictions on which stocks and how members of Congress, Cabinet members, and Federal Reserve bankers can trade are therefore fine.
It is possible, however, to take this too far.
This is something to worry about with regards to the call to tighten rules at the Federal Reserve. Robert Kaplan, the Dallas Federal Reserve president, faces criticism for having made a number of million-dollar stock trades. All these trades were entirely within the current rules, of course. Kaplan spent years at Goldman Sachs. He’s exactly the sort of person we’d expect to have a considerable and actively traded stock portfolio.
Make the rules too tight and few people with Kaplan’s financial position will want to take these sorts of jobs. One recent report substantially criticized former Commerce Secretary Wilbur Ross for similar actions. Indeed, the implication of corruption was barely hidden. What Ross had done was sell out of his individual stock holdings in order to meet the ethical rules concerning the investments of a Cabinet member. His efforts to obey the current rules were exactly what the criticism was based upon.
If suspicions of corruption are thrown at people when they act to obey the rules, where do we go from there?
It’s entirely righteous that there are rules. But we do need to make sure that the laws aren’t deliberately set so as to be politically partisan or even exclusionary to anyone who participates in capitalism.
