Tom Price’s Trading Days His investments are an argument for index funds, not a case of scandal.
http://www.wsj.com/articles/tom-prices-trading-days-1484784046
Democratic opposition to Donald Trump and his cabinet nominees is consistently shrill, but the inability—or unwillingness—to make distinctions may backfire. Not everything deserves emergency footing, and eventually people tune out. Witness the meltdown over Tom Price’s investment portfolio.
The Georgia Republican and orthopedic surgeon is on deck to lead the Health and Human Services Department, and at Wednesday’s Senate hearing and in the Democratic trade press he stands accused of abusing his office for personal profit. Mr. Price’s net worth includes about $300,000 of stock in health-care-related companies, and over the years he’s sponsored legislation, sent letters or otherwise taken policy positions that reporters are now flyspecking for evidence of insider trading.
To take the latest non-bombshell at face value, Mr. Price took a position in 2015 in a company called Zimmer Biomet that makes hip, knee and other replacements. The same year, HHS proposed changing how Medicare pays for such devices. In a letter Mr. Price cosigned, he warned that the new system “could have a negative impact on patient choice, access and quality,” and he asked HHS to delay the project. In 2016 he cosponsored legislation to do so.
According to the daisy-chain allegations, the HHS proposal would reduce reimbursements for joint replacements, and therefore harm Zimmer Biomet’s profits, and therefore Mr. Price intervened. But the rule went forward in 2016 despite Mr. Price’s criticism, and he has been consistent as someone with health-care expertise in scrutinizing all HHS regulations he believes undermine patient care.
About 5,000 bills are introduced in every Congress and far more “dear colleague” letters are posted. This background noise is rarely market-moving, and Members of Congress are not prohibited from trading. Politicians aren’t insiders in the classic definition, meaning they don’t work for companies and owe a fiduciary duty to shareholders. Many Democrats on the Senate Finance Committee, such as Tom Carper and Mark Warner, also hold health-care shares.
In any case, the Zimmer Biomet purchase was made by Mr. Price’s Morgan Stanley broker and became known to him only for financial-disclosure compliance. The broker bought 26 shares whose total value has risen by about $300 in the months since. If Mr. Price really is self-dealing, he’s doing a lousy job.
The larger question is whether politicians, or any nonprofessional investor for that matter, should hold individual securities. As a matter of financial literacy, most small investors should opt for index funds, eliminating the familiar day-trading peril of buying high and selling low, with low transaction costs to boot.
The political danger is the appearance of conflicts of interest, which is why Members would be wise to not actively trade, whatever the law allows. Chief Justice John Roberts recently had to recuse himself from a patent case because he discovered after oral argument that the petitioner was a subsidiary of a company whose stock he owned, which means the outcome could flip in favor of the Supreme Court’s judicial liberals. Why public officials think they can beat the markets is a mystery, even if such trades don’t interfere with or compromise their public duties.
If Democrats were praising index funds and divesting their own portfolios, they’d be more credible critics. Inflating Mr. Price’s boring investments into scandals guarantees that when something does merit outrage, fewer people will believe it.
Comments are closed.
