A better rule would be to only allow congressmen to invest in ETFs so they can’t push for policies that favor certain firms and hurt others. The rule would still create incentive alignment—they should be making policies that increase growth, which would be reflected in the S&P500 etc.
This wouldn’t really solve much of the problem though, since ETFs are still pretty expressive.
For example, when they have a sense for whether an important clean-energy bill will pass or fail, they could buy/sell a clean-energy-tracking ETF.
Some ETFs are pretty high-weight Nvidia, so it would be pretty easy to still trade it indirectly, albeit a little bit less efficiently.
And honestly even the S&P500 will still move a lot based on various policy outcomes.
I agree that ETFs are pretty expressive and they can absolutely select into ETFs that directly correlate with their pet policies. But stock movements are often correlated across different sectors, so this would curb the most egregious carve-outs and concentrated benefits that politicians can confer on certain companies. Like an ETF made up of electric cars etc. would still generally correlate with economic growth.
A better rule would be to only allow congressmen to invest in ETFs so they can’t push for policies that favor certain firms and hurt others. The rule would still create incentive alignment—they should be making policies that increase growth, which would be reflected in the S&P500 etc.
This wouldn’t really solve much of the problem though, since ETFs are still pretty expressive. For example, when they have a sense for whether an important clean-energy bill will pass or fail, they could buy/sell a clean-energy-tracking ETF.
Some ETFs are pretty high-weight Nvidia, so it would be pretty easy to still trade it indirectly, albeit a little bit less efficiently.
And honestly even the S&P500 will still move a lot based on various policy outcomes.
I agree that ETFs are pretty expressive and they can absolutely select into ETFs that directly correlate with their pet policies. But stock movements are often correlated across different sectors, so this would curb the most egregious carve-outs and concentrated benefits that politicians can confer on certain companies. Like an ETF made up of electric cars etc. would still generally correlate with economic growth.