Senator Frist’s PAC Worth Less than Its Bank Loan

It is hard not to like Senate Majority Leader Bill Frist (R-TN). As the only physician in the Senate, he has a clarity on science, and especially healthcare, that balances out a few of the more troglodyte perspectives in the chamber. But the good doctor has found a way to get into political, but not legal, hot water over the way his political action committee has handled its money. It has a bank loan of $360,000 outstanding at 4% with US Bank in Nashville. According to Federal Election Commission filings, the PAC is worth $312,807 and has "debts and obligations owed" of $349,107. The embarrassing part is the loss of $460,000 in the stock market.

Now, the practicalities of handling money in the 21st century means one can’t put large sums of cash under the mattress. One can imagine the field day the media would make of a Senator who operated in cash. So, the money needs to be in a bank, or some other institution for safe keeping and to leave an acceptable paper trail. The PAC, Frist 2000, decided to put its money in the stock market through brokerage. This is perfectly legal and many will argue that it is more sensible than sticking it in a checking account at no interest and where only the first $100,000 is federally insured.

One the other hand, losses in a stock index fund during the dark days of 2001 and 2002 ran to more than $500,000. There has since been a small recovery, but in order to pay bills, Frist 2000 took out the loan rather than liquidate the stock at a loss. Linus Castignani, treasurer of Frist 2000, was quoted in the Washington Post as saying, "Our investments had been made and were losing money, so if we had decided to sell the stock while it was down, the losses would have been permanent. Our hope is the market is improving and our losses will become less."

Ah yes, the eternal optimism of the stock market naïf. Successful traders cut losses and let profits run. Any good poker player knows when to fold. Frist 2000 doesn’t want to book the loss and is sure the market will comeback. Note to Mr. Castignani: bulls make money, bears make money, pigs get slaughtered.

That, though, isn’t the politically embarrassing part. That comes when one considers that Senator Frist is going to be leading the charge to privatize part of Social Security, to let workers invest part of their payroll taxes in the market. Todd Webster, who is on the staff of outgoing Senate Minority Leader Tom Daschle (D-SD), put in an e-mail statement, Frist "still thinks we should put seniors' Social Security funds in the stock market?!" This may soon go away as the holidays approach, but it will come back like a good dose of malaria every time the Doctor Senator tries to push the president’s plan along.


© Copyright 2004 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.


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