First Out the Exit Door

With the revelation in this WaPo story of Senate Majority Leader Bill Frist's uncanny unloading of personal stock in HCA just before the company issued a nasty earnings report, it might be worthwhile to revisit the last time Frist's stock market activity made news. From a WaPo piece in December 2004:

A campaign fund controlled by Senate Majority Leader Bill Frist (R-Tenn.) has lost almost $460,000 in stock market investments since 2000 and now does not have enough to cover a sizable bank loan, according to federal election records and the manager of the Frist account.

The heaviest losses, totaling more than $500,000, occurred in a stock index fund in 2001 and 2002, years when the securities markets suffered a major downturn. But the Frist campaign account lost an additional $32,050 in July and August, a setback that was only partially offset by a gain of $11,472 in September, according to Linus Castignani, treasurer of "Frist 2000," which was created to finance the senator's successful campaign for a second six-year term in 2000.

Meanwhile, records show, Frist has continued to use money from the 2000 campaign account to cover various expenses.

In August 2001, well after the campaign ended, Frist 2000 took out a variable interest rate loan of $360,000 from the Nashville office of U.S. Bank, at an initial rate of 4 percent.

There was a need for cash, Castignani explained, because bills for administrative and political expenses had to be paid from the account even though the money was tied up in the stock market. "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."

One of the pearls of wisdom the investment industry is fond of peddling to the public is that it never pays to panic. Wall Street veterans, however, have long known that it often pays to panic before everyone else does then ask questions later.

Did Frist's ongoing painful experience with losses in his campaign fund cause him to "panic first" when it came to his own wallet?