All the President’s Money

Why is President Obama’s financial disclosure form so vague?

President Obama

President Obama released his federal financial disclosure forms on Monday, revealing that he and the first lady hold between $2.8 million and $11.8 million in assets. Last year the president reported between $2.3 and $7.7 million. Why do financial disclosure forms have such enormous and seemingly arbitrary ranges?

Because each asset is reported individually. Financial disclosure forms aren’t intended to publicize an officeholder’s total net worth, even though that’s generally how the media reports on them. In fact, there isn’t even a line on the form for total assets. Rather, they are designed to describe the different kinds of assets an official owns, so that conflicts of interest can be avoided or at least exposed. Each investment has its own line on the form, and the official must indicate a range of value. It would be impractical and not particularly meaningful to report precise dollar amounts, as values can fluctuate daily. As the dollar totals get larger, the ranges increase in size. The lowest range is between $0 and $1,001, while the highest is between $25,000,001 and $50 million. (There’s also a category for assets over $50 million, with no upper limit.) The more assets an officeholder has, and the more valuable each asset is, the harder it gets to put a precise number on his total net worth by adding them all up.

Although we don’t know exactly how much the president is worth, we do know that he has invested a very large percentage of his assets in treasuries, or government debt. At a minimum, treasuries represent 57 percent of President Obama’s net worth, but they might account for as much as 93 percent of his assets. The next largest assets are the three checking accounts that he and the First Lady own jointly, and their stock market index funds. Each appears to constitute less than 12 percent of the Obamas’ total wealth.

These investment decisions are a bit curious. Most financial advisors recommend that risk-averse clients in the president’s age group invest no more than half their assets in bonds, and many would set the maximum at a third. The president also has a diversification problem. Even if he wants to invest hyperconservatively in bonds and avoid the stock market, government debt probably shouldn’t constitute more than a quarter of his bond holdings. With his current overexposure to low-interest treasuries, the president faces the possibility that inflation will consume most or all of his profits. His meager stock holdings are also focused entirely on large, U.S. corporations, to the exclusion of smaller, potentially faster-growing companies.

By tradition, presidents don’t actively pick individual stocks. (They want to avoid the appearance that they’re legislating with the health of particular companies in mind.) But that doesn’t mean they have to stay out of the market altogether. President Obama would do well to put his assets in a blind trust, in which a designated advisor would manage his money without the president’s participation or knowledge. That’s what his predecessor did (PDF) with a large portion of his portfolio. (Although, because of the 2008 stock market collapse, he might actually have been better off adopting President Obama’s super-safe treasuries strategy.)

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Explainer thanks Dan Auble of the Center for Responsive Politics and Mark Berg of Timothy Financial Counsel and the National Association of Personal Financial Advisors.