Need a prolific stock broker? Call your Congressional representative

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While most of us suspected that Congressional members have an “in” to some easy money, it appears those ties between Congress and Wall Street run deeper and more intimate than most of us feared. A new study, “Abnormal Returns From the Common Stock Investments of Members of the U.S. House of Representatives”, released this week in the Business and Politics journal, (part of the Berkeley Electronic Press) focused on the higher percentages of stock earnings by 300 House members as compared to private investors with no access to non public information. The jaw dropping results revealed abnormally consistent stock successes that, over a period of decades with even a modest market, could net the elite Congressional members millions in portfolio earnings.

From the Washington Times article today by Valerie Richardson:

“We find strong evidence that members of the House have some type of non-public information which they use for personal gain,” according to four academics who authored the study, “Abnormal Returns From the Common Stock Investments of Members of the U.S. House of Representatives.”


The professors reviewed more than 16,000 common stock transactions carried out by about 300 House members as revealed in the members’ financial-disclosure forms from 1985 to 2001.

In a 2004 study, the same professors found that U.S. senators also enjoy a “substantial information advantage” over the average investor — and even corporate bigwigs — when it comes to picking stocks. The latest study shows that members of the Senate outperform their House colleagues by an average of 30 points per month.

Considering the BAP's “mother ship” electronic publisher, the four authors – Alan J. Ziobrowski, Georgia State University; James W. Boyd, Lindenwood University; Ping Cheng, Florida Atlantic University; and Brigitte J. Ziobrowski, Augusta State University – must have found it even more quizzical that the gains between party lines of the House members also showed a notable percentage difference in profits. And it wasn't the GOP, most traditionally characterized as being in the pocket of Wall Street, who was coming out on top.

The Democratic subsample of lawmakers beat the market by 73 basis points per month, or 9 percent annually, versus 18 basis points per month, or 2 percent annually, for the Republican sample.

“Given the almost folkloric belief that Wall Street invariably favors Republicans, the superior performance of trades made by Democratic representatives may seem surprising,” the study authors said.


Also blogging with the same bipartisan foul taste in the mouth is Townhall's Finance columnist, John Ransom. Ransom runs some calculations to put a figure on that percentage of basis points.

Actually 12 times .55 percent comes out to 6.6 percent annually. That .6 percent return accounts for an additional $130,000 over a 17 year period.

So how lucrative can the 6.6 percent advantage be for Senators and Representatives?

A portfolio of $100,000 getting average stock market returns of 11 percent over a 17 year period would have grown to $589,000. If you were a member of the United States House of Representatives, though, enjoying the advantage that inside government information can bring you, your portfolio would have reached $1,573,000, according to an investment calculation I did using the finding from the study.

Assuming only average market returns for the next 20 years, a Representative would grow their portfolio to close to $13 million.

Under the same circumstances US Senator would have grown the portfolio to $18 million.

No doubt about it… we're all in the wrong business. How good can the elected elite get it? Paid by the taxpayer and their payroll backed by fed reserve printing presses that run 24/7, cadillac health care and pension plans also on the taxpayers' dime, and the inside skinny on stock tips PLUS the power to vote for favorable legislation. That doesn't include book deals, saps that go and hear them speak, and the green gathered at fundraisers for their campaign coffers.

Call me nauseous here….

What is the most surprising for me to learn is that Congressional members are immune from insider trading laws, in addition to being able to vote on legislation that would benefit their particular stock holdings. Evidently we, the public, are last to learn of the more than suspicious ties to the prolific trading of our elected officials. A bill was introduced in 2006 – the Stop Trading on Congressional Knowledge (STOCK) Act – by Dem House members, Brian Baird (WA) as HR 5015 and 14 co-sponsors, only two of which were Republican. He tried again for the next two sessions of Congress but all lead to a dead end.

Why does that not surprise me?

It's been reintroduced again this year by Dem Rep Timothy J. Walz of MN as HR 1148. Co sponsors include Louise McIntosh Slaughter (NY), and two other Democrat co sponsors. Interestingly, only Rep Slaughter has been in Congress long enough to have possibly been a subsample of the BAP study. Baird came close, coming into office in 1999. The rest on the latest bill are all post the study period of years involved.

So why, if it's Democrats who seem to be faring better than their Republican colleagues, is it the Democrats who are furiously introducing the bills? Oddly enough, the theory floated in the Washington Times article suggests that since the Democrats were in majority power for the longest duration of the study's scrutiny, they had greater access to their minority peers, and that's why they profited more than the GOP. And evidently, they considered the GOP a bit slow on the up “take”, so to speak. Certainly their naivety is viable since the Democrats have traditionally held both chambers for a sinful majority of sessions since the 1930s.

So did the GOP shun the legislation, hoping to catch up to the earnings of their Democrat colleagues? Well, they sure didn't attempt to promote the legislation. Then again, neither did the bulk of the Democrats.

The moral of the story here is, the corruption still runs amok, and is probably about the only genuine bipartisan trait in our Congress. Perhaps we should be viewing our own “joe blow” world as less Democrat vs Republican, and more us vs elected officials and their above the law mentality.


Vietnam era Navy wife, indy/conservative, and an official California escapee now residing as a red speck in the sea of Oregon blue.

12 Responses to “Need a prolific stock broker? Call your Congressional representative”

  1. 2



    Insider trading? Martha Stewart knows all about that little step over the line. It’s time for criminal prosecutions of these whores in congress and not just a Charlie Wrangle wrist slap. Let’s talk about Martha Stewart type penalties.

    How do we convince guys to investigate and prosecute themselves? Vote in new ones and prosecute the old ones to prevent breaches of the public trust in the future. The government is run by people with the integrity of ghetto pimps.

  2. 3


    I am of two minds on this, as I haven’t quite reasoned an equitable solution, both for the congresspeople, and the populace.

    If one were to limit, or even place in stasis, the investment holdings of congresspeople, it would address the problem of there being conflict of interest on their votes for certain bills, but only to a point. However, it would also remove the freedom of association for those congresspeople, and I do not support that.

    Something needs to be done though, as it is outrageous that a congressperson votes, on certain bills, may be influenced more heavily by his own investment holdings than his constituency.

  3. 4



    Understandable that Congress needs to maintain their ability to choose, associate and invest in whatever they want, johngalt. That’s not my issue.

    What is my issue is that there is a law for insider trading for private investors, but holds Congress members immune. No one in this country should be above the law. If there is a bill that contains conditions that can affect their personal portfolios for profit, they should have to disclose and abstain from voting. This might leave about 10 Congress members able to vote on any legislation, eh? LOL

    Now I know that the latter is rather a tongue in cheek suggestion. Having an elected representative recuse themselves from a vote because of a conflict of interest does more damage to the constituents who lose their voice in legislation, so that really doesn’t work either.

    In the long run, I think that the trading finances of Congress members should be scrutinized annually for anomalies and, if found they are profiting from inside non public information, they should be penalized as the law provides. Consider this fiscal “body pat” as akin to Congress mandating that drug tests be regularly performed on some employees, but not themselves. Since cash is apparently their drug of choice, they should also have random and regular “pee” checks.

  4. 5

    oil guy from Alberta

    First, the major oil companies were receiving 4 billion in subsidies. Then, the story changed that it was medium to small companies. Then, they were not subsidies, but write offs or tax deductions. Now, the conclusion is that these deductions are applicable to all companies across N America. Its nothing but anti oil production propaganda.
    New or old oil, and depletion allowances. Great method to apply new well head taxes, completely under the radar.
    Politicians are subsidizing Green Energy by how much? Politicians are on the ground floor as investors in this green energy and the taxpayers are paying the risk and general operations of this enormous scam.
    Crap and Trade. Why hasn’t this died, yet? Politicians lining up to sell hot air.
    Politicians policing themselves? lol.

  5. 6

    Gary G. Swenchonis

    Mata Harley: Thanks for writing a post so informative into just how crooked, and sleazy politicians are in reality. I was extremely naive when it came to how politicans on any level of government could reap riches when voted into office when I went to work in government. I also learned very quickly how politicans bent the rules to make sure that they, and only they could benifit from rules that were ment to protect the public. I have always thought that it was “us vs the politicans”. Politicans can and do get away with just about anything due to many reasons. 1: they know the average American does not have the time to research, and or follow all the news. 2: that many citizens do not vote for several reasons, “they are all crooks”, “why bother”, etc…. 3: that the hardcore voters will overlook the politicans behaviors just so that they can get their man/woman elected. 4. that the average voter will lose interest in a “hot topic” after two weeks. So they stall and make promises to have investigations, and to revamp the rules to eliminate the “few bad apples” in their profession. The investigations are never held, and or the results demonstrate that those “bad apples” have retired, and everything has been taken care of. While the double dipping, and cheating continues. And their supporters will always be there to make excuses for their outrageous behaviors.
    So why should they change? Why should they pass laws to save this country on the brink of total collapse? They are the chosen ones! No matter what happens to us, the millions they make can save their sorry butts.

  6. 7


    Hey Mata, don’t ya know, the “house always wins.” Just think casino, as that is what the ‘market’ has now become. Who do you think creates the bubbles? Hint: the same folks who know when to sell short.

    Be it interest rates , stock prices, or the price of gold, rest assured the “puppet masters” are at work behind the curtain. It’s all one big power-elite con game. Heck, look what just happend to LinkedIN, screwed over by their own investment bankers. Gee, who could have seen that comin’?

    I say, go to Vegas and at least get the f ree room and drinks!

  7. 8

    Alfonso Bedoya

    @johngalt: >> I am of two minds on this, as I haven’t quite reasoned an equitable solution, both for the congresspeople, and the populace.

    Defenestration is the simplest.

    Rope and light poles would work well, too.

  8. 9



    What is my issue is that there is a law for insider trading for private investors, but holds Congress members immune. No one in this country should be above the law.

    And I agree with this. My concern was not only for the congresspeople, but for the population entire. You are right, of course, that laws that are good for the goose, should be good for the gander as well. Even so, there still is the strong possibility of their own investment portfolios influencing their votes, rather than their constituents back home, even if they do not engage in insider trading.

    I’ve actually warmed to the idea that their investments should be placed ‘in stasis’ for the time period that they hold office. If it is made a condition to hold office, they still have the freedom to, or not to, associate, and by placing their investments ‘in stasis’, their votes are less likely to be influenced by anything other than the voice of their constituents.

    These people should be reminded every day that they are there to serve us, their constituents, rather than to be served.

  9. 10


    This does not even consider that Congress creates legislation and regulations that will affect business. Including federal projects and the awarding of government contracts that can make or break companies. The Congressional bill creators and committees have great power over an industry can be the ultimate insider traders.