Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Congress Gets Richer on Insider Trading Whilst Middle Class Suffers

Politics / US Politics Nov 17, 2011 - 06:05 AM GMT

By: Money_Morning

Politics

Best Financial Markets Analysis ArticleKerri Shannon writes: While many Americans continue to struggle to save money, members of Congress are getting richer.

A Roll Call analysis of Congress members' financial disclosure forms showed their collective net worth was more than $2 billion in 2010 - a 25% leap from 2008. Minimum net worth in the House of Representatives rose to $1.26 billion, with minimum Senate net worth at $784 million.


With a median net worth of $891,506, Congress members are nine times wealthier than the average American household - and some Congressional leaders are exceedingly richer.

About 11% of Congress has net worth of more than $9 million, landing them in the top 1% of America's wealthy.

And these numbers aren't even the whole picture. They don't include members' homes and other non-income-generating property, which could add hundreds of millions of dollars to total net worth.

Congressional leaders' presence in the top 1% is one of the catalysts that angered citizens enough to start the global "Occupy Wall Street" movement. It also has prompted a closer look at how these elected representatives are gaining such riches, especially on an annual salary of $174,000.

According to a CBS News "60 Minutes" segment that aired Nov. 13, congressional "insider trading" might be a key factor in their financial success. Congress members may be using information gained from their "insider" positions to make highly profitable trades in the stock market.

This form of insider trading may be unethical, but it's also legal.

"This is a venture opportunity," Peter Schweizer, a fellow at Stanford University's conservative think tank the Hoover Institution, told "60 Minutes" correspondent Steve Kroft. "This is an opportunity to leverage your position in public service and use that position to enrich yourself, your friends, and your family."

Congressional "Insider Trading"
Schweizer has extensively reviewed Congress members' financial disclosure records for his book, "Throw Them All Out," released this week. He wanted to know how our elected representatives manage to accumulate so much wealth while in office.

Schweizer found that congressional representatives were trading stocks related to hot topics being discussed and debated in Congress before information had been disclosed to the public.

"We know that during the health care debate people were trading health care stocks," Schweizer said to Kroft. "We know that during the financial crisis of 2008 they were getting out of the market before the rest of America really knew what was going on."

Take for example Rep. Spencer Bachus, R-AL, chairman of the House Financial Services Committee. According to the "60 Minutes" report, Bachus attended closed-door briefings in September 2008 with then-Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. Congressional leaders in those meetings were warned that a "global financial meltdown" was about to occur.

The next day, Bachus bought stock options that allowed him to profit if and when the economy tanked.

Bachus' office released a statement that he never trades on nonpublic information, or in financial services stock, but a disclosure showed he turned a profit trading General Electric Co. (NYSE: GE) during the financial crisis.

Such an action by a corporate executive, executive branch member, or federal judge would fall under insider trading, a punishable criminal act.

Just ask Galleon Group founder Raj Rajaratnam, who was sentenced Oct. 13 to 11 years in prison, the longest-ever sentence for insider trading. Rajaratnam's position as a $7 billion hedge fund manager qualified him as an "insider" who used nonpublic information to net $64 million.

Congressional leaders, however, even though privy to non-public information, are not considered corporate insiders, and can trade on such information and escape penalty. Congressional staffers and lobbyists also are exempt.

Bachus is not the only representative highlighted in the report.

Rep. John Boehner, R-OH, was one of the members of Congress who bought health insurance stocks during the 2009 healthcare debate. Boehner fought against a government-funded insurance plan that would compete with private companies, which rose in share price after the provision died in Congress - and after Boehner bought the related stocks.

Former Rep. Dennis Hastert, R-IL, made $2 million from selling land he owned after receiving a federal earmark to build a parkway near his property. Former Sen. Judd Gregg, R-NH, helped get $70 million in funds to go toward redeveloping a U.S. Air Force base in which he and his brother had a commercial interest. And Rep. Nancy Pelosi, D-CA, bought shares of the 2008 Visa Inc. (NYSE: V) initial public offering (IPO) while legislation affecting credit card companies was debated in the House.

Congressional leaders defend their actions by saying their financial advisers do their trading without consultation, or that representatives' spouses are the ones directing the trades, or the trades are coincidental.

An End in Sight?
Former Rep. Brian Baird, D-WA, told "60 Minutes" correspondent Kroft that the insider situation in Washington is worse than ever. He said there's a "political intelligence" industry in our nation's capital involving former congressmen and staffers hunting around town for nonpublic information they can sell to hedge funds and traders.

And until all of our political leaders are considered "insiders," this activity will continue legally unless Congress itself does something about it.

Baird spent about six years during his time in office - he retired last year - trying to gain support for the "Stop Trading on Congressional Knowledge," or STOCK, Act. Together with Rep. Louise Slaughter, D-NY, and Rep. Tim Walz, DFL-MN, he introduced the act that would make it illegal for Congress members to trade stocks on nonpublic information, as well as change financial reporting requirements to every 90 days instead of one year.

Not surprisingly, the movement got little support.

"The first time this legislation was introduced, 14 people endorsed it," Victoria Dillon, Slaughter's press secretary, told MarketWatch. "The last time, it got nine. Congresswoman Slaughter is saying, "We shouldn't have the opportunity to do this. It shouldn't be legal. This is not one of the more complex pieces of legislation. This is common sense.'"

But shedding more light on the problem could start to change things. Sunday's "60 Minutes" segment triggered new support for the bill.

Sen. Scott Brown, R-MA, on Tuesday introduced the STOCK Act of 2011, prohibiting members or employees of Congress, as well as executive branch employees, from using nonpublic information gathered through their public service for investing or any attempt at personal financial gain.

"Members of Congress should live under the same laws as everyone else," Brown said in a statement Tuesday. "If they trade on inside knowledge to line their own pockets, they should be punished. Serving the public is a privilege and honor, not an opportunity for personal gain."

Source :http://moneymorning.com/2011/11/17/w...

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

American Taxpayer
25 Nov 11, 20:44
Sold Out

The American people have been sold out by the very people claiming to represent them.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in