Back to The DetailsCorruption, Congress, and Stocks
When money is allowed to play the role that it does in American politics, politicians are always going to favor…and do favors for whoever manages to give them the most money. Simple corruption, old as the day is long. But why do we allow this…why does this never change? Why don’t the good people in congress just vote to reform money out of politics, and render corporate lobbying illegal? Well, as it turns out, part of the answer is that many of those people representing us may not be as good as we’d like to believe, and they prove this to be true in no better way than with their stock trading habits.
All signs point to the probability that insider trading is, and has always been rampant in congress. This means that congress members take the nonpublic information they are privy to in their day-to-day work, some of which may be classified, and use it to buy and sell stock. This also means that we have no way of knowing that they won’t vote on legislation solely to benefit their own stock positions, as opposed to voting in our best interest. A major study published in 2004 by Cambridge University Press showed that between 1985 and 2001, members of the house beat the world’s most expert traders by an average of 6%, while the senate beat the market by an average of 10%. So far in 2021, 54 members of congress have been identified as having not complied with the 2012 Stop Trading on Congressional Knowledge Act, or STOCK Act, which is designed to prohibit congress from using the insider, often classified information it deals with every day to influence the stock trades its members make. What is their punishment? So far…nothing. Since its outset in 2012, in spite of these infractions, no penalties have ever resulted from violations of the STOCK Act.
The conflict of interest here is so simple that it needs no analogy. We donate our hard-earned money to political campaigns in order to support our preferred candidates. When they get elected, our tax dollars pay their salaries, currently $174,000 per year! While in office, a considerable percentage of these elected officials vote to benefit the companies and individuals who most heavily donated to their campaigns, and to enrich themselves, casting votes and using insider information to profit heavily in stock purchases and sales. Over 75% of Americans believe that congress should be barred from trading individual stocks. Is it any surprise that only 5% of congress agrees with them? When they leave office, many of them join the boards or companies that they took campaign donation funds from, and passed legislation to help enrich. Many of them also find ways through loose regulations to spend unused campaign donations on themselves, their friends, and their family members.
In short, we would be hard pressed to create a system that encourages and allows our elected officials to lie, cheat, and steal from you, the taxpayer, more than our current system does. Does that make you angry? Feel like doing something about it? Great- let’s work together to get money out of politics, out of corrupt official’s pockets, and back into the bank accounts of the working American!!