“Congressional leadership is corrupt,” says economics professor Tyler Cowen. Both Democrats and Republicans are corrupt, according to the study he cites — Congressional leaders of both parties use inside information to profit at others’ expense, and take actions that enrich themselves at public expense:
“Using transaction-level data on US congressional stock trades, we find that lawmakers who later ascend to leadership positions perform similarly to matched peers beforehand but outperform them by 47 percentage points annually after ascension. Leaders’ superior performance arises through two mechanisms. The political influence channel is reflected in higher returns when their party controls the chamber, sales of stocks preceding regulatory actions, and purchase of stocks whose firms receiving more government contracts and favorable party support on bills. The corporate access channel is reflected in stock trades that predict subsequent corporate news and greater returns on donor-owned or home-state firms.”
That passage is from a National Bureau of Economic Research working paper by Shang-Jin Wei & Yifan Zhou. Economics professor Alex Tabarrok has written about this for years.
Congressional leaders have made a great deal of money from insider trading, and resist calls to ban the practice, even though “an overwhelming majority of voters in both parties want to ban lawmakers and their family members from trading stock, and view the practice with great suspicion,” reports The New York Times. As it notes, former House Speaker Nancy Pelosi (D-San Francisco) “Resisted Stock-Trading Ban as Wealth Grew, Fueling Suspicion: The former speaker failed to appreciate the groundswell of support for banning the practice, refusing to give an inch amid G.O.P. accusations that she was corrupt.”
The Times adds:
Born into a politically connected family in Baltimore, Ms. Pelosi has been wealthy for decades. As a first-term member of Congress, she reported more than $600,000 in stock holdings, according to her financial disclosure at the time.
But she became exponentially wealthier during the years when her power grew. And the stock trades made by her husband, the venture capitalist Paul Pelosi, were so lucrative that they spawned a cottage industry of copycats. The “Pelosi Tracker” app for years has clocked all of his investments and allowed its users to follow and mimic his trades. Over the past three years, Ms. Pelosi has reported a trade volume of $56.9 million.
