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You're watching it happen right now. A year before the Election of
2012, Congressmen
and Senators are already spending much of
their time and energy raising the millions of dollars in campaign
funds they will need to get reelected to a job that pays $174,000
per year. It doesn't make sense. None of them are doing it be-
cause they are patriotic and want to give something back to the
country although all of them will claim that's the reason. In reality,
they are doing it for more personal reasons than patriotism. They
are doing it to gain power, prestige and the opportunity to get rich
in an environment of privilege.



The rules, and sometimes the laws created by Congress, apply to the rest of the country, but not to them. Since the mid-19th century when political graft became prevalent, Congressmen and Senators as a rule leave office (if they ever do) with far more wealth than they had when they were first elected. One good example of that was Sen. Nelson Aldrich [R-RI] who was a pivotal figure in the Bank Panic of 1906 and who was one of the architects of 16th and 17th Amendments, and the enactment of the Federal Reserve Act of 1913 even though he resigned from Congress on March 3, 1911, nine months before his term in office expired. Aldrich expected to be named the head of the new Central Bank. The job went to Paul Warburg.

When Aldrich was elected to the US House of Representatives in 1878, his resume included working in the wholesale grocery business as a clerk. After winning the job as President of the Providence City Council, and then as Speaker of the Rhode Island House of Representatives. As he became more politically connected, Aldrich was given a partnership in the wholesale grocery business. Aldrich's father, Anan Aldrich, was a mill hand. When Aldrich was elected to Congress, his net worth—including the value of his wife's family home and the value of his partnership in the wholesale grocery company—was less than $60 thousand. When he died on April 16, 1915, Aldrich left an estate worth over $30 million. Among Aldrich's holdings was a substantial interest in the Providence, Rhode Island street car system which he sold a few years before his death. Aldrich represented the corporate and financial world's interests and shared handsomely in their prosperity. Aldrich was one of the first true Washington insiders because of his in-laws. Aldrich was the father-in-law of John D. Rockefeller, Jr. He used that information well to enrich himself.

In 2010, Peter Schweizer, a DC policy wonk and a research fellow at the Hoover Institute, began noticing that Washington's most powerful politicians were also Washington's wealthiest politicians. He wondered if they came to town that way, or amassed their wealth after they arrived. He began a year long odyssey digging into financial records dating back to 2000 to find out. As he began to dig through reams of public records, Schweizer discovered that members of Congress of free to buy and sell stocks in companies who owe their success and/or failure to policies determined by those same men and women. In fact, those same congressmen and senators routinely profit from what can only be called insider trading—a felony if done by a stock broker or trader.

For example, when Congress overhauled Medicare in 2003, the bill included a new prescription drug entitlement that would be a financial boom for Big Pharma. As the final version of the Medicare bill (which did not include ceilings on the price of drugs neared approval, brokers for Sen. John Kerry, Chairman of the Healthcare subcommittee who was pushing the bill through the Senate, completed 103 buys of pharmaceutical stocks—and dumped 8 stocks that would be hurt by the new bill. The capital gains the Kerrys paid on that transaction was between $500 thousand and $2 million. A spokesman for Kerry said the allegation that the Senator may have been trading on insider information was ridiculous because his stock holdings were in a blind trust. That may be, but whomever manages it for Kerry isn't blind.

In 2008 Congressman Spencer Bachus [R-AL] the ranking member on the House Financial Services Committee, attended a closed-door session with then Treasury Secretary Henry Paulson and Fed Chairman Ben Bernancke who warned that a global financial meltdown was imminent. The next day, Schweizer reported, Bachus bought options in hedge funds that would make money if the market went down. While Bachus said he never uses nonpublic information to trade, his financial disclosure form indicates otherwise. Bachus made money trading General Electric stock during the financial crisis—a third of GE's business is in financial services. In 2009 then House Minority Leader (and now Speaker) John Boehner, along with most members of Congress, were trading healthcare stock when Boehner was fighting to kill the "public option." When he killed it, the stocks he bought went up. Boehner said he does not trade in any stocks. His portfolio is managed by an outside firm whom, his staff said, Boehner meets with about once a year.

When Illinois Congressman Dennis Hastert became Speaker of the House, his net worth was a few hundred thousand. When he left office a few years later, he left as a multimillionaire. Former Sen. Judd Gregg [R-NH] steered $70 million in government funds to redevelop a defunct Air Force Base. It turned out the Gregg and his brother had a commercial interest in it. Former House Speaker Nancy Pelosi and her husband participated in at least lucrative eight IPOs (Initial Public Stock Offerings). One of the IPOs came to Pelosi from VISA just as an ugly piece of legislation that would have hurt credit card companies was making its way through Congress. Pelosi bought 5,000 shares of VISA at the public offering price of $44 (cheap, in other words). Two days later it was trading at $64. Pelosi netted a 48 hour profit of $100,000. The credit card legislation never made it to the floor for a vote. Bad for credit card consumers, good for VISA—and very good for Nancy Pelosi. She, of course, denied that it ever happened.

Schweizer refers to the practice as "honest graft." A better term is "legal graft." Schweizer said, "It's legal, but I think it's highly unethical. I think it's highly offensive. It's wrong." If you are a Congressman or Senator, insider trader laws are deemed not to apply. Why? Because that's how the laws are defined by the people who write them—Congress. The buying and selling of stocks based on insider information by stock brokers is a criminal offense. However, because lawmakers have no corporate responsibilities, are considered to be exempt from insider trading laws even though they have daily access to information and the opportunity to trade on that information.

Based on this 60-Minute report and Peter Schweizer's research, and what promises to be a best-selling book, THROW THEM ALL OUT, 85 members of Congress are now backing legislating to outlaw the practice that allows Congressmen and Senators to profit from insider information. The question is, are there enough honest Congressmen and Senators in Washington to enact the law, and someone in the Oval Office honest enough to sign the bill into law?

 

 

Just Say No
Copyright 2009 Jon Christian Ryter.
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