Want a Stock Tip? Invest in Stocks Owned by Members of Congress

Wednesday, November 25, 2009

When it comes to playing the stock market, members of Congress know how to pick ‘em. Over the past three decades lawmakers have increasingly invested in stocks and bonds with little regard for potential conflicts of interest that may arise from passing (or not passing) legislation that can impact a particular industry or business sector. Although representatives and senators insist their investing is above board, their level of success has left some researchers wondering whether Congress takes advantage of what and who they know by virtue of their elected positions.

One study of congressional portfolios from 1985 to 2001 found lawmakers regularly earned higher returns on their investments than average Americans. This fact led one researcher, Georgia State University professor Alan J. Ziobrowski, to speculate if lawmakers were taking advantage of their “government and important social contacts.”
Ziobrowski told the Washington Post: “No one else has this kind of success, not even mutual fund or hedge fund managers. It’s no accident.”
Today, more than half of the 535 members of Congress own stock. In the House of Representatvies, 259 lawmakers invest in the stock market, up from only 91 in 2001. Among their investments are blue-chips like General Electric, Microsoft, Bank of America, and Procter & Gamble, some of which hold government contracts or have received bailout funds. Members of both major parties have also heavily invested in the growing medical-device industry while at the same time voting on legislation to ease restrictions on the approval of such devices.
-Noel Brinkerhoff
Policy, Portfolios and the Investor Lawmaker (by Robert O'Harrow Jr., Kimberly Kindy and Dan Keating, Washington Post)


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