The US Capitol Hill hides many "stock gods"

Not long ago, Paul Pelosi, the husband of U.S. House speaker Pelosi, bought a large number of shares of chip company Nvidia before Congress passed the "Chip and Science Act," which aroused widespread concern and criticism. For a long time, members of Congress and their families, represented by Pelosi, have been suspected of using policy information they have in advance to engage in insider trading, thereby obtaining huge benefits. The New York Post called the phenomenon "licensed theft."

Their shares traded 355 million last year

After the surprise purchase of NVIDIA shares was exposed, Paul Pelosi sold his shares under great pressure of public opinion, and reportedly lost $340,000. However, this money is only a dime for the "stock god" Pelosi and his wife, and the Pelosi couple is only one of the many "investment masters" on Capitol Hill.

"Incredible" good luck

Over the years, Paul, who loves technology stocks, has repeatedly accurately cut the "pulse" of the stock market, buying stocks of different companies before the government introduced relevant policies, and making a lot of money. According to the New York Post, since 2007, the Pelosi family has made $5.6 million to $30.4 million by investing in five big tech companies, including Facebook alone. The Washington nonprofit "Open Secrets," which specializes in tracking campaign funding and lobbying data, revealed that Pelosi's fortune has increased from $41 million in 2004 to nearly $115 million now.

The Pelosi family is just one of those investors on Capitol Hill with "incredible" good fortune. According to market watch websites, U.S. lawmakers and their spouses not only make a lot of stock investments, but their return on investment is significantly higher than average.

United States Capitol. Infographic

U.S. lawmakers and their relatives traded as much as $355 million last year, including buying $180 million in stock and selling $175 million in stock. Among them, Republican lawmakers are involved in stock trading of about $201 million, and Democratic lawmakers are about $154 million. There were 41 members of the U.S. Congress who bought and sold more than $500,000 in stocks last year, including Representative McCall of Texas and Republican and California Congressman and Democrat Connor, known as the two "stock traders" on Capitol Hill. McCall was blown up to buy about $31 million in stock and sell about $35 million in 2021. Connor bought about $34 million in stocks and sold about $19 million in stocks.

Congress has become a place of prosperity for many lawmakers. The New York Post cited New Jersey U.S. lawmaker and Democrat Gotheimer as an example to talk about the "storm operation" of lawmakers in the stock market. Gotheimer is one of the most active Capitol Hill "stock traders," making 134 trades in the first quarter of 2021 alone. Like Pelosi, he has a preference for tech stocks. After years of trading small stocks, Gotheimer turned to riskier options trading last year, with each trade worth up to $1 million. According to publicly available information collected by the Unusual Whales website, which tracks politicians' stock market investments, Gotheimer bought 64.5 million options and sold 62.18 million last year. The site estimates Gottheimer's return on investment at 12.7 percent.

The crisis became an opportunity to invest

Citing an investigative report, the New York Times said some members of Congress, relying on their knowledge of policy changes, bought stocks before stock prices rose and sold stocks before they fell to profit. According to a number of US media reports, many members of Congress have used the crisis to "get rich", and the Russian-Ukrainian military conflict and the new crown pneumonia epidemic have become important investment opportunities for them.

According to the Beast Daily reported on March 19, more than a dozen US congressmen were nervously trading stocks before and after the outbreak of the Russian-Ukrainian military conflict. Data show that from February 1 to March 19, some members of Congress traded $7.7 million in stock. Business Insider said in May that at least 20 members of Congress bought shares in Raytheon and Lockheed Martin after the outbreak of the Russian-Ukrainian conflict. Benefiting from U.S. military assistance to Ukraine, the two companies saw a sharp rise in stock. In addition, Florida Rep. Schultz, a Democrat, bought energy stocks in late January. Since the purchase, the price of these stocks has also "soared".

On 13 February 2020, about a month before WHO declared the COVID-19 pandemic, Senator Burr, Republican of North Carolina, sold $1.6 million worth of stocks, averting a subsequent stock market circuit break. In addition, in the early days of the outbreak, at least 75 U.S. members of Congress bought and sold shares in pharmaceutical companies, including Johnson & Johnson, Pfizer, etc., and then the multi-trillion dollar relief bill passed by the US government gave a strong boost to the stock prices of related stocks.

"Patron eats mountain"

The suspicion of insider trading among U.S. members of Congress not only makes the public feel unfair, but also makes them worry that the relevant conflicts of interest may affect U.S. policy. Business Insider recently reviewed nearly 9,000 lawmakers' financial disclosure reports and interviewed hundreds of people and found that many U.S. lawmakers have business in mind.

More than 200 members of Congress and senior congressional staff are suspected of violating the principle of conflict of interest, including 15 lawmakers responsible for setting U.S. defense policy who actively invest in arms manufacturers, more than a dozen "environmentally conscious" Democratic lawmakers who invest in fossil fuel companies, and 16 lawmakers who buy and hold stock in tobacco companies, including some who speak out against smoking. Business Insider's website Conflicting Congress rated members of Congress for alleged conflicts of interest, among other things, and found that 13 senators and members of the House were rated on the red "dangerous" level, while 113 lawmakers were rated on the yellow "critical" level.

In fact, many institutions in the United States, including Congress, have violated the principle of conflict of interest. A 2021 Wall Street Journal investigation found that from 2010 to 2018, 131 federal judges held or bought and sold shares in the companies involved while hearing hundreds of cases. In addition, Clarida resigned as vice chairman of the Federal Reserve in January due to suspected insider trading. The day before Fed Chairman Jerome Powell announced the bailout measures, Clarida bought an equity fund accused of violating the principle of conflict of interest.

The stock law is the "toothless tiger"

U.S. congressmen suspected of insider trading has sparked outrage, why is there no law to restrict this? In fact, the United States passed the Stop Using Congressional Information Trading Act (stock law) in 2012, which prohibits lawmakers from insider trading, but this law is better than nothing, and there is no deterrent at all.

Under U.S. stock law, members of Congress, the executive branch of Congress, and their staff may not use nonpublic information to trade stocks. These people are required to report trading in stocks and other securities with a trading amount of more than $1,000 within 45 days to prevent them from profiting from undisclosed information. In addition, the above-mentioned persons are required to publish their stock and securities trading information on the Internet in a searchable, categorizable and downloadable form.

However, U.S. stock law does not prohibit members of Congress and their relatives from holding or buying and selling stocks, and even if members of Congress violate the provisions of the law, the penalties are very small. According to a recent investigation by business insider, at least 55 members of Congress and 182 senior congressional staff members overdue stock trading reports in 2020 and 2021. Their excuses are varied, such as not knowing that the stock law exists, clerical errors, and the mistakes of accountants. Under the Stock Act, late submission of such reports is punishable by a $200 fine, but the U.S. Congress has not made public the penalty, so it is not clear how well the law will be enforced. In addition, in the past 10 years, very few people have been prosecuted for violating the stock law. While insider trading is common, it is difficult to prove. A 2020 study showed that only 15% of insider trading in the U.S. was discovered and prosecuted.

The U.S. stock law is inherently a "toothless tiger" and is incomparably weak, and the U.S. Congress used a fast-track procedure to pass amendments to the law in 2013, eliminating provisions such as members of Congress that require their stock trading reports to be stored in searchable databases, further weakening the law's oversight role.

Few people believe in Congress's "self-regulation."

The suspicion of US lawmakers to profit through insider trading has aroused strong dissatisfaction in the media and the public. According to a survey, 76% of voters believe that members of Congress and their spouses have an unfair advantage in the stock market. 67 percent of U.S. voters said lawmakers should be barred from trading stocks.

Despite the general public support for banning lawmakers from trading stocks, the vast majority of lawmakers from both parties in the United States are surprisingly consistent on this issue, which is rare in a politically polarized United States. According to the British "Guardian" report, when Pelosi was asked in December last year whether she supported the ban on MPs and their spouses trading stocks, she replied: "No (ban MPs from trading stocks), we are a free market economy, they should be able to participate in economic activities." Republican Federal Rep. Sessions said there was no need for a ban. Democratic Rep. Loria asked reporters: "Why do you think that members of Congress are inherently bad people or corrupt people?" We already have stock laws that require lawmakers to report stock trades, so I strongly oppose any legislation like that (prohibiting members of Congress from buying and selling stocks). ”

Pelosi's above remarks caused a storm of public opinion, and she had to change her position, claiming to support the bill banning lawmakers from trading stocks. According to the US Pagebowl News News Network, multiple sources revealed that House Democrats may introduce a bill in August this year to prohibit members of Congress, their spouses and senior congressional staff from buying and selling stocks. The new bill would require lawmakers and others to entrust their holdings to a confidential trust (giving control to an independent third party) or sell them all, or impose hefty fines. The Guardian said Republican Senator Hawley had introduced a similar bill, though his bill did not include a penalty clause.

Some US media reported that the above bill may be voted on in Congress in September. However, there are still many obstacles to passing these bills. U.S. President Joe Biden has been silent on the issue. Time is also getting tighter. Members of Congress will leave Washington, D.C., in August, and when congress is adjourned, they will have to prepare for the midterm elections soon, making it difficult to pass the bill in September.

The New York Post interviewed some senior Washington, D.C. officials about legislation prohibiting lawmakers from trading stocks. Some told the newspaper that the likelihood of Congress truly self-regulation was so low that the claim was ridiculous, "Why would they do something bad for themselves?" Some officials said that the two parties in the United States proposed relevant bills, perhaps to attract attention, rather than to carry out serious reforms. A cynical Senate worker put it bluntly: "It's all a show... There will be no result. ”

This isn't the first time Congress has discussed restricting lawmakers from trading stocks. Earlier this year, calls to ban the trading of shares among members of Congress were so loud that lawmakers in both houses of Parliament introduced bills, but in the end they did not end well.

Some EXPERTs on the United States said in an interview with the Global Times reporter on the 7th that US congressmen represent different interest groups, and they not only use the power in their hands to serve these interest groups, but also serve themselves on behalf of these groups, so many members of Congress are desperately trying to win re-election, and how likely it is to let them pass laws that restrict their own interests can be imagined.

It is worth noting that most members of the US Congress are millionaires. According to USA Today in 2021, the NGO Center for Responsive Politics estimates that most members of Congress have a net worth of more than $1 million. Information from the Washington-based nonprofit Open Secret website for 2020 shows that Florida Senator Scott is the richest congressman with a net worth of nearly $260 million. Pelosi is 10th in all members of Congress and 19th among Republican Senate leader McConnell.

Source: Global Times