HONEST GRAFT

August 25, 2023 ethlac47

What are the odds that a slew of modern politicians are better than world-class investors at playing the stock market? Written by Ryan DeLarme and edited by V for Veritas, HONEST GRAFT checks the receipts and audits the bank accounts of American politicians who likely won’t quit their day jobs anytime soon.

TRANSCRIPT & SOURCES

When discussing the wealthy, we tend to categorize people by how they’ve acquired their fortunes. The term “old money” typically describes those who’ve inherited their wealth, while “new rich” describes those who have only recently broken into the upper class. There are other, more specific terms like “Oil Rich” or “Dot-Com Rich”, but in recent decades we’ve seen the rise of a new type of wealth, one that was never meant to be—”government rich.”

Have you ever wondered how it is that politicians, who enter office with relatively meager means, often retire rich? It seems unlikely that they built their fortunes by clipping coupons or playing the lottery, so how do they do it? Where does this money come from, exactly?

George Washington Plunkitt, a party boss from the late 1800s, once said:

“There is so much honest graft in this big town that they would be fools to go in for dishonest graft.”  

Plunkitt’s words are as true today as they were a hundred years ago, particularly when applied to Washington D.C.

Honest graft seems to be a bipartisan affair, and has led to the entrenchment of what some have called the “Permanent Political Class.”

Philosophical and political ideology matter in DC, but perhaps not quite as much as one would like to think. Hidden in complex bills, which often range from hundreds to thousands of pages in length, a single sentence or even a single word could translate into millions of dollars for those who know how to act on this information.

The sad truth is that instead of enacting the will of the people, financial incentive is the key factor in how some members of Congress choose to vote.

In 2019, an article from lovemoney.com determined that our legislators, without participating in any form of graft, were some of the most well-paid in the world, trailing behind only Japan, Italy, Nigeria, and Singapore. But despite only making a few hundred thousand dollars a year, many politicians retire with millions in their coffers.

Where is all of this excess money coming from?

An APSA 2009 Toronto Meeting Paper entitled “Getting Rich(er) in Office? Corruption and Wealth Accumulation in Congress” demonstrated that members of Congress accumulate “wealth 50% faster than expected.”

And according to the Center for Responsive Politics in Washington, legislators saw an 84% net worth increase over a two-year period, nearly triple that of normal citizens.

Another study, conducted by Ahmed Tahoun of the London Business School, found that during the critical votes on the subprime mortgage bailout and subsequent issues related to the 2008 financial crisis, a key factor in how members of Congress voted was whether they held stock in banks and in the financial sector.

Once again, the vote seemed to have had less to do with politics and more to do with pocketbooks.

Is it any surprise that Washington lawmakers are staying in office longer than ever before? That in recent years we’ve seen the oldest Congress ever?

Gone are the days of civil servants like Thomas Jefferson, who once wrote:

“I have the consolation of having added nothing to my private fortune during my public service, my hands are as clean as they are empty.”

In 2020, the DOJ conducted an insider trading investigation into several members of Congress, primarily Diane Feinstein, Kelly Loeffler, James Inhofe, and Richard Burr – all of whom sold significant stock shares following a January 24th meeting on the Coronavirus threat.

This meeting supplied our elected officials with knowledge outside of the public purview and they capitalized on this information, something that would land the average American citizen in a prison cell.

Diane Feinstein’s husband, Richard Blum sold his shares in Allogene Therapeutics Inc, a biotech company, making between $1.5 million and $6 million after the Jan 24th meeting but before the Coronavirus stock market spiral. Feinstein claimed she had nothing to do with her husband’s stock trades and just like that, the investigation is closed.

Richard Burr decided to dump $1.7 million in hotel stocks soon after the January 24th meeting, a move he likely wouldn’t have made without the insider information. As the head of the intelligence committee, Burr had access to the government’s most highly classified information about threats to America’s security. His committee was receiving daily coronavirus briefings around this time.

The Pandemic isn’t the only sensationalized issue that’s prompted insider trading.

Climate Change and the push for “Net Zero” has created opportunities for many in government to turn a profit, particularly Biden’s Secretary of Energy Jennifer Granholm.

Granholm, who is overseeing efforts to move the country toward electric vehicle transportation, is one of many politicians suggesting that the best solution to high gas prices is to buy a $60,000 electric vehicle.

Granholm is currently facing scrutiny for promoting Proterra, a California-based electric bus company that she previously sat on the board of and held 240,520 shares of stock. Granholm made $1.6 million when she finally divested them 157 days after her nomination. According to Forbes, Granholm’s net worth is around $8 million, meaning a fifth of her fortune came from the deal.

The California-based Proterra stands to benefit greatly from this Biden administration electric vehicle investment. Unsurprisingly, the Center for Responsive Politics found that nearly 85 percent of Proterra’s employee campaign contributions went to Democrats, including Biden.

To the average American, this might seem like a glaring conflict of interest, but to the bigshots in Washington, it’s just business as usual.

Perhaps the most notable modern example of a member of Congress profiting off of their insider knowledge is our very own Speaker of the House, Nancy Pelosi.

The House Speaker’s penchant for using her insider knowledge to determine her family’s stock trades is now a subject of great interest to those looking to beat the market.

The Pelosi family’s “luck” on the Stock Market is well documented. A federal financial filing released in July of 2021 revealed that in May of 2021, Nancy Pelosi’s husband Paul Pelosi, spent $250,000 purchasing 50 calls on Apple stock. Mr. Pelosi also purchased 20 calls on Amazon stock for a price of $1 million and exercised call options on Alphabet stock valued at $4.8 million. These stock purchases put the Pelosis in a unique position to profit quite handsomely if on the off chance the Big Tech market were to suddenly shift dramatically.

These multi-million dollar big tech stock trades came just weeks before the House pushed through a number of bills designed to limit the overarching powers of big tech firms like Apple, Google, and Amazon. This caused many in the media to begin to scrutinize these curiously timed trades.

When asked about all these suspicious transactions, Nancy Pelosi dodged the question. [Clip] when confronted again, she elaborated further [Clip].

The Pelosis’ aren’t an anomaly in Washington. In fact, it was recently reported that at least 72 members of Congress are in violation of insider trading laws. but if there are laws in place to stop insider trading, then why is it so prevalent?

The STOCK Act. or the Stop Trading on Congressional Knowledge Act of 2012, was a law passed by Congress and signed by Barak Obama in an effort to address rampant  insider trading.

The law forced lawmakers to be more transparent about their financial dealings. Under the STOCK Act, members of Congress are required to disclose trades worth more than $1,000 that they, their spouses, or their dependent children have made within 30 to 45 days of the transactions.

But if the Act was effective, why is it now being reported that more than 71 members of Congress have failed to properly report their trades, in violation of the Act?

When Obama first signed the STOCK Act into law, it was celebrated by a bipartisan cadre of lawmakers and was generally seen by the public as a win. But once Obama and company had reaped the praise, it didn’t take long for him to sign a bill reversing the more productive portions of the bill, leading many to believe the STOCK Act was always meant to become more of a vestigial placation rather than an effective law.

In most cases, lawmakers either reported transactions late or failed to report them altogether. Violation of the Act incurs lax penalties, the fines have been described as “nominal.” For such a serious matter, the punishment is laughable. For such a serious matter, the punishment is laughable. Lawmakers who violate the STOCK Act face a hefty fine…of $200.

The permanent political class, for the longest time, has had no sense of urgency to change how things are done because quite frankly, business is good.

But the changes we hope to see may not be so far off…

Pelosi and company may have just received some bad news. Democrat lawmakers have recently introduced legislation that would prevent stock trades by members of Congress altogether.

The Bill in question is called the Combatting Financial Conflicts of Interest in Government Act. The framework of this legislation would force members of Congress, their spouses, and senior staff to place assets in either a qualified blind trust or completely sell them off. In addition to members of Congress, the ban in the bill would cover senior officials in all three branches of government and extend the individual stock trading ban to spouses and dependent children. The legislation also covers cryptocurrencies.

It’s unclear if it’s a real attempt to root out a serious problem in Congress, or just another attempt to placate the public, much like its predecessor the STOCK Act. Only time will tell, though so far, it does not look good.

In mid-September, House Speaker Nancy Pelosi indicated that a floor vote on this legislation would come within the month. However it wasn’t until the very end of the month that the House Administration Committee even presented lawmakers with the 26-page bill. A bill that drew criticism from ethics experts.

Among those disgruntled by this course of action were Missouri Senator Josh Hawley, and Pelosi’s fellow democrats State Rep. Emanuel Cleaver, and Rep. Abigail Spanberger. Josh Hawley stated:

“This should be a slam dunk: ban members of Congress AND their spouses from owning stock. But no. Pelosi & Company won’t give up the $$$$.”

Cleaver likened the state of insider trading to “pickpocketing the public”.

But it was Virginia Rep. Abigail Spanberger who’s been the most vocal. Spanberger had been working with a bipartisan coalition of lawmakers on a congressional stock-trading ban before Pelosi and her House Administration Committee took over and derailed the effort.

Spanberger has since called for “new house leadership”.

Additionally, current House Speaker Kevin McCarthy – who could become the next Speaker if Republicans win back the House in November – seems to suggest that there will be an investigation into the Pelosis’ stock trading.

It’s quite possible that these new measures are just another attempt to placate the public concern. Ultimately, it is up to us as citizens of this great nation to be vigilant and hold our elected officials accountable.

Insider trading and crony capitalism may not be the worst things that go on in DC, but these normalized behaviors have had a corrosive effect on politics, the economy, and the nation’s character. The Constitution is a living contract, rooted in legal soil, meant to give We The People the power to keep out politicians who would serve themselves above their constituents.

It’s high time the American people clean house.