When Senators Beat the S&P 500

In the US Senate, more members could take a tip from their colleague Richard Lugar (R) of Indiana, who sold all his individual stocks in 1967 after being elected mayor of Indianapolis to avoid the appearance of a conflict of interest.

In fact, too few put their holdings in "blind trusts" or divest themselves of assets once in office. And they're not required to recuse themselves if they have a financial stake in the outcome of a bill - a requirement of other federal employees.

A new study suggests more Senators should foster financial transparency in the Senate, and work to prevent the perception that law-making and profit-making go together.

The study found that between 1993 and 1998, a majority of senators was trading stocks, and beating the market by 12 percentage points per year on average. Compare that with individuals who trade in their own company stock. They outperformed by just 5 percent. Indeed, typical households underperformed by 1.4 percent. And there was no difference in results between Democrats and Republicans.

That's enough to suggest senators must work to avoid even the appearance of having a stock-market advantage over the average investor, even if they're doing nothing wrong.

The study, a collaboration by four universities, won't be published until December, but advance material shows that during the years in question, 62 senators disclosed 6,000 trades. Nearly half were reported by just four solons. Were these individuals just fortunate? Or was there "a substantial information advantage," as one business school professor put it in a related story for the Monitor Tuesday?

Financial disclosure statements, especially in the Senate, need more transparency. Thankfully, The Center for Responsive Politics puts members' personal financial disclosure statements online at www.opensecrets.org. But even they are not complete, and why should a privately funded group bear such responsibility? Meanwhile, access to original documents isn't easy, and can be costly. Also, the records are not permanent.

The numbers in official financial disclosure reports also can be misleading. Dollar amounts of assets are recorded in broad ranges, such as "50,000 to $100,000" or "over $50 million." With nearly half the Senate now weighing in as millionaires, narrower categories are in order.

Senators have the opportunity to make some sensible financial adjustments befitting legislators who serve the public interest.

You've read  of  free articles. Subscribe to continue.
QR Code to When Senators Beat the S&P 500
Read this article in
QR Code to Subscription page
Start your subscription today