"Frankly, These People Are Economically Illiterate"

Here's a tasty tidbit from a Roll Call story about the many members of Congress--especially those who will be making decisions about congressional action in response to the banking crisis and coming recession--who have been taking a beating in the market:

Cleta Mitchell, a lawyer who works with many GOP Members on their financial disclosure statements, suggested...that it's not surprising that nearly 10 percent of lawmakers may be out millions of dollars because of the current credit collapse.

“Frankly ... these people are economically illiterate,” she said.

Sen. John Kerry (D-Mass.), for example, may face as much as $2.9 million in banking stock losses, according to the story. None of the affected senators have announced any intention to recuse themselves from decisions about bailouts and regulatory changes, either on the grounds of conflict of interest or on the ground of economic illiteracy.

Via The Weekly Standard

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  • ||

    Failing to correctly predict the ups and downs of the stock market does not make one "economically illiterate". If you're a multi-millionaire with a diversified portfolio, of course you're gonna lose money in sector X when sector X nosedives.

  • Mike Laursen||

    Mitchell didn't necessarily judge them to be economically illiterate on the basis of their losses in the "banking crisis". Of course, the story requires a login, so it's hard to actually RTF.

  • TallDave||

    Can't we tie them down and force them to read Adam Smith and Friedrich Hayek?

  • ||

    Sen. John Kerry (D-Mass.), for example, may face as much as $2.9 million in banking stock losses, according to the story.

    Isn't this something less than 1% of his and his wife's holdings?

    More importantly, don't all these Congressweasels have their investments in blind trusts to preclude their making money off legislation?

  • ||

    Trusting any member of Congress is like trusting a gay man... not that there's anything wrong if you do that!!

  • ||

    You're only looking at the money they admit to having. The under the table payouts for "bailout" legislation more than makes up for market losses.

  • ||

    The Weekly Standard wants FOREIGN intervention, not economic intervention. Damn Pols aren't doing their jobs.

    The economy must be kept strong to finance the Pox Americana.

  • ||

    How much does John Cornyn stand to benefit if Bush's tax cuts are extended?

  • ||

    Can't we tie them down and force them to read Adam Smith and Friedrich Hayek?

    Well, John McCain is reading Alan Greenspan's book, so we know he's got sound economic policy.

    ...uh oh.

  • ||

    MikeP,

    One would think so. But actually no, congress people are not forced to invest strictly in blind trusts, or something like a general index fund. All they have to do is report their holdings annually.

    Some guys looked at this and found, unsurprisingly, that senators compounded capital at very high rates and given that they are not geniuses, this is probably from the presence of inside information or the direct ability to affect the financial performance of firms.

    I don't have a link to the paper handy.

    Democrats and Republicans both engaged in this behavior in equal part.

  • The Democratic Republican||

    Here we go with joe trying to be the arbiter of fairness.

    In case you haven't noticed, Ds and Rs alike are going along with intervention in the housing markets.

    Besides, don't pull your non sequitir crap around here. Tax cuts are something government SHOULD do; intervention in the housing market something it SHOULD NOT do.

  • ||

    Here is an abstract, can't find the paper.

    If you figure the market goes up about 10% a year, then 85 basis points of monthly alpha (returns above the market) gives you something like a 20% return per year, Warren Buffett territory and among the greatest investors alive. This is far better than 99% of investment professionals.

    ________________________________



    Abnormal Returns from the Common Stock Investments of the U.S. Senate
    Alan J. Ziobrowski, Ping Cheng, James W. Boyd, and Brigitte J. Ziobrowski

    The actions of the federal government can have a profound impact on financial markets. As prominent participants in the government decision making process, U.S. Senators are likely to have knowledge of forthcoming government actions before the information becomes public. This could provide them with an informational advantage over other investors. We test for abnormal returns from the common stock investments of members of the U.S. Senate during the period 1993--1998. We document that a portfolio that mimics the purchases of U.S. Senators beats the market by 85 basis points per month, while a portfolio that mimics the sales of Senators lags the market by 12 basis points per month. The large difference in the returns of stocks bought and sold (nearly one percentage point per month) is economically large and reliably positive.

  • economist||

    "These People (Congressmen) are Economically Illiterate"
    And this is a surprise?

  • ||

    Failing to correctly predict the ups and downs of the stock market does not make one "economically illiterate".

    Judging by their work product, though, election to Congress does make you economically illiterate.

  • ||

    Democratic Republican,

    Conflict of interest does not go away because the government action that could benefit an official involved in a decision meets with your ideological approval. A Planning Board member who stands to benefit from the government granting a permit needs to recuse himself, just as much as a Planning Board member who stands to be harmed if the permit is granted.

    Conflict of interest being one of the topics raised in the post, and not a non sequitor.

  • ||

    In case you haven't noticed, Ds and Rs alike are going along with intervention in the housing markets.

    Yes, it's almost as if I'm making a point that has nothing to do with party politics. My goodness, now what will you do?

  • ||

    joe @ 1:20 PM: Bingo!

    It doesn't matter what side of the aisle the Congresscritter is on. He should recuse himself from any vote that offers a particular benefit to him.

    General tax cuts are a little more problematic as that is a matter over-all policy. The constituents have a right to expect that their representative take a position on something of that nature. (Leaving aside the fact that none of them would likely be able to vote if the rule were applied that broadly.) I think a fair compromise solution would be that the Senator or Representative would have to forego any benefit from a cut or new exemption until the year following his/her next election.

    OTOH, if (for example) the person in question owns or has an interst in a cornfield, he/she should recuse from all votes on subsidies or other "incentive" programs related to corn.

  • ||

    "Sen. John Kerry (D-Mass.), for example, may face as much as $2.9 million in banking stock losses, according to the story."

    "may face as much as $2.9 million in banking stock losses" is logically equivalent to "may not have lost a dime". As others have pointed out, almost anyone who owned stocks back on Jan. 1 2008 has lost money, BECAUSE THE MARKET IS DOWN 10%! Aren't libertarians supposed to be, you know, economically literate? Because they sure aren't members of Congress.

  • shecky||

    C'mon, Alan, be a sport. Don't be denying us our 10 minute hate on John Kerry.

  • TallDave||

    I'm almost to the point of thinking that upon election to high office, politicians should be required to relinquish the rights of free citizens. No privacy, no income other than a modest stipend... I'm thinking a lifestyle a notch or two above a Supermax prison.

  • ||


    TallDave | April 10, 2008, 2:26pm | #

    I'm almost to the point of thinking that upon election to high office, politicians should be required to relinquish the rights of free citizens. No privacy, no income other than a modest stipend... I'm thinking a lifestyle a notch or two above a Supermax prison.



    The snarky part of me wants to say "why even a single notch above?", but realistically this would mean you would get either super-ascetics who have no idea how the real world works or people whose sole source of pleasure is controlling the lives of others.

  • robc||

    He should recuse himself from any vote that offers a particular benefit to him.

    Sweet. Im all in favor of congress not being allowed to ever vote.

    What vote doesnt involve a conflict of interest? Can only unmarried, gay men vote on abortion issues now?

  • ||

    robc

    That had occurred to me. I think all members would still be allowed to vote on the motion to adjourn.

    ;)

  • ||

    The Weekly Standard are the main cheerleaders for our failed Iraq adventure. If we can't afford a manking bailout (and we can't) how in hell can we afford a 3 trillion dollar war?

  • Mike Laursen||

    No privacy, no income other than a modest stipend... I'm thinking a lifestyle a notch or two above a Supermax prison.

    I'd settle for making them file their own tax return. No help from accountants allowed.

  • ||

    He's really more a boy-emperor than a man-king.

  • ||

    "None of the affected senators have announced any intention to recuse themselves from decisions about bailouts and regulatory changes, either on the grounds of conflict of interest or on the ground of economic illiteracy."

    Banks haven't recused themselves from involvement either, and no doubt continue lobbying and wheedling for advantage, and they too have severe conflicts of interest and are also economically illiterate, as demonstrated by their recent performance.

    I mean, who's more economically illiterate? The person holding stocks in banks? Or the bankers who had all the data at their fingertips, had economists on staff, but still made all the bad loans?

  • ||

    What gets me really riled is the fact that our public servants electioneered automatically re-elected congress-criminals are making so much money they have enough to invest gamble in the stock markets.

    /These people scumbags will come out of this alright.

    //The people who will be ruined in this economic downturn severe recession will have a hard time putting food on the table, filling up the gas tank and keeping a roof over their heads, while these bozos whine about having to maintain 2 households and making 3-4 times the average American, on the government teat.

  • ||

    Conflict of interest does not go away because the government action that could benefit an official involved in a decision meets with your ideological approval.

    True, joe.

    The only way to police this is on the front end: have any sitting member of Congress liquidate all their investments (including investments that they have an interest in due to marriage) and put them into a total market fund (equities and bonds). If your spouse happens to be a billionairess, well, you better let her know up front what's about to happen.

  • ||

    If congress-people are truly public servants then they should be willing to stay in government quarters like the Watergate Hotel. They should have private quarters and offices and have 3 meals a day all on the government nickel. Their pay should be reduced to no more than $100,000 / yr. and they should return to their districts immediately after the close of each session to engage with their constituents rather than going on junkets.

  • J sub D||

    If congress-people are truly public servants then they should be willing to stay in government quarters like the Watergate Hotel.

    Fuck that. Put them in enlisted barracks.

  • economist||

    I'm all for having Congress and the president imprisoned and having their governing privileges revoked, (I would let the Supreme Court get away with a slap on the wrist), and starting over with a similar constitution but with certain parts being modified(ie "right to bear arms individual right stemming from right to self-defense","no forcible property takings by the government, even for 'public use', etc.").

  • ||

    zig-zag man

    I see no reason why our congressmen should even have to go to Washington to do their job. With the technology today they could do their work in their office in their district. It could all be done on-line or by video. This would make it much harder for lobbyists to get at them and make it much harder for then to lose focus on their constituents.

  • SIV||

    WTF, I'll weigh in:

    I think we should treat our elected officials and unelected bureaucrats as if they are witches in 17th century Europe.

  • JB||

    As Arnold would say: "Shoot them first."

  • Lost in Paradise||

    John Kerry serially invested in wives and plowed his first hundred million into making billions. Jealous much?

  • ||

    As I've often suggested, Congressional pay should be a fixed multiple of minimum wage, so that in order to give themselves a raise, they'd have to raise the minimum for everyone.

    They'd face pretty serious opposition from corporate donors, which would incentivize them to not keep raising it. But eventually, they'd probably decide they really needed the raise, and raise it despite the backlash from business.

  • VM||

    "severe recession"

    ???

  • ||

    "What gets me really riled is the fact that our public servants electioneered automatically re-elected congress-criminals are making so much money they have enough to invest gamble in the stock markets."

    Anyone with a 401K or IRA is investing/gambling in the stock market.

  • ||

    I guess Bear Stearns is also economically illiterate.

  • ||

    "I see no reason why our congressmen should even have to go to Washington to do their job. With the technology today they could do their work in their office in their district. It could all be done on-line or by video. This would make it much harder for lobbyists to get at them and make it much harder for then to lose focus on their constituents."

    Great idea, with secure lines and video conferencing they could be more accessible / accountable to their constituents. Time to join the 21st century congress.

  • Apaulogist||

    "I see no reason why our congressmen should even have to go to Washington to do their job. With the technology today they could do their work in their office in their district. It could all be done on-line or by video. This would make it much harder for lobbyists to get at them and make it much harder for then to lose focus on their constituents."

    Where do I sign the petition? I love it.

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