Hat Tip to BlackSwan (Moderator at Mish's Blog)
Part 1
Black Swan says:
“High salaries are obviously not enough. Our elected officials don't just take their marching orders from the kleptocrats, because the kleptos are funding their campaigns. Get ready to rage:
"For a group often criticized for being out of touch with what's happening on Main Street, some argue Congress seems to be deeply in touch with what will soon happen on Wall Street, especially when compared to the average investor.
"If the question is -- are they using information that they're picking up in Congress to beat the market? The answer is absolutely," said Dr. Alan Ziobrowksi, a professor of economics at Georgia State University.
This may surprise you, but it's perfectly legal for both members of Congress and their staff to use inside knowledge about upcoming legislation to play the stock market.
For example, let's say Congress is quietly preparing to pass a bill that helps the dairy industry. Before the public is aware of Congress's intentions, our elected leaders and their staffer can invest in dairy companies that stand to benefit from the bill. Then, they can pass the bill and watch the stock take off. Critics call it a form of legalized insider trading.
Critics of Congressional investment practices point to a recent transaction made by Republican House Minority Leader John Boehner of Ohio. In September of 2008, when the economy was on the brink of collapse, the U.S. Treasury Secretary and Chairman of the Federal Reserve went to Capitol Hill to privately brief Boehner and other congressional leaders. At the time, one of the greatest economic dangers the country was deflation. One day after that meeting, records show Congressman Boehner pulled his money from a fund tied to inflation.
"It says to me he picked up some information and he tried to save himself a lot of money by dumping it as soon as he could," Dr. Ziobrowksi said. "And again, though, technically speaking, there is absolutely nothing illegal about that."
"I think the worse danger of course is that they're going to be passing and lobbying legislation on the basis of what's good for their portfolio rather than what's good for you and I," Dr. Ziobrowski said.
