Lawmakers' inside advantage to trading:
A year ago this week Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke dashed to Capitol Hill. They hastily met with a small group of congressional leaders to tell them that the country was teetering on the edge of financial catastrophe.
Paulson and Bernanke asked Congress to spend hundreds of billions to save the banks.
JOHN BOEHNER: We clearly have an unprecedented crisis in our financial system.
GOP House Minority Leader John Boehner...
BOEHNER: "On behalf of the American people our job is to put our partisan differences aside and to work together to help solve this crisis."
The next day, according to personal financial disclosures, Boehner cashed out of a fund designed to profit from inflation. Since he sold, it's lost more than half its value.
Sen. Dick Durbin, an Illinois Democrat, who was also at that meeting sold more than $40,000 in mutual funds and reinvested it all with Warren Buffett.
Durbin said like millions of others he was worried about his retirement. Boehner says his stock broker acted alone without even talking to him. Both lawmakers say they didn't benefit from any special tips.
Innocent isolated events? The data suggest that we should be skeptical:
But over time members of Congress do much better than the rest of us when playing the stock market.ALAN ZIOBROWSKI: Senators make significant abnormal returns, some place around 1 percent above the market, 12 percent a year.
Alan Ziobrowski is a business professor at Georgia State University. Using hundreds of personal financial disclosures from the 1990s, Ziobrowski analyzed more than 6000 stock transactions by members of Congress going back up to 15 years.
ZIOBROWSKI: I mean they do better down market, up market. They just outperform the average.
Most lawmakers are not active traders. But Ziobrowski found that politicians who do play the market fare even better than corporate insiders when it comes to picking stocks.
ZIOBROWSKI: We have every reason to believe they are trading on information that the rest of us don't have.
The value of information that flows from the inner workings of Washington isn't lost on Wall Street professionals.
Michael Bagley is a former congressional staffer who now runs the OSINT Group. Bagley sells access and research. His clients are hedge funds, and he makes it his business to mine Congress and the rest of Washington for tips.
None of this is illegal.
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> None of this is illegal.
Why would a high pries^H^H^H^H^H politician make his own job benefits illegal?