This is not a good thing.
Posted on 11/11/2004 5:41:08 AM PST by billorites
As discussed in detail in this post a couple weeks ago by Professor Bainbridge, a recent study by Alan J. Ziobrowski of Georgia State University and colleagues at three other schools showed that during the 1990s, senators' stock picks (which must be publicly disclosed periodically) beat the market by 12 percentage points a year on average. By comparison, corporate insiders only beat the market by about six percentage points a year, and U.S. households underperformed the market by 1.4 percentage points a year on average.
As reported in this article in Sunday's Philadelphia Inquirer, the authors of the study conclude that these results "suggest that senators are trading stock based on information that is unavailable to the public, thereby using their unique position to increase their personal wealth...." The study adds that it is as if "senators knew appropriate times to both buy and sell their common stock." The article quotes Ziobrowski as stating in a recent interview that "there is cheating going on, at a 99 percent level of confidence."
The Inquirer article states that according to Ari Gabinet, head of the SEC's Philadelphia Office, "agency staff reviewed a draft of the study in March but decided not to press the issue because it is hard to win insider-trading cases without detailed knowledge of what, if any, privileged information the subjects received and proof insiders used it to trade. The SEC lacked such information in the senators' case."
Huh? Yes, it's hard to win insider trading cases but the SEC does so routinely by using its subpoena power to gather documents and testimony that often will provide "detailed knowledge of what, if any, privileged information the subjects received and proof insiders used it to trade."
The article also points out that "the SEC may have little incentive to tangle with the Senate, given their relationship. Senators approve members of the SEC's governing body, as well as the agency's budget."
This is not a good thing.
US Senators have been shown to have astonishing positive returns on their investments while in office, in their financial reports. Bribery is the order of the day. Thiink Hillary.
And the names of these Senators are...?
I'm guessing Daschle is on the list. Maybe Torricelli.
The study cited (Ziobrowski) reported average investment performance for the entire Senate. Interestingly, the "freshman class" did even better - 16% above market for the years studied.
thanks, yatros.
I am pretty sure our lovely Sen Boxer was one. I recall that during the dot.com boom, she was on the A list for several of the big public offerings. This was basically a marginally legal way to give money to insiders and buddies of the bank. A hot offering would be oversubscribed and virtually guaranteed to go up. If you were lucky enough to get on the initial list, you got the stock at the offering price, then turned around and sold the stock in the first minutes to the B list. To the extent the A list represents a bank's biggest investors, there is at least some sort of market justifcation - but if politicos get put in, it is as close to a pure pay-off as you can get at virtually no risk.
The Kleptocracy at Work.
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