Your Local Politician Is A Millionaire

Your chances of bumping into a millionaire on the street are just 1 out of 10. A Bloomberg Businessweek study shows that millionaire households represent less than 1% of all households. However, if you take a visit to the United States Capitol, your chances of bumping into a millionaire increase to better than 4 out of 10. Whatever your political ideology, there is no disputing the fact that most politicians are far richer than most of us.

According to a 2009 study by the Center for Responsive Politics, there are 237 million millionaires in Congress. That’s 238 wealthy people out of 535 “public servants”. 44.5% of all members of Congress are rich. This is just the reported wealth. No one knows how many undisclosed assets that members of Congress may possess. These figures do not include the value of personal residences for politicians. The numbers would likely be even higher if personal residences, government salaries, and pensions were included since personal residences are the biggest source of wealth for most Americans.

It makes perfect sense that Congress has a difficult time passing laws that will help the average citizen because they cannot relate to the struggles of the average individual. Only 1% of the American public are millionaires while nearly half of your duly elected representatives fit in this category. The Senate in particular is known as the millionaires club. Political affiliation doesn’t appear to matter when it comes to wealth as both Democrats and Republicans seem to be rolling in money.

I do not have an issue with a wealthy individual serving in Congress that will responsibly represent their constituents. My only problem is if politicians use their platform to protect their own interests over those of the American public. For example, passing laws that help enrich themselves or drafting legislation that will help them land a nice cushy lobbying job after leaving Congress. It seems however that lawmakers are generating income from companies that are benefitting from taxpayer dollars.

A perfect example of this can be seen in the TARP bailout. Congress decided to devote billions of dollars to bail out companies like Bank of America, General Electric, Goldman Sachs, Wells Fargo, and Citigroup. The decision to bail out certain companies and to let others fail seemed largely subjective. Why save Goldman Sachs and let Lehman Brothers go under? The answer is because Lehman Brothers wasn’t a Congressional core holding. The aforementioned five stocks are largely held by members of the House and Senate.

I am absolutely fine with a member of Congress that invests in an industry as long as they are not voting to protect their own financial interests.Remember Congress was supposed to working on financial legislation that was supposed to regulate the derivative market. That never happened because the securities and investment industry is the third largest sector holding of Congress. We had the real estate boom due to an easy money policy and now Congress is trying to prevent the real estate market from tanking. Why is that? This sector is the number 1 holding of Congressional members. The oil and gas industry ranks number four in the Congressional investment chain. There is always talk of moving off of our dependence on foreign oil but this never occurs. Exxon, Shell, BP, Conoco Phillips, and Chevron account for 44% of all Congressional oil and gas investments.

With so much money pouring in from lobbyists and investments in the sectors that they regulate; it can be difficult for a politician to vote in the best interest of their constituents and not in the interest of their pocketbook.

Why do you think so many millionaires run for public office?

Photo by: jontintinjordan

Comments

  1. avatar Barry says:

    I completely agree about politicians and their benefitting from the knowledge the have of businesses and legislation. Here is an article by the WSJ about how congressional aides make trades based on legislation they know will pass

    http://online.wsj.com/article/SB10001424052748703431604575522434188603198.html

    We must also remember that many congressmen come from successful business backgrounds, and are ambitious and intelligent people. While they should not benefit from inside information, should we make them liquidate their portfolios just because they win election?

    • avatar Mark says:

      That is crazy that such a large number of congressional aides trade stocks in industries that they oversee. They have direct knowledge about laws that will impact these companies. I believe that politicians should be able to hold their positions but should not be able to trade their positions based on insider information. For example, if someone serves on the Senate banking committee then he should not be involved in trading bank stocks.

  2. Having control over tax dollars = huge leverage. Although nobody should be directly pocketing tax dollars, it’s no surprise that their position of power proves to be an advantage.

    • avatar Mark says:

      That’s what I worry about Kevin. They can decide which companies survive and which ones fail. They are in a direct position to benefit from this information.

  3. avatar Evan says:

    I am not sure if it is a good or bad thing, but this is certaintly not a new thing. Our founding fathers were MUCH wealthier than the normal soon-to-be American.

    • avatar Mark says:

      That’s true but the founding fathers were not investing in publicly traded companies! They had no control over the activities of the private sector.

  4. Our Presidents, who are also usually millionaires, put their investment portfolios into a blind trust while they are in office. Maybe, we should require this of Congress, as well. Congressional aids who use inside information to trade should just be put in jail. That would stop it pretty quickly.

    Also, I wanted to point out that derivitives reform did pass, as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Despite an intense lobbying effort by investment and deposit banks, the legislation was pretty robust.

    • avatar Mark says:

      Bret,

      A blind trust isn’t a bad idea for all Congressional members. The aides should not be trading on the information at all. I wanted to see a bill with more teeth. Financial institutions should be forced to disclose derivative positions. That would shed more light into what firms are trading derivatives and the dollar amount. That way we could know what firms are potentially putting the taxpayer on the hook again in the future. Banks hide many of their assets off of their balance sheets so that no one know their risk levels. If Bank of America, Citigroup, or JPMorgan Chase were facing failure again, the government would have to step in and bail them out.

  5. Talk about blatant conflict of interest. Who are we kidding, I would also vote for/against any legislation that might impact my investments. Human nature at its best!

  6. avatar Rich says:

    If you can’t even figure out how to make a million dollars, what makes you think you can run a country. If you would take all the money away from all the people and start over, the same people would rise to the top, make the money back, and the status would eventually be the same as it is today.

    • avatar Mark says:

      Rich,

      You missed the point. It’s not that politicians shouldn’t be rich. It is that their investments can influence their voting positions.

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