IN JUNE, Rep. Judy Biggert (R-Ill.) introduced legislation designating September as Life Insurance Awareness Month. “Losing a family member is painful enough without encountering new financial difficulties,” Biggert said, adding that she hoped her congressional decree would “draw attention to the importance of life insurance to the economic security of all Americans.”
Life insurance is certainly important to Biggert’s own economic security. According to financial disclosure data filed with Congress, her husband has invested a chunk of the couple’s net worth in companies that sell life insurance, among them Aflac, Legg Mason, M&T Bancorp, Wells Fargo, and Synovus Financial Corp. It’s impossible to know exactly how much money the Biggerts have invested in the insurance and financial-services sectors, because lawmakers need only list their assets in broad ranges (such as $15,001-$50,000) rather than specific amounts, but the total falls between $502,024 and $1,455,000.
Biggert has another connection to the financial industry: She serves on the House committee in charge of regulating it. Isn’t that a conflict of interest? In most government agencies it would be. Federal agency officials are generally prohibited from buying and selling stock in the companies they oversee. But Congress long ago exempted itself from ethics rules regarding investments. At one time this exemption made sense: Farmers wanted to be able to serve on the Agriculture Committee without selling their farms, for example. But many lawmakers now interpret this exception as carte blanche to invest after taking office.
Both House and Senate ethics rules bar lawmakers from “improperly using their official positions for personal gain.” The rules also require members to disclose their financial interests, and those of their spouses and dependent children. Some members, seeking to avoid the appearance of conflicts of interest, avoid buying stock or stow their assets in blind trusts. Others invest only in index funds or in diversified mutual funds. But a substantial share of House members and senators trade enthusiastically — or, like Biggert, permit their spouses and children to do so. An examination of the latest batch of financial disclosure reports, filed this summer for calendar year 2004, shows that dozens of lawmakers routinely buy and sell stock in industries they oversee, raising questions about whether they have an unfair advantage over the average investor.
They certainly do better than the rest of us. A recent Georgia State University study found that between 1993 and 1998, senators made “abnormally high” returns on their investments, beating the market by an average of 12 percent per year. The authors credit this to “a substantial informational advantage over ordinary investors.”
In 2004, homeland-security and defense-related stocks were very popular with lawmakers. For example, Senator Judd Gregg (R-N.H.), who leads the Appropriations Subcommittee on Homeland Security and also serves on the panel that controls the Pentagon’s budget, bought between $15,001 and $50,000 worth of stock in ManTech, a company that builds information systems for the Army, Navy, Air Force, and Department of Homeland Security. Gregg also sold between $15,001 and $50,000 worth of stock in IPIX, which provides battlefield imaging equipment to the Pentagon. Dozens of other lawmakers own stock in defense contractors, among them House Rules Committee Chairman David Dreier (R-Calif.), Deputy Whip Dave Camp (R-Mich.), Senate Minority Leader Harry Reid (D-Nev.), and Rep. John Dingell (D-Mich.).
Where Congress’ votes go, its portfolios follow. Energy-related stocks were big last year, especially among those who voted to open the Arctic National Wildlife Refuge (ANWR) for oil drilling. For example, Rep. Ed Whitfield, a Kentucky Republican who serves on the Energy and Commerce Committee, has between $100,001 and $250,000 worth of ExxonMobil; Rep. Anne Northup (R-Ky.) reported that her spouse bought between $15,001 and $50,000 worth of Shell/Royal Dutch Petroleum five months before the ANWR vote, and between $15,001 and $50,000 each of ExxonMobil and oil-driller Schlumberger four months before that.
Some lawmakers do vote against their own economic interests, at least some of the time. Rep. Lloyd Doggett (D-Texas) voted against opening ANWR, despite his heavy oil- and gas-industry investments. Rep. Clay Shaw (R-Fla.) voted to allow seniors to import cheaper pharmaceuticals even though he holds $15,001 to $50,000 in stock in Santarus, a drug company.
Shaw isn’t the only member with stock in the heavily regulated drug and health care industries. Rep. Pete Stark (D-Calif.), a leading player on health policy, has between $50,001 and $100,000 worth of stock in Delcath, which is in the process of seeking FDA approval of its drug-delivery system. Stark says he bought the stock on a tip from his brother; he says he’s not worried about a conflict of interest, arguing that there’s not much any one congressman could do to affect the fortunes of a publicly owned company. Similarly, a spokeswoman for House Minority Leader Nancy Pelosi (D-Calif.) — whose husband, a professional investor, owns between $250,001 and $500,000 in Pfizer — says Pelosi often votes against her financial interests and pays attention to her portfolio only when she has to sign the annual disclosure form.
But Charles Lewis, founder of the watchdog group Center for Public Integrity, finds that argument unconvincing. “There might be some cases where members are so rich that they aren’t aware of every single holding,” Lewis says. “But it defies credulity to think that when members of Congress are voting, they don’t know that they are helping themselves financially…. You might as well move to Neptune if you think that’s how the world works.”