The Spoils of Being a Senator

The SEC was correct not to investigate - it's an unwinnable case. But I'm sure their initial suspicions were correct.

Senators' stock picks bring profit, scrutiny
By Joseph N. DiStefano
Inquirer Staff Writer

Staff at the Securities and Exchange Commission say they considered, but rejected, investigating the U.S. Senate early this year after a study found senators made suspiciously high profits from stocks during the 1990s bull market.

Senators' investments beat the Standard & Poor's 500 by an average 12 percent a year from 1993 to 1998, according to the study by Alan J. Ziobrowski of Georgia State University and colleagues at three other schools.

Put another way, a typical investor who matched the S&P's performance in those years collected about $220 in profit for each $100 invested. The average senator, by contrast, collected $460 on a $100 investment.

"The economic returns earned by the senators are abnormally large," and are even greater than those corporate inside-traders typically collect using illegally obtained information, the study concluded.

The 100 members of the Senate often have access to business information that ordinary investors cannot get. They acquire this information in the course of holding hearings at which company executives appear, reviewing Senate staff and regulatory agency reports, and considering legislation that governs business conduct, the study said.

In addition, senators socialize with and collect campaign contributions from regulated businesses, their executives, and lobbyists. They also acquire information from overseeing federal regulators, such as the SEC, and their budgets.