One Simple Trick Made Congress Rich — Time for You to Do the Same

Written by Jason Simpkins
Posted April 22, 2022

In the past 40 years, the median net worth of members of Congress has quadrupled — even when adjusted for inflation.

Meanwhile the real median household income has improved by just 27%.

In fact, more than half of the people serving in Congress are millionaires, representing less than 1% of the population.

How did they get so rich?

Well, it's not the salary...

We know that because the annual salary of a rank and file member of Congress is $174,000, and it's been that way since 2009. That means the average Congressman is actually making about 15% less than they were 13 years ago when you account for inflation.

So what's the source of this massive financial gap between the people and their representatives?

Well, part of it is insider trading.

This is something that's been an issue for decades but has gained new traction in light of recent events.

That is, while Congress was debating economic sanctions, military assistance, and billions of dollars in emergency spending to address Russia's pending invasion of Ukraine, more than a dozen members reported trades in sectors that were directly affected by potential legislation. CNBC even estimated the total trading activity to be about $7.7 million around that time.

And they weren't even subtle about it.

On February 22, Rep. Marjorie Taylor Greene bought shares of Lockheed Martin (NYSE: LMT).

Then, just one day later on February 23, she tweeted: “War and rumors of war is incredibly profitable and convenient.”

And a day after that, the day that Russia officially invaded, Rep. John Rutherford bought shares of Raytheon Technologies Corp. (NYSE: RTX) as he simultaneously tweeted that Putin "must be held accountable," and that the U.S. "must impose the maximum possible sanctions & leave nothing off the table."

Again, this isn't new.

I remember back in 2008, then-Treasury Secretary Hank Paulson and Fed Chair Ben Bernanke held a secret meeting with members of Congress. But when they were informed of the pending economic calamity that was set to befall the United States and the world, they didn't warn anyone. They didn't get working on emergency legislation to help mitigate the damage.

They called their brokers and started dumping their stock. Some even bought shares of financial firms that would later be saved by the federal government.

The same thing happened when Obamacare was being negotiated in 2009.

John Boehner, House Minority Leader at the time, bought a slew of health care stocks just days before they skyrocketed on news that the so-called "public option" had been struck from any potential legislation.

All of this audacious backdoor dealing was brought to light in an episode of CBS’s "60 Minutes" in November of 2011. And the outrage prompted Congress to pass the Stop Trading on Congressional Knowledge (STOCK) Act.

Ostensibly, the law prohibits any members or employees of Congress from using “any nonpublic information derived from the individual's position… or gained from performance of the individual’s duties, for personal benefit.”

But in reality it does nothing of the sort. It's clear now that it was always just political cover.

For one thing, it’s nearly impossible to prove that a member of Congress acted solely on insider information.

And secondly, even if someone is found to have violated the law, the penalty is a paltry $200 fine.

That's $200... for committing a crime that could net someone millions.

House and Senate ethics officials also have the power to waive the fines completely.

That's incredible. No wonder our lawmakers violate it with impunity.

We saw that in 2020 when U.S. Sen. Richard Burr of North Carolina (one of only three senators to vote against the STOCK Act) sold off his stock after receiving classified reports on COVID-19 but before the public was made aware of how severe the pandemic had become. The shares were worth somewhere between $630,000 to $1.7 million and unloaded through 33 individual trades made on a single day.

Burr, who was Chairman of the Senate Intelligence Committee, even tipped off his brother-in-law, Gerald Fauth, who was chairman of the National Mediation Board, which facilitates labor-management relations in the U.S. railroad and airline industries.

Of course, the Trump Department of Justice ultimately decided not to charge him or any of the senators.

Now, there's a new political push to reign in these ghastly backdoor trades, but it'd be pretty naive to believe it's actually going to change anything.

It turns out politicians like being able to trade on insider information with impunity.

“I don’t think that’s a good idea,” says Sen. Mike Crapo. “The bottom line is we already have the Stock Act.”

Missouri Sen. Roy Blunt said: “I’m not going to make it harder for people to serve.”

And House Speaker Nancy Pelosi says we're “a free-market economy," and that members of Congress "should be able to participate in that.”

I'm not surprised she feels that way, considering Pelosi has seen her wealth increase to nearly $115 million from $41 million in 2004.

Gee, I wonder how that happened.

No, I'm afraid there's no way representatives are going to call out their own corruption.

Really, the only thing you can do is profit right along with them.

And my friend and colleague Alexander Boulden can help you do just that.

He just launched a brand-new trading advisory designed to profit from this very phenomena.

At its heart is an algorithm that analyzes the stock trades being made by America's politicians, as well as company insiders and major financial institutions.

You can find out all about it here, and you'll be getting in on the ground floor because he just launched it earlier this week.

It's pretty much the only choice you have, because the Nancy Pelosis in this world aren't going to help you get rich right alongside them.

So you might as well beat them at their own game.

Fight on,

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Jason Simpkins

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Jason Simpkins is Assistant Managing Editor of the Outsider Club and Investment Director of Wall Street's Proving Ground, a financial advisory focused on security companies and defense contractors. For more on Jason, check out his editor's page. 

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