BUZ LIVINGSTON: What 60 Minutes missed and we will, too
About the time Occupy Wall Street protests sprouted, a hard-hitting 60 Minutes segment focused on a more reprehensible American subset than big bankers — congress. Adding insult to injury, congressmen and women supposedly benefited from legal but insider trading. In retrospect, 60 Minutes used misleading data.Where have you gone, Andy Rooney?
No, congress does not regulate itself adequately and the only vestige of bipartisan cooperation is Washington’s shady culture of crony-capitalism. Unfortunately, evidence indicates congress underperformed as most actively managed mutual funds hawked to investors.
While members of congress have an ethics rule prohibiting the use of their official positions for personal gain, this vague regulation does little to prevent members of congress enhancing their stock portfolios via their access to levers of power. Surprisingly they blow it, sarcasm off.
60 Minutes based their expose on Peter Schweitzer’s book, “Throw Them All Out,” which used research from two Alan Ziobrowski papers. Importantly, Ziobrowski’s work does not include actual portfolios owned by members of Congress. A more comprehensive report from Andrew Eggers and Jan Hainmueller uses actual portfolios and casts a different light on Schweitzer’s claim that a permanent political class cashes in via insider trading. Egger and Hainmuller report members underperformed the market (2 to 3 percent) from 2004-2008. Even more damning is their performance was actually worse, relative to the market, in 2007-2008 compared to 2004-2006.
In a Dec. 13, 2011, Advisor Perspective article, Michael Edesess chided Schweitzer for sensationalizing his data. Schweitzer, for instance, cites the late Congressman Tom Lantos’ Boeing purchase at $5 per share as evidence of Congressional skullduggery since Boeing skied to over $85/share at the time of Lantos’ death. Unfortunately for Lantos, a $5 investment in the S&P 500 index over the same period would be worth $100. Lantos took more risk by buying an individual stock then received a lower return. Congress is the gang that can’t shoot straight.
Schweitzer claims former speaker Nancy Pelosi’s Visa initial public offering (IPO) purchase “soared by 203 percent” as a direct result of legislative action on bank fees. Visa hit the market in 2008 at around $64/share and closed last in mid-January at $102. Ban members of Congress from participating in IPOs if you like; just get the math right.
In his State of the Union address, President Obama praised the STOCK (Stop Trading on Congressional Knowledge) Act, but the president is baracking up the wrong tree. He should have instead called on support for Sen. Bernie Sanders’ constitutional amendment excluding corporations from First Amendment freedom of speech protection. Sanders’ amendment would affirm the regulation of campaign donations thus reversing the Supreme Court’s Citizens United ruling.
The tsunami of corporate cash from anonymous donors threatens our democracy and potentially corrodes our economy. As long as the revolving door from Congress to K Street lobbyists stays open, throwing them all out accomplishes little.
Locally, just wait. Well-funded unspecified groups will soon tell us why Walton County needs the state’s highest sales tax rate while cloaked in the name of free speech. Follow the money, if you can.
Buz Livingston is a certified financial planner. He operates Livingston Financial Planning Inc. focusing on hourly financial planning and investment management. Contact him directly at 850-267-1068 or at buz@LivingstonFinancial.net.
