Rise in stock ownership among lawmakers brings ethics concerns
Monday, November 23, 2009
When Sen. Max Baucus (D-Mont.) this summer proposed a $4 billion tax on medical-device firms to help offset the cost of health-care reforms, an unusual mix of lawmakers joined in a chorus of protest.
Sen. John F. Kerry (D-Mass.), a liberal from the Northeast, warned that the tax could undermine companies developing "new technology that saves lives and money."
Rep. F. James Sensenbrenner (R-Wis.), a conservative from the Midwest, cautioned that the tax would "harm our districts' economies, impede innovation and ultimately deny access to lifesaving medical devices."
Because their politics rarely align, the shared opposition underlined something else Kerry and Sensenbrenner have in common: millions of dollars of family wealth invested over the years in the companies that make medical devices.
This juxtaposition of investments and policy has become more common as stock ownership has soared on Capitol Hill over the past two decades. The investments increasingly put lawmakers in the position of voting or advocating on matters that could affect their personal wealth, whether the lawmakers realize it or not.
That issue has become more acute over the past year. Congress has intervened in unprecedented ways into the private sector, allocating billions of dollars for stimulus projects, federal bailouts and health-care reform.
Kerry and Sensenbrenner are wealthy men, and under congressional ethics rules are entitled to invest in the stock market as other Americans can. Medical-device investments are a relatively small part of their large portfolios, and both men say through spokeswomen that their positions on the tax were driven by concerns about their constituents and the health of the industry, not by their families' investments.
But growing investments on Capitol Hill, such as those in the medical-device industry, raise questions about appearances of conflict. Even if lawmakers have done nothing wrong, ethics specialists said, such apparent conflicts are troubling because it is often impossible to know whether the lawmaker is acting in the interest of citizens or their own portfolios. On Wall Street and in federal agencies, the suggestion of a conflict is often the basis for an investigation.
The uncertainty created about lawmakers' motivation undermines confidence in Congress and the political process, the specialists say. More than half of all lawmakers own stock. In the House, the number of lawmakers trading stock jumped from 91 in 2001 to 259 today, according to academic researchers and the nonprofit Center for Responsive Politics. That includes 68 lawmakers who, as of the beginning of 2008, individually owned more than $100,000 in stock, not including mutual funds.
Some of the most popular stocks in Congress are also widely held across the country, including General Electric, Microsoft, Bank of America, Procter & Gamble and other blue-chip names. Some of these companies are also government contractors or bailout recipients. Top industries include oil and gas, electronics and health-care products. In the medical-device field alone, 108 lawmakers collectively own $6 million to $14 million worth of stock.
The rise in congressional investing has come at a time when longstanding ethics rules leave it almost entirely to the lawmakers themselves to decide whether investments pose a conflict. Although Congress has imposed numerous strict conflict-of-interest rules on federal agencies and private business, the rules it has set for itself are far more permissive.
The congressional financial disclosure system, an annual form filled out and policed by members of Congress, is supposed to help keep lawmakers honest and reassure the public by making stock holdings transparent. But the reporting is delayed, information is limited and the paper forms prevent the computer analysis of trading that is commonplace elsewhere.