Posted by Karl Denninger
We examine whether the equity ownership in financial institutions held by members of the U.S. Congress is associated with these institutions receiving government support under the Troubled Asset Relief Program (TARP). We find that the equity ownership of members of the House of Representatives, but not the Senate, is positively associated with voting in favor of key legislative proposals to bailout the financial sector. In a sample of 555 publicly listed financial institutions, we also find that the equity ownership of Congress members seated on the Senate Finance, the House Financial Services and the Senate Banking, Housing and Urban Affairs committees is positively associated with both the amount of bailout these institutions receive, as well as the timing of that bailout. We find that when the chairpersons and ranking members of these committees hold larger investments in a given financial institution, the amount of support committed thereto as well as their likeliness of receiving this support at an earlier time increases. In contrast, institutions’ campaign donations to the members, including the chairpersons and ranking members, of these committees are not associated with either the amount of bailout received or the timing of its receipt; rather, we find that the bailout is positively associated with the total donations made to all non-financial-committee members. In addition, we find a positive association between government support and the presence of a (former) politician on an institution’s board of directors.
So now we have a scholarly study says that our politicians are crooked? That they are self-dealing?
I have in the past written about the ugly reality of Congressional insider trading, and so have others. Unlike you or I, Congresscritters and their staff are not prohibited from trading on information they learn in the performance of their duties.
So why is this sort of thing allowed?
One reason: They make the laws, you have to follow them.
They’re big, you’re small.
They’re right, you’re wrong.
And every penny they can’t manage to steal they’ll “make” by either trading on inside information or they’ll help those firms that would help them.
From Merriam Webster:Main Entry: ol·i·gar·chyPronunciation: \’ä-le-,gär-ke, o-\Function: nounInflected Form(s): plural ol·i·gar·chiesDate: 1542
1 : government by the few
2 : a government in which a small group exercises control especially for corrupt and selfish purposes; also : a group exercising such control
3 : an organization under oligarchic control