Pelosi “Insider” Investments Expose Inherent Conflicts of Interest

Should elected members of Congress be allowed to invest in things whose value depends upon how the government spends money? Or whose growth prospects depend upon how government rules and regulations affect them?

Since members of Congress have direct influence over both these things, “no” is the obvious answer to both questions. That’s because there are clear and inherent conflicts of interest involved. Politicians are able to shape legislation and spending bills in ways that influence the value of their investments. As political insiders, they can minimize their risk of losses and transform their investments into sure-fire bets.

An example of that may be found in the stock market investment portfolio owned by House of Representatives Speaker Nancy Pelosi. Since January 2019, Pelosi’s portfolio has outperformed the S&P 500, with $100 invested in 2019 rising to $196 versus $173 in the S&P index.

Red Flags

That’s a red flag because the S&P 500 index consistently outperforms the portfolios of most professional investment managers. Even the volatile years of 2020 and 2021 were no exception.

But Speaker Pelosi’s investments often outperform the S&P 500. Lydia Moynihan and Theo Wayt report in the New York Post:

While there’s no smoking gun showing that the Pelosis have traded using insider info, their portfolio has often outperformed the S&P 500, causing critics to question whether the speaker and other stock-picking politicians have the public’s best interest in mind when legislating.

Capital gains and dividends from their holdings in just five Big Tech firms—Facebook, Google, Amazon, Apple and Microsoft—reaped the Pelosis at least $5.6 million and up to $30.4 million between 2007 and 2020, according to an analysis of publicly available disclosures shared with The Post.

And the Pelosis’ overall portfolio—which has also included companies like Disney and Roblox—beat the S&P 500 by 4.9 percent in 2019 and a whopping 14.3 percent in 2020, according to data crunched for The Post by FinePrint, an outfit pushing for greater transparency of financial holdings on both sides of the aisle.

The Pelosi portfolio lagged behind the S&P 500 in 2021. New investments combined with some political influence however could improve the Speaker’s fortunes in 2022.

Cashing Out

The relative performance of Pelosi’s investments could benefit from the Speaker exerting influence on Capitol Hill over antitrust legislation:

Late last month, the House Speaker disclosed that the Pelosis scooped up millions in bullish call options for stocks including Google, Salesforce, Micron Technology and Roblox. At the same, some insiders say she has slow-walked efforts to rein in Big Tech....

“The optics are terrible for her, for the party, and for Congress,” one Democratic insider told The Post. “And it raises serious questions anytime she takes action or doesn’t act on issues relating to holding these companies accountable.”

“It’s not a good look for the Speaker of the House to simultaneously profit directly from the companies she is supposed to rein in,” another source close to the situation told The Post.

No, it’s not a good look at all. But why would a soon-to-retire politician care about looks when doing what they’re doing makes them richer? Especially when they’re ready to cash out and face no serious consequences for their actions?

It’s not just a problem in Congress. The insider trading scandals extend to federal government employees at all levels of power. Today, 9 out of 10 Americans see this kind of insider trading by politicians and bureaucrats as a problem. But if you want it fixed, it means taking away their power to pick winners and losers with every spending bill or rule they make.

Craig Eyermann is a Research Fellow at the Independent Institute.
Beacon Posts by Craig Eyermann | Full Biography and Publications
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