Paul Tracy

The truth will make you sick.

Congress is rich -- unbelievably rich. According to the Center for Responsive Politics, 249 of the 535 congressmen are millionaires. That's 47%. By comparison, about 5% of U.S. households are worth more than $1 million.

And until recently, insider trading laws didn't apply to congress. They could buy or sell investments based on non-public information they learned from their privileged positions.

As you would expect, that's led to some great returns for Congress' investments. In a study cited by Barron's, members of the U.S. House of Representatives beat investors like you and me by 55 basis points a month. That comes out to an extra 6.8% per year.

I don't know which is worse: the fact that insider trading was legal for some of our nation's wealthiest politicians... or that Congress refused to do anything about it for decades.

I even wrote about this problem back in July 2011, after doing research into how congressmen invest.

Then, in late 2011, 60 Minutes -- one of the most-respected investigative journalism programs on TV -- dedicated a segment to the issue. Here's a portion of what they had to say...

"In mid September 2008, with the Dow Jones Industrial Average still above 10,000, Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke were holding closed-door briefings with congressional leaders, and privately warning them that a global financial meltdown could occur within a few days. One of those attending was Alabama Representative Spencer Bachus, then the ranking Republican member on the House Financial Services Committee and now its chairman."

"While Congressman Bachus was publicly trying to keep the economy from cratering, he was privately betting that it would, buying option funds that would go up in value if the market went down. He would make a variety of trades and profited at a time when most Americans were losing their shirts."

And that was just one example of what was happening on both sides of the aisle.

The report from 60 Minutes led to a frenzy. And a few months after the story aired, the Stop Trading On Congressional Knowledge (STOCK) Act, which curbed insider trading by Congress, was signed into law.

Of course, for many years, the rules required all members of Congress (along with some of their higher-paid aides) to publicly disclose information on their finances each year -- including stock holdings.


Get the best of Townhall Finance Daily delivered straight to your inbox

Follow Townhall Finance!