Why are politicians so DAMN RICH?!

(slurping sounds) - All right, let's do this. Check this out. On September 19th, 2008, Republican Congressman Spencer Bachus made a trade that was effectively a bet that the stock market would drop. His trade meant that for every percentage point that the NASDAQ dropped, his investment would go up by 200%. This is what's known as shorting the market, and it was actually a brilliant bet, because take a look what happens over the next four days.

(intense upbeat music) Oh, and this is when he sells, nearly doubling his investment. It was an amazing trade. It was almost as if he could see the future. Wait, what's this? Ah, the day before he made this trade, Bachus was sitting in a room in a private meeting with the top officials of the US Treasury and Fed. The meeting was so secret that everyone had to hand over their phone before entering the room. The people that Bachus was meeting with were the ones who were in charge of making sure that everything was under control in the US economy. But this was September, 2008 and things were not under control.

- This could be the most serious recession in decades.

- So in this meeting, Bachus was told that quote, it was a matter of days before there was going to be a meltdown in the global financial system.

- Let's talk about the speed with which we are watching this market deteriorate.

- We're down over 16%.

Okay, so that explains why he was able to make this brilliant trade. He knew when the market was about to crash, because he had intel from within. But what's crazy is that Bachus's short on the market wasn't breaking any rules. It was totally legal. Luckily, we have financial disclosures, all of the stocks that lawmakers buy and sell, public information. So we can see who's making trades based on insider information. And we've used all of this information to make a list for you, a list of the lawmakers that we see as some of the best investors in our country. And in this video, I want to explain how their insider knowledge may help them make the best bets on Wall Street.

- [Reporter] There's all sorts of insider trading happening in Congress.

- [Male Reporter] That's because they're corrupt. They wanna keep making money from that inside trading.

- [Reporter 2] The American people should know that a member of Congress is never leaving a classified briefing and calling their stockbroker.

(intense music) So, we in the West love a good free market, buy, sell, and invest as you please. But, for certain people who have special insider information about the economy, we have rules to stop them from gaming the system with their knowledge. We passed these laws like a century go. They're called insider trading laws.

- Insider trading.

- Insider trading.

Basically, they prohibit people from selling an investment like stocks, using non-public information. This includes tipping this info to other people who then go buy the stocks based on that insider information. And an insider is anyone who is an officer or director or 10% stakeholder, or anyone who possesses insider information, because of his or her relationship with a company. This could be like the daughter of a CEO who has insider information, because she talked to her dad around the dinner table about what the company's gonna do next. So if you're the CEO of Microsoft, you're not allowed to sell a bunch of your stock the day before you release an earnings report that shows that your company's profits are down, which will likely trigger like a drop in the stock price. A free market needs to be a fair market too, so that the insiders aren't always the ones with the knowledge to make the best trades. Okay, so while insider trading laws are very clear when it comes to business executives, there's a group of people in our society to whom these rules kind of don't apply, lawmakers.

Historically, Congress has had no restrictions when it comes to trading stocks. For most of American history, insider trading laws that affected CEOs, didn't apply to members of Congress.

Lawmakers hear loads of private information. They sit on committees, where they investigate and talk to businesses all the time. This stuff affects the economy and thus the stock market. And a lot of it is private. They know this stuff before the rest of us do. And yet, for most of our history here in the United States, lawmakers have been able to buy and sell stocks with very little restriction, (crowd applauds) and that is why this report exists.

(smacking sounds) This brilliant study recreates all of the trades that senators made over the course of four years in the 90s and found that consistently these senators had abnormal positive returns, like way better than some of the best investors in our country.

- [Narrator] A study of data from the 1990s showed senators' trades outperformed the market by 12% per year. That crushes investment guru Warren Buffett, who only managed to beat the market by 2.5% that decade.

Hmm, okay. So either these civil servants are just like super savvy investors, or as the study suggests, the senators knew the appropriate time to buy and sell their common stocks. Like we're all kind of guessing when we're playing the stock market, everyone's guessing what's gonna happen next. If you kind of know what's gonna happen next, because you're like privy to information about the economy, you can play the game a lot better.

If we were trading stocks based on insider info, we'd go to prison. They don't go to prison. This happens out in the open.

And then, as banks in the stock market were collapsing in 2008, lawmakers once again made headlines with their surprisingly successful and suspiciously timed trades. In 2012, the Washington Post did a big investigation into this and found that in the lead up to the 2008 meltdown, had least 34 lawmakers from both sides of the aisle, changed portions of their portfolios, 166 times within two business days of speaking with administration officials. So many of these lawmakers are making loads of money while the economy is melting down around them. When asked about their shady transactions, lawmakers such as John Boehner quote, declined to discuss their transactions. After this blatant display of insider knowledge, it became more and more clear that lawmakers were using their knowledge to enrich themselves. And it was not a great look at a time when millions of Americans were losing their life savings and jobs and houses.

- It was the worst day on Wall Street, since the crash of 1987.

Oh, but remember, it was still legal. They weren't breaking any rules. It was their right to do this. But the pressure mounted. And in 2012, they passed a law on themselves. We have an act of Congress. Look at this. 112th Congress passing laws to regulate their own greed. I love this. I love this.

- The idea that everybody plays by the same rules is one of our most cherished American values.

Oh, and look at the name of the law. This is the Stop Trading on Congressional Knowledge Act. The Stock Act, pretty clever. This law bans Congress from buying and selling stocks based on insider information and requires them to publish all of their trading activity, which is one reason why I have all of this paper. They're like now required to disclose all of their stock trading. Great, 2012, they passed the law. Problem solved, right? Well no, not according to our reporting. Despite this law, we still have a list that I'm now about to show you.

(upbeat music) This is a list of all the lawmakers who went on to continue to make savvy trades in the market, all while still being totally clued in to private and privileged information about the economy.

(intense upbeat music) Okay, first up, we've got the financial disclosure of Republican Senator Richard Burr from North Carolina.

(ominous music) In January, 2020, before any of us really knew that the world was literally about to shut down, Burr was the chairman of the Senate Intelligence Committee. On January 24th, he together with a bunch of senators were briefed on secret information about how bad the Coronavirus pandemic really was about to get. And according to this unsealed FBI document, a few days later, Burr discussed some of that non-public information that he had learned in the briefing with someone via text. Who was that someone? Their name was, redacted. We don't know, because it's an FBI thing. Doesn't matter. What we do know is that minutes after this call, Burr logs into his trading account and sells $110,000 worth of stocks.

(upbeat music) That same day, literally at 3:43 that same day, right after he sells his stocks, like a few hours later, the White House comes out and says that they're going to ban people from traveling to the United States if they've been to China in the last 14 days. Soon after selling all of his stocks, Senator Burr writes an op-ed for Fox News claiming that the US is quote, better prepared than ever to face the Coronavirus threat. And yet Burr continues to sell his stocks. This is his disclosure from February of 2020 and the guy's going kind of nuts on sales. All of this whole entire row are all sales. This guy is selling, sell, sell, sell.

(intense upbeat music) In this time period, Burr moved over a million dollars from stocks into Treasury securities, which is an investment that is super safe during an economic downturn. But what was crazy is that the stock market was at an all-time high and he just sold essentially all of his stocks. And then look what happens.

(upbeat music) And while he was downplaying the severity of the pandemic in public, in private, he was spilling the beans like in this secret recording of obtained by NPR, where Burr is telling a group of his social club.

- [Richard] There's one thing that I can tell you about this, it is much more aggressive in its transition than anything that we have seen in recent history. It's probably more akin to the 1918 pandemic.

According to an investigation by ProPublica, Burr also passed his private info to his brother-in-law in a call that lasted only 50 seconds. And the very next minute, his brother-in-law called up his broker and dumped between 97,000 and 280,000 US dollars in shares. I mean, if this isn't insider trading, I don't know what is. And yet it's impossible to prove anything. Burr himself might even be convinced that this wasn't insider trading and that he's just a really smart investor and that he did all of this based on publicly available information. And indeed the SEC and Department of Justice investigated this, but ultimately dropped the matter. Oh, and fun fact, Burr is like one of three senators who voted against the insider trading law, the Stocks Act. So yeah, we know where he stands.

Okay, that was kind of a longer one. Not all of them are gonna be that in depth. Next up, we've got this monstrosity of a document. We are looking at the financial disclosure of Congressman Ro Khanna from California.

(upbeat music) Look at this, it's like dozens and dozens of pages and they are effectively unreadable.

(intense music) What's the point of disclosing your financial transactions if no one can read them? These disclosures show that since 2019, Congressman Khanna's family has made at least 10,500 trades involving nearly 900 companies. Oof, it's quite a few. Okay, like not a crime to make a lot of trades. What's the deal? A lot of these trades, most of these trades were done through a trust that belongs to like his wife and kids.

- Well, it's not, I don't trade at all. I'm up for banning trade. It's my wife's money, which I have no actual legal rights to.

But, when you look at what companies are being bought and sold, you see that of the 897 companies traded by his family, 149 of them were ones that Khanna likely had non-public information about, because of his role as a congressman who sits on a bunch of committees. Like for example, he sits on the House Oversight Committee, which is a committee that has directly investigated drug prices for companies like AbbVie, at the same time that his wife was trading in AbbVie stock. You're right, it was his wife, not him. But you see, you see this is not okay. And this wasn't the only one. The New York Times did an investigation that found loads of instances where Khanna's wife and kids were trading in companies that were being actively investigated by Khanna himself, at the same time. Examples include weapon manufacturers, like Lockheed Martin, big pharma companies, like Johnson and Johnson. Yes, technically it was his wife and kids doing it, not him. But come on, this feels kind of like a blurry line, but it also feels really clear like you shouldn't be able to trade stock if your husband is investigating the company that you're trading stock in. Also, these are his children. Like, they're not the ones deciding what stocks they're gonna buy and sell. So yeah, feels off to me. But again, there's no way to prove this. There's no like direct smoking Ganesh type thing that's like, this is insider trading. Anyway, let's move on.

(cheerful music) And then there is Congresswoman Nancy Pelosi, a democrat from California who served as Speaker of the House for years. Speaker of the House is a role that has major influence on what laws get through our system. Nancy Pelosi is also married to an investor. So yeah, the story told in these financial disclosures is one of Nancy Pelosi being married to a very, very good investor, especially during financial turmoil in America.

(upbeat music) In the two years following the 2008 financial crisis, the Pelosis' estimated net worth grew from $31 million to over a $100 million. That's up 220%, all while the S and P 500 fell by 13%. The Pelosis also did super well during the pandemic, seeing their net worth jump from a $106 million to $171 million, within in like the two years of the pandemic, that's an increase of 60% during the pandemic. And I mean, listen, like let's be fair on this. I'm sure Paul Pelosi is a fantastic, savvy investor, and there's frankly no evidence of foul play or anything insider trading here, but there doesn't have to be. The very fact that a professional investor lives in the same home as the woman who is at the center of the American legal and regulatory system, presents a major conflict of interest, in my opinion. But I know it's tricky because I believe that people should be able to do what they want with their money. But when we pay our lawmakers to handle special information, it feels off to me when suddenly those lawmakers are making bank during financial meltdowns. But it's not just these financial meltdowns and recessions where they do well. The Pelosis sold $3 million worth of Google stock, just a few weeks before the DOJ announced that it was suing Google for anti-trust reasons, like right before their stock tanked.

(upbeat music) Did Pelosis know that the DOJ was going to investigate? Do we know? No, we don't know. But the timing was fishy. And besides, there's plenty more examples here. Like when Paul Pelosi bought millions of dollars of Tesla stock, while his wife was passing laws that would directly impact the value of Tesla, like major taxpayer sponsored electric car subsidies. Or when he dumped millions of dollars of Nvidia stock, days before the US government announced that it would restrict chip makers from trading with China and Russia. I mean, the Pelosi investor-lawmaker combo has been so successful that people have started copying their trades.

- Oh man, Nancy Pelosi's back at it again. You know what they say, "you wanna see how to be successful in trading stocks? Just watch what Nancy Pelosi is doing".

- She literally locked in a 20% gain for you, because it sold when she sold.

- She's like a meme within the investor community because of this. And when a journalist asked her in a press conference about these allegations of insider trading or if this should be banned, this was her response.

- No, to the second one.

(reporters mumbling) Because this is a free market and people, we are a free market economy, they should be able to participate in that.

And I mean, yes, she's right. This is a free market economy. People should be able to do what they want with their money, even if they are civil servants who frankly do a difficult job every day. But a free market is not a fair market if some people, especially civil servants are operating with information that affects the market and using that information to get rich. But again, all of this is legal. Like no one's breaking any rules here, at least overtly. You can't prove that a law was broken. And even if you could, the only people who have the power to really change it and enforce this are the people who are making money off of the lobbying really lax. More on that in a second, but let's get back to our list.

- [Female Reporter] Republican Congresswoman Marjorie Taylor Greene, once again defending her controversial rhetoric.

Next up, we've got Republican Congresswoman Marjorie Taylor Greene. She's number 12 on the best performing stock investors in our Congress. So naturally, we had to take a look. On February 22nd, 2022, a little over a year ago, Greene invested in Lockheed Martin, which is a defense contractor, and Chevron, which is a giant oil company. The next day, she puts out this tweet, war and rumors of war is incredibly profitable and convenient. Okay, and then the day after that, Russia invades Ukraine. Her investment in a defense contractor and an oil giant. It made her a good amount of money. But who knows, could have been a whole coincidence or could have been public information. We all kind of knew that Putin was thinking of invading. It's all technically legal and unprovable. But, if you wanna go down another rabbit hole on how lawmakers profit from war and the military industrial complex, check out our video on who got rich off the war in Afghanistan. Anyway, moving on.

(cheerful music) Next up, we've got Kelly Loeffler, former Senator from Georgia. Loeffler was also in that private CDC Senate Health Committee briefing that her colleague Richard Burr attended. And look, the next day she's tweeting out her thanks for this wonderful briefing. What you've forgot to mention was that within hours of the meeting, she and her husband sold off between 50,000 and a $100,000 of stocks.

(buzzer chimes) And then, according to her financial disclosures in the following weeks, she sold somewhere between 1.2 and $3.1 million in stocks, right before the big market crash on February 20th.

(bell chimes) (upbeat music) Like, do you realize it's the same exact thing? She had a head start. She had information that none of us had about how bad this really was and she was able to sell all of her stuff at the right time. Like Senator Burr, she was investigated for a while, but nothing ever came of it. I mean, it's kind of tricky like, should Senator Kelly Loeffler like not sell her stocks ever, even if the economy's melting down and we all know it? Like should she be forced to hold on to her stocks? I don't think that's right either. There are some good solutions to this and we'll get to them in a sec. But let's move on to Senator Dianne Feinstein.

(ominous music) Who was also in that room in January of 2020, getting briefed on how bad the pandemic was about to be. And like others, right after the briefing, she dumped a bunch of stocks like somewhere between 1.5 and $6 million. Man, these senators have a lot of cash lying around. The FBI questioned Feinstein about this and she said that she had no influence over this, that it was her husband who did the trading and that it was all just impeccably timed all by himself. No dinner table conversations about today's briefing with the CDC. No pillow talk, nothing, lips sealed. Honey, how was your day at work today? Good, but I can't tell you about it because it was a privileged briefing because you might go off and sell all of our stocks and avoid us losing hundreds of thousands of dollars, 'cause the market's probably gonna crash soon. So I'm just gonna stay totally quiet, because the Stocks Act says so. Like no, I'm not saying that Feinstein told her husband to sell stocks. I'm saying that it's absurd to think that a husband and wife don't talk about everything in a normal conversation and a conversation that would probably be laced with inadvertent, insider information that maybe as benign sounding as an update on your day or how your day at work was. It's just a natural conflict of interest. And yes, the FBI backed off and closed the investigation like they did for everybody else.

Okay, let's get to one more case on our list. This is by no means a comprehensive list of everyone who has had suspicious timed trades. It's just sort of our highlights. And this is the last but not least.

(upbeat music) Former Senator David Perdue, who traded 2,596 times in a single term. The New York Times did this great deep dive on those trades and found that he regularly bought and sold stocks in companies that fell under the Senate Oversight Committee, which he was on. One very clear example in all of this is 2016, Perdue made a bunch of trades in a company called FireEye. It's a cybersecurity company that had, oh, landed a 30 million contract with the federal government. It operates out of Purdue's home state of Georgia, and most of these trades in this company happened while he was sitting on the cybersecurity panel, a role that could easily give him non-public industry and business information about companies like FireEye, which he owned stock in. Two years later, Perdue reported that he made up to $15,000 off of his investment in FireEye. He also traded in a bunch of financial institutions, like JP Morgan Chase and Bank of America, while he was supposed to be overseeing them as a member of the Senate Banking, Housing and Urban Affairs Committee. Like conflict of interest, regulating the companies that you are personally invested in. Like it's so clear I don't even have to explain like it's.

Okay, well that's it. So this is all pretty frustrating and like not right, but wait, what happened to the Stocks Act? Like, what? Where's that law? Remember the Stocks Act? Remember this, 2012? Didn't they like pass a law that said, you're not allowed to do this anymore? Kind of.

- Lately, I've been talking a lot about the choices facing this country. We can settle for a country that in the economy where a shrinking number of people do exceedingly well, while a growing number struggle to get by or we can build an economy where everybody gets a fair shot and everybody plays by the same set of rules.

It turns out that while the acronym is very strong, the legislation is incredibly weak.

- It's certainly illegal for members of Congress to partake in insider trading. Proving that is very difficult.

- Second, even if you do get caught in this, like not disclosing or sharing insider information, the fine is laughable.

- As a lawmaker, you don't face any real significant penalty for violating the Stock Act, if you ultimately do, particularly the disclosure provision,

- Theoretically, it's supposed to be like 15 years in prison. But in all of our research, not a single lawmaker has faced any consequences. Even though there's been at least 78 instances where Congress has violated the law very overtly.

- You can make tens of millions of dollars with privilege information and what's the penalty for failing to report these purchases? It's a joke. It's as low as $200.

The Stocks Act was never going to prevent members of Congress from making a few extra dollars here and there with their insider information.

- We have a free market economy. They should be able to participate in that.

But here's the thing, lawmakers themselves know that this is a problem. Like this is not a good look.

- But I'm actually for banning stock trading.

- Members of Congress should not be selling individual stocks, put it in a blind trust, trade in mutual funds.

But it's not really happening anytime soon and it's not hard to see why. I mean, we're talking about Congress having to regulate Congress.

- The Speaker put forth really a bill destined to fail and the speaker has employed stall tactic after stall tactic in order to kind of keep delaying what's potentially a vote on any bill that would ban members of Congress from selling stocks.

(intense music) The tragedy in all of this to me is that both our financial markets, as well as our entire democracy and society are held together by a very important and delicate thing called trust.

If we expect that to apply to our biggest corporations and to our most successful citizens, it certainly should apply to our elected officials, especially at a time when there's a deficit of trust, between this city and the rest of the country.

A democracy can only function if we trust the people running it. And stuff like this, even if technically no rules were broken in an evidence-based way, that undermines trust, it looks really bad. In January, a republican senator who was feeling very snarky, introduced the prevent election leaders from owning securities and investments act, which spells Pelosi. The Pelosi Act. Man, if there's one thing that our elected officials seem to be good at, it's these acronyms that have like really fun optics, but like don't actually do anything. What this says to me is, "no, nothing's going to change", but it just shows the fact that we can like create a meme out of Nancy Pelosi and then dog pile over how insider trading this all looks, even if there is no wrongdoing technically, that's the problem. The optics are the problem. Trust in our democracy is delicate and the optics actually matter. Trust matters. When we erode that trust, we erode our democracy.

If you, for example, are driving down the highway and you're going 55 miles an hour, but it's a 30 mile an hour zone and you know you're only gonna get a $5 ticket, well you might be driving 55 a lot.

(upbeat music) What do I do with all this paper now? Hopefully recycle it. Paper's very, very useful for me to understand information, so I do a lot of printing. Anyway, thank you all for watching today's video. I wanna tell you about a couple things. Number one, this poster that I designed with a bunch of map projections on it, this is something I've thought about for years. I'm very excited to finally launch it to the world. It is a map poster about why all maps are wrong and it is these beautiful projections on this really nice paper. It's just kind of a fun art piece for map nerds if you're into that. Also, we have LUTs and presets. If you are interested in coloring your photos or videos, you can do that with our LUTs and presets. That is what we use to color our stuff. I should also tell you about our community over on Patreon called the Newsroom. The Newsroom is a place where the community supports the journalism we are doing here. We are a big operation now. That is why we are able to publish so often. And to do this kind of work, we more and more rely on the community to help support us. So, thank you patrons over at the Newsroom. Newsroom members get a new video every month that is only available to patrons. It is a behind the scenes vlog of just how we do what we do here in the studio. You also get access to my scripts, and a bunch of other things. But more importantly, you are here, a part of this ongoing discussion we're having about how the world works and trying to be smarter and trying to be more informed and trying to be critical thinkers in this day and age of lots of information, some of it true, some of it not. So thank you for being here. Thank you for watching and I will talk to you soon, bye.

(ominous music)