My colleague Ilan Moscovitz and I once wrote about the giant revolving door between Wall Street and Washington. "Those whose duty it is to regulate Wall Street," we wrote, "have a curious tendency to be elite members of ... Wall Street."
Even those who don't hail from Wall Street still happen to invest there. Quite a few of them, too. According to Economic Policy Journal, Goldman Sachs
What's wrong with this? At face value, nothing. Neither are bad companies. And no one's suggesting Congress be banned from owning public companies -- although if you want to know why the Wall Street reform bill was so merciful, there's your answer.
Still, as Fool Rich Smith explained last year (and followed up on yesterday):
You may be surprised to learn this, but the laws forbidding trading on insider information -- the ones Congress passed to keep the rest of us on the straight and narrow -- generally do not apply to Congress itself. That means that lawmakers can generally trade on information they obtain by virtue of their status as guardians of the republic.
Little wonder that in a world where Congress can legally trade on inside information, the most faith is put in companies where Congress' actions influence most of the outcome. Can you imagine how much money you could have made trading bank stocks if you knew about TARP before it was announced to the public in 2008?
Sure enough, according to a recent report in Business and Politics, Congressional members' stock investments outperform market averages by nearly 7% annually. If they ran a mutual fund, an average member of Congress would be among the nation's most successful investors.
Coincidence? You tell me.
