The saying "The House always wins" holds true, as evidenced by more than two dozen members of Congress who outperformed the stock market in 2022, despite Wall Street experiencing its worst year since 2008. An analysis conducted by a popular stock-trading news site, Unusual Whales, revealed these remarkable investment successes.
However, one notable exception was Nancy Pelosi, the outgoing House Speaker. Her investment portfolio experienced a decline of 19.8% in 2022, worse than the 18.2% drop in the S&P 500 ETF, as indicated in Unusual Whales' comprehensive 100-page report.
One freshman Democratic congressman representing Wall Street has emerged as one of the most active stock traders in Congress, recently selling shares in a troubled California bank shortly before its stock value plummeted. Rep. Dan Goldman, who represents a district including Lower Manhattan's Financial District, sold up to $15,000 worth of shares in PacWest Bancorp on March 6, just two days before the bank's stock experienced a sharp decline due to investor concerns about Silicon Valley Bank's impending failure.
Goldman's sale occurred when PacWest's stock was valued at $27.40 per share, but it dropped to around $5.75 per share after Silicon Valley Bank collapsed on March 10. This timing has raised questions about the congressman's actions, with critics highlighting the problematic nature of members of Congress engaging in stock trading.
Since taking office in January, Goldman has made over 500 trades amounting to between $10 million and nearly $31 million, according to his financial disclosure forms. As a wealthy individual and heir to the Levi Strauss & Co. fortune, he serves on the Committee on Homeland Security and the Select Subcommittee on the Weaponization of the Federal Government. Notably, he invested up to $50,000 in defense contractor Northrop Grumman and up to $15,000 each in weapons manufacturers Raytheon Technologies and L3 Harris Technologies.
In response to these concerns, Goldman's office stated that the congressman does not personally manage his stock trades, which are handled entirely by an investment adviser. They also noted his support for legislation banning members of Congress from trading stocks and his initiation of the process to establish a blind trust.
Goldman is not alone in trading stocks among members of Congress, although his rate of trading stands out. Rep. Lois Frankel, a Democrat from Florida, recently disclosed selling shares of First Republic Bank and purchasing JPMorgan stock. Similarly, Republican Rep. John Curtis of Utah sold First Republic Bank shares. It is worth mentioning that Rep. Nancy Pelosi, a Democrat from California, has faced criticism for her husband's profitable trades in companies she has worked to subsidize.
The issue of members of Congress engaging in stock trading has prompted calls for stricter regulations. Bipartisan legislation has been introduced to ban lawmakers from buying or selling stocks and to require divestment or placement of holdings into blind trusts. Unusual alliances have formed around this issue, with Rep. Alexandria Ocasio-Cortez and Rep. Matt Gaetz teaming up to introduce legislation that would prohibit lawmakers, their spouses, and dependents from trading stocks.
In 2022, members of Congress reportedly traded securities worth $788 million, and many lawmakers managed to outperform the stock market despite its poor performance that year. However, concerns persist about the potential conflicts of interest and insider trading opportunities that arise when lawmakers have the ability to influence policies affecting specific companies and industries.
Among the top performers was Representative Patrick Fallon (R-Texas), who achieved a 51.6% return on his investments in 2022, closely followed by Representative Debbie Wasserman-Schultz (D-Fla.) with a 50.8% increase, according to the report.
Fallon's most profitable investment was in Twitter. He acquired approximately $150,000 worth of stock in January 2022 and sold it after Elon Musk announced plans to acquire the social media company, resulting in a gain of up to $75,000, according to Unusual Whales' analysis.
However, Representative Fallon disputed the analysis, stating that his active stock portfolio in 2022 actually lost nearly $600,000 in value, representing a 20% loss. He emphasized that he, like many Americans, has faced challenges in the market over the past two years.
Wasserman-Schultz's notable gains came from her investment in an energy company, Patterson-UTI Energy, which provides drilling and pressure pumping services for energy sources. As oil prices surged, the value of these services increased, leading to substantial returns.
The Unusual Whales report was based on financial disclosure forms filed by 131 members of Congress who reported trading activity in 2022, representing approximately 24% of the total 535 members. The data showed that members of Congress conducted trades amounting to up to $788 million, a decrease from around $918 million in 2021.
On average, Democrats experienced a 1.76% loss on their investments, while Republicans gained 0.4%, according to the report.
The analysis also revealed that Representative Michael McCaul (R-Texas) conducted over 1,600 transactions worth as much as $176 million, while Representative Diana Harshbarger (R-Tenn.) made over 1,000 transactions worth as much as $21 million.
Some of the top stocks purchased included Apple, Disney, Google, Tesla, and Nvidia, while stocks that were heavily sold included Visa, Nvidia, Exxon Mobile, Eli Lilly, and Microsoft.
The required financial disclosure reports filed by members of Congress are known for their lack of transparency. Instead of precise figures, the reports often provide value ranges, making it difficult to determine their net worth accurately.
These lucrative trading activities by many members of Congress occur while efforts to pass legislation to curb such trading remain stagnant. The only existing rule governing trades is the STOCK Act, passed in 2012, which requires lawmakers to disclose trading information within 45 days but still allows them to engage in potentially conflicting trades.
Critics argue that despite promises to enact stricter regulations, Speaker Pelosi has failed to bring about meaningful changes. Meanwhile, several members of Congress continue to benefit immensely from insider information, either through buying or selling stocks, which adversely affects average individuals.
It is worth noting that Pelosi and her husband, Paul Pelosi, faced scrutiny for actively trading stocks such as Google and Nvidia, which could have been influenced by legislation that Pelosi had control over.
Wile the majority of members of Congress experienced varying degrees of success in their stock investments, Nancy Pelosi's portfolio performed poorly in 2022. The analysis by Unusual Whales sheds light on the trading activities of members of Congress and highlights the need for stricter regulations in this area.