JUANA SUMMERS, HOST:
Yesterday a bipartisan group of U.S. Senators unveiled a new version of a measure dubbed the Ethics Act. The bill would ban members of Congress, along with their spouses and their kids, from trading individual stocks. The idea is to prevent any sort of insider trading by lawmakers. NPR's Deirde Walsh has been reporting on this, as have our colleagues at The Indicator From Planet Money. Here's more from Darian Woods and Wailin Wong.
DARIAN WOODS, BYLINE: Just 16% of Americans surveyed by the Pew Research Center say they trust the government to do what's right just about always or most of the time.
WAILIN WONG, BYLINE: Oh, geez, that's really low - 16%.
WOODS: Not so good. And with the stock trading they're doing, it would be good to know the reality. Like, are politicians systemically making outsized gains on their stock trading?
BRUCE SACERDOTE: Short answer is no, absolutely not.
WOODS: Bruce Sacerdote is a professor of economics at Dartmouth College, and he and his co-authors tallied all the congressional trades from 2012 to late 2020.
SACERDOTE: On average, they do average. You know, stuff that they sell sometimes goes up, stuff that they buy goes up, down. And in our paper, they, as a group, underperform.
WONG: Bruce is not saying corruption in regards to trading never occurs, it just doesn't appear to be systemic. He finds even the top 1% of traders don't look any different from stocks randomly picked, like the proverbial monkeys throwing darts at a dartboard.
SACERDOTE: Now, Bruce didn't test monkeys with darts, but he did test reindeer.
WONG: Actual reindeer.
WOODS: Yes. Bruce and his college student co-authors did some further research where they literally went to a Christmas-style theme park, and they got reindeer to pick stocks by walking on pages of The Wall Street Journal.
SACERDOTE: They used the point of the hoof to decide which stock they were buying.
WOODS: Wow. So you actually did this. I was reading the paper, and I wasn't sure if this was just a Christmas parody. But you actually got the reindeers to pick stocks.
SACERDOTE: Absolutely. And, you know, some of my favorite parts of the paper are where we point out that they exhibit herding behavior and that they're good at sniffing out new trends.
WONG: I feel like Bruce, like, temporarily turned into a zoologist. Are we talking about investors or animals?
(LAUGHTER)
WOODS: Look. He always wanted to study biology, but his parents made him study economics. But, you know, Bruce does say there is a serious point here.
SACERDOTE: The reindeer outperformed the congresspeople and the senators on average, especially in a finite time horizon, and a couple of good picks dominate everything. And that point might carry over to the recent conversations about congressional leaders doing so well because you have this idea that, well, maybe Nancy Pelosi is really killing it in Nvidia and other tech stocks. But you have to ask yourself, OK, is that really inside information, or is it that she represents a district that has a lot of tech companies, and when tech companies are doing well, she and her husband, Paul, are doing well?
WOODS: Still, should members of Congress be investing this way? Josh Graham Lynn is the CEO and co-founder of RepresentUs, which is an anti-corruption advocacy group, and he does not like the status quo.
JOSH GRAHAM LYNN: Members of Congress who are serving the American people simply shouldn't be in a position to trade individual stocks.
WOODS: Josh supports the bill to ban this trading, and the findings in Bruce's study haven't made him rethink his position.
LYNN: I don't think so. Think of it this way. If you had an NBA player who was bad at rigging the rules in favor of their team, would you still let them rig the rules in favor of their team? Of course not.
WONG: Maybe this ethics bill would protect congresspeople from their own bad stock picks. Wailin Wong.
WOODS: Darian Woods, NPR News. Transcript provided by NPR, Copyright NPR.
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