Last week, we gave you an interesting chart on political donations from Wall Street firms by election cycle, dating back to 2004. This week, we’ll follow it up with an equally interesting chart on the amount of investments in Wall Street firms (again, ‘Securities & Investments‘ from Open Secrets) by Democrats and Republicans. Read on to find how much the two parties invest in Wall Street! If you’re reading this in a feed, click through for dynamic content!
Is There Danger in Heavy Wall Street Investment By Politicians – Or Not?
Is it possible, as Megan McArdle recently wrote, that some Congressional investments are really a sneaky form of insider trading? Just like company insiders can act on information that isn’t known to the public, so too can Senators and Representatives. For example, a politician may invest (or divest) in a company immediately preceding the introduction of a bill which materially affects the profit potential of an industry. Consider that politicians are investing in the very companies they purport to regulate – it wouldn’t be too hard for a company insider to exchange information with a politician in trade for political benefit.
As Megan points out, the two academic studies on the matter came up with different conclusions – the study by Gregory Boller finding potential insider trading and the study by Alan Ziobrowski casting doubt on insider trading. Thanks to disclosure laws (and the data at Open Secrets – a very underrated source!) we can show you the two parties’ investments in Wall Street in the period from 2004 – 2009.
Financial disclosure data comes with a range, so this chart graphs the minimum and the maximum amount that a party invested in the Securities & Investment sector from 2004-2009. It also includes the price of the ETF IYG, the iShares Dow Jones US Financial Services ETF, at close on Friday on the first week of the year for a general benchmark on how the sector was doing.
How Political Investments Relate to the Occupy Wall Street Movement
As recently as 2006 both parties had roughly equivalent investments in the field. It is only since the Class of 2006’s election that Democratic investment in Wall Street has been definitely greater than Republican (measured by the Democratic minimum being greater than the Republican maximum).
Again, I stress the dangers of either party latching onto the Occupy Wall Street movement. The truth is that both parties benefit from Wall Street – whether from direct political donations or by having investments in the sector. With news that the Democratic Party is going to align themselves even more intimately with the protesters it will be interesting to continue to follow the happenings. Comments please!
On a side/funny note, check out the Washington Post’s article on the “tea party vs. Occupy Wall Street“.