A new study identifies “a direct channel through which financial institutions contribute to the net worth of members of the U.S. Congress”—especially those ostensibly tasked with overseeing those very Wall Street entities.
The paper from London Business School professors Ahmed Tahoun and Florin Vasvari, which is based on a “unique dataset” provided by the Center for Responsive Politics (CRP), finds that members of Congress sitting on the finance committees in the Senate and the House of Representatives “report greater levels of leverage and new liabilities as a proportion of their total net worth, relative to when they are not part of the finance committee or relative to other congressional members.”
The authors write that their analysis was “motivated in part by anecdotal evidence suggesting that some U.S. politicians, who are in a position to potentially affect the future performance of financial institutions that lend to them, have allegedly received preferential treatments from lenders.”
In other words, as International Business Times reporter David Sirota wrote Friday: “It is good to be king.”
Sirota explained:
In evaluating lawmakers from 2004 to 2011, the researchers found that finance committee members’ personal borrowing tended to jump in the first year they were appointed to the panels—a trend not seen for other lawmakers who were given seats on other powerful committees. Similarly, the data show that upon joining the finance panels, lawmakers tended to be given 32 percent more time—or on average four and a half years more—to pay back those new debts than loans they previously had and that other members of Congress have.
[…] The study, which was supported by the Institute for New Economic Thinking, did not evaluate whether the loans and interest rates constitute a systemic violation of congressional rules designed to prevent financial institutions from using loans to deliver special gifts to lawmakers. The restrictions are explicit: the U.S. House’s ethics manual declares that “there can also be an improper gift when a Member or staff person is given a loan at a below-market interest rate.”
The researchers conclude by confirming that indeed, data indicates that “finance committee members may use their oversight and legislative power to potentially extract benefits from financial institutions.”
They add: “We hope that additional research in this area will provide further insights into the personal borrowing activities of members of the U.S. Congress and how this borrowing influences their committee activities on legislative matters and their positions with respect to various pieces of legislation that affect the financial sector.”
Look here to see the members of the Senate Finance Committee, the Senate Banking Committee, and the House Financial Services Committee, all cited in the paper.
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