Alabama Senator's Wealth Increased 3,200% During 44-Years in Congress
Former Sen. Richard Shelby entered Congress in 1978 potentially worth $700,000 and left earlier this month potentially worth more than $23 million
There’s an old saying about going to work in Washington, D.C.
One goes there to do good.
But one stays there to do … well.
That adage is strengthened by the fact that a majority of lawmakers in the last Congress were millionaires, according to a study by the watchdog group Open Secrets.
And Alabama’s recently retired Senator Richard Shelby was near the top.
Shelby entered the House of Representatives in 1978 potentially worth about $700,000 and left the Senate earlier this month potentially worth more than $23 million, according to financial disclosure records kept by Congress.
That’s an increase of more than 3,200% — nearly $22.5 million.
By contrast, during that same time period the median household income of the American family increased by only 370% — about $55,000 a year — according to data from 1978 and 2021 kept by the U.S. Census Bureau.
And the typical American household’s median net worth has increased only 273% since the early 1980s, rising from $32,600 to $121,700 — about $89,000 total — according to Business Insider’s review of the latest data from the Federal Reserve and the Survey of Income and Program Participation from 1984.
Every member of Congress is required to file an annual financial report showing their assets and liabilities listed within certain ranges, so the maximum potential value in each category was used for this analysis. Also, although the Senate Ethics Committee no longer requires the value of primary residences to be listed, the last instance it was reported, in 2018, was used in this calculation.
Why This Matters
On the anecdotal level, while this disparity is quite striking, it doesn’t point to any specific, individual problem. Shelby’s a smart man, and he likely made wise investments and managed his finances well. Good for him. Furthermore, nobody has made any allegations that his wealth was generated illegally.
However, there was a Washington Post article covering how Shelby used $100 million in federal earmarks to fund a revitalization effort in downtown Tuscaloosa, right around an office building he owns.
From the story:
“One block over from Shelby’s building sits a four-level red-brick parking garage built with about $10 million in his earmarks and about $2.5 million in local money. Stretching east from the garage — and around the corner from Shelby’s property — is a new park plaza with winding sidewalks, ornamental lighting and a pavilion clock tower, also built with his earmarks. Directly east of that sits the new 127,000-square-foot federal courthouse, funded with $67 million in Shelby earmarks …”
The former senator told the Post at the time that there wasn’t a conflict of interest between those earmarks and his personal property.
“Under congressional ethics rules,” the story continued, “spending like this is permitted as long as the primary purpose is not to benefit the financial interests of only lawmakers or a limited class of people connected to them.”
Nothing ever became of the newspaper’s reporting.
But … on the overall level, some find it curious that so many people go to Congress to be public servants and, coincidentally, either become multi-millionaires in the process or substantially increase their already massive investment portfolios. This can be seen across Congress, and among both Democrats and Republicans. Here are just a few examples, according to Open Secrets:
Significant financial gains while in office:
Former House Speaker Nancy Pelosi, D-California, from $31.3 million in 2008 to $114.6 million in 2018.
Senate Minority Leader Mitch McConnell, R-Kentucky, from $16.9 million in 2008 to $34.1 million in 2018.
Significant financial gains since entering office:
Rep. Don Beyer, D-Virgina, from $52 million when he was elected in 2015 to $124.9 million in 2018.
Rep. Suzan DelBene, D-Washington, from $54 million when she was elected in 2011 to $79.1 million in 2018.
And this list goes on and on.
Are these lawmakers or hedge fund managers?
Or … wait a minute … are they both?
That’s what some people suspect.
Professors from Georgia State, Florida Atlantic, Kent State, and Augusta State analyzed the stock trades of U.S. Senators throughout the ‘90s and found that they do quite well compared to the average trader.
“We document that a portfolio that mimics the purchases of U.S. Senators beats the market by 85 basis points per month, while a portfolio that mimics the sales of Senators lags the market by 12 basis points per month,” they wrote in December 2003 edition of the Journal of Financial and Quantitative Analysis. “The large difference in the returns of stocks bought and sold (nearly one-percentage point per month) is economically large and reliably positive.”
Congressional Insider Trading
Merriam-Webster defines insider trading as “the illegal use of information available only to insiders in order to make a profit in financial trading.”
The idea is this: Members of Congress have access to information that the public doesn’t, either by means of receiving classified briefings on various subjects or through their normal job of overseeing certain parts of the government, which, in-turn, regulate certain parts of the economy.
What if a Senator receives a classified briefing about a coming event that will negatively impact the price of oil, and then they sell all their shares of an oil company before the public becomes aware?
Does this happen?
To answer that question, Insider conducted a five-month investigation of Congress in 2021, combing through more than 9,000 public financial disclosures statements from lawmakers and their top aids. The report was titled, “Conflicted Congress,” and here are just a few highlights:
57 members of Congress and 182 top aides violated a federal conflicts-of-interest law.
When caught, they faced “minimal and inconsistently applied penalties” for violating the rules.
Dozens of lawmakers held stocks in companies that make the COVID-19 vaccine, and many bought or sold the stocks in the early days of the pandemic.
15 lawmakers who oversee defense spending “actively invest” in defense contractors.
And again, the list goes on and on.
In Defense
But what are our lawmakers supposed to do … not earn anything outside of their Congressional salaries? (That’s currently $174,000 per year, which might sound like a fair deal of cash, but when one must maintain a residence in Alabama and Washington, D.C., plus raise kids, pay off a mortgage, save for retirement, etc., … that ain’t much.)
Besides, many have already built wealth before running for election, either by starting a business, owning property, or trading in the market. Are they supposed to sell all of that before taking office?
Because if the law required lawmakers to do either of those things, our already anemic selection of potentially wise candidates would dwindle even further than it already has.
And what was Shelby supposed to say to his constituents in Tuscaloosa who lobbied for the earmarks to revitalize downtown? “Sorry, folks. I’d love to help you, but I own a building down there. So, best of luck.”
Who would want a job that a) requires one to put up with all sorts of personal harassment, character attacks, and ceaseless requests for attention, b) causes one to go broke in the process, and c) generates an endless number of conflicts of interests?
Answer: Nobody worth having.
The Answer
There have been several laws enacted and even more bills proposed over the decades trying to solve the problem, both in terms of the perception of corruption it creates and the actual corruption it allows. They all seem grounded in the principle that sunlight is the best disinfectant.
Transparency, in other words.
Show what you’re doing, when you’re doing it, and how it benefited you. That’s why we have those financial disclosure reports that were detailed earlier in this article.
That’s a good start, but it doesn’t go far enough.
Here’s why: Say you’re a congressman who has about $100,000 worth of shares in a major shipbuilder. You also sit on the defense committee, and you’ve just learned — long before the public will learn — that the Navy’s request for additional ships … ships that were to be manufactured by the shipbuilder in question … will be denied, likely sending the company’s already shaky stock tumbling downward.
What do you do?
Forget you heard that you’re about to lose a boatload of cash? Somehow un-ring that bell in your mind? What if those shares were critical to your retirement strategy, or were to be the source of the inheritance you left your grandchildren?
Do you sell the stocks and avoid the loss? Do you lobby your colleagues to reverse their decision, saving your nest egg but forcing the Navy to buy ships it doesn’t want or need?
And as far as getting caught, how can it be proven that you sold the stock after learning about the decision? There wasn’t a paper trail, just a conversation you heard in the hallways.
While we can hope our lawmakers would do nothing and let the chips fall where they may, it’s too much to expect of everyone all of the time, especially when there’s so much at stake. That, and it denies the reality of human nature.
We must put that temptation in check by simply taking it away, and that can be best be done with something called a blind trust.
From Investopedia:
“A blind trust is … established by the owner (or trustor) giving another party (the trustee) full control of the trust. The trustee has full discretion over the assets and investments while being charged with managing the assets and any income generated in the trust. The trustor can terminate the trust, but otherwise exercises no control over the actions taken within the trust and receives no reports from the trustees while the blind trust is in force. Blind trusts are often established in situations when individuals want to avoid conflicts of interest between their employment and investments.”
There have been several attempts over the decades to require Members of Congress to place their assets into blind trusts. All have stalled or failed. The latest attempt, called the Transparent Representation Upholding Service and Trust in Congress Act, or TRUST, was re-introduced earlier this month in the House of Representatives.
It’s a bi-partisan bill, with several notable conservatives signing-on as cosponsors, though none are from Alabama.
Going Forward
Every month we’re treated to a new poll revealing what little confidence we have in Congress.
There are many reasons for that, from bad decisions to pointless bickering, but the perceived corruption on both sides of the aisle is probably the one thing that conservatives and progressives are united about. So doing something about it is the one thing we should most easily accomplish.
So what’s the hold up?
Requiring our lawmakers to place their assets — or at least their stock portfolio — in a blind trust might go a long way to restoring our confidence in their decisions and in the institution as a whole.
If they fail to pass the TRUST Act this year, they’re essentially expecting us to continue blindly trusting them.
But we don’t.
And we won’t.
(J. Pepper Bryars is Alabama’s only reader-supported conservative journalist. You can support his writing by subscribing at https://jpepper.substack.com/subscribe.)