← Money Rehab with Nicole Lapin
Money Rehab with Nicole Lapin
Insider Trading in Politics Is a Bigger Problem Than We Thought
00:13:49
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- [00:00]
Nicole Lapin
So I just went to the grocery store and I actually flinched at the cost of eggs and I don't even really eat eggs. That's how bad it is. Everything feels more expensive. And so I'm hearing from a lot of money rehabbers right now that their credit cards are getting a lot of exercise right now. But the last thing I want for any of you is to go into credit card debt. Enter Chime Credit Builder Card. This is a secured credit card with no annual fees. You can build credit with money you set aside and avoid interest or expensive debt. Plus you can get access to MyPay and get up to $500 of payday with no mandatory fees. Start building credit with your everyday purchases and regular on time payments with no annual fees, interest or credit check@chime.com mnn and then when you go to chime.com mnn as in money News Network, you'll start thinking about all the doors that will open once you start building your credit. Like lower rates on loans. Who doesn't want that? Turn your everyday purchases into steps toward your financial goals with Chime Secure Credit Card. Get started today@chime.commnn that's chime.com Chime feels like progress. The Chime Credit Builder Visa credit card is issued by the Bancorp Bank NA or Stride bank na. Spot ME eligibility requirements and overdraft limits apply. Out of network ATM withdrawal and OTC advance fees may apply. Late payment may negatively impact your credit score. Results may vary. MyPay eligibility requirements apply. Credit limits range from 200 to $500. Go to Chime.com disclosures for details. So I have written, count them five books now. But each time I'm in the writing process I stay at an Airbnb. I love to stay at an Airbnb. When I was actually first launching this show, I was at an Airbnb in Arizona. It was so peaceful. It was stunning. I could be productive and comfortable. The Airbnb was also surrounded by a ton of javelinas. If you know Arizona, you know they're like wild pig creatures. But honestly, I love them too. Being away for work, for fun, or both is a perfect opportunity to host your space on Airbnb. And if you think that hosting is overwhelming, I have a solve for you. With Airbnb's co host network, it's easier than ever ever before to host. It's also a great way to earn some extra cash, which I know we all love. Now you can hire a quality local co host to take care of your home and your Guests. They can do everything from creating your listing to managing reservations, to messaging guests and even providing on site support. So if you've got a secondary property or an extended trip coming up and you need a little help hosting while you're away, you can hire eight co hosts to do the work for you. Find a co host@airbnb.com host. I'm Nicole Lapin, the only financial expert. You don't need a dictionary to understand. It's time for some money rehab. Hey, guess what? I want to teach you how to grow your money. 20,000% in just one day. And I promise it is so, so easy. It is just this one little money move called insider trading. So if you missed this story, let me first say I'm totally kidding. Do not try DIY insider trading. It is super duper illegal. But I'll fill you in on what I'm talking about. There was a viral post on X that showed a screenshot of someone, and we do not know who, buying a hundred grand worth of zero day options for the S&P 500 index spy. This means that that person basically made a bet that the stock market would go up that day and if they were wrong, they would lose all of that money they'd put in. But what'd you know, they happened to place this order right before President Trump rolled back some of the Liberation Day tariffs. And this person made an estimated 20,900% on their investment, or 21 million bucks. Now, the market did not move because of some factor that you or I could have seen coming on a technical chart. The market moved because of an unexpected announcement the President made. So this person probably is not a fortune teller or even a really skilled investor. They probably had some insider information. Insider trading is a huge issue in Washington. I got intel on this from Senator Kirsten Gillibrand, who came on the show before I went on maternity leave. She told me this.
- [04:21]
Kirsten Gillibrand
We don't do any stock investing in our family because I passed a law that said members of Congress have to disclose all their stocks. And so I've told them if you're buying and selling stocks, you need to tell mommy right away so I can disclose it. I'm hoping to ban it. And that would stop the insider trading by members of Congress. They have a 17% higher return rate than the S&P 500. And that is not because they're smarter.
- [04:43]
Nicole Lapin
Well, you know, have often said that most investors don't beat the market. Well, members of Congress aren't just better investors than most financial advisors. They have access to more information than we do and more influence over stocks than we do, for that matter. And they translate that into outperforming the s and P500 by 17%. It is definitely infuriating. But is it illegal? Since 2012, members of Congress and their spouses have been required to disclose trades thanks to the Stock act, which stands for Stop trading on Congressional knowledge. Classic legislative example of creating a backronym. You know, an acronym that you just sort of back into based on what you want the abbreviation to be. This law made it explicitly illegal for members of Congress to use non public information. They learn through their jobs to make personal financial gains, I. E. Insider trading. Under the Stock act, lawmakers must file a disclosure within 45 days of making a trade over a thousand bucks. And that includes trades made by their spouses and their dependent children. These disclosures are public and can be tracked pretty easily. I'll get to that in a bit. But here's the potential problem. While the law requires disclosure, it does not ban members of Congress from owning or trading stocks. I say potential problem because there are people out there who believe no one in public office should be able to own stocks, while others believe disclosure should be good enough. But I think everyone can agree the penalty for not disclosing should be pretty severe. But it's not. It is basically a $200 fine, pocket change for someone who just made a six figure trade. Senator Gillibrand told me that disclosure isn't actually happening like it should.
- [06:35]
Kirsten Gillibrand
Members of Congress, which are very, very bad at this, most don't disclose like they're supposed to. One in three are trading, one in seven are disclosing.
- [06:44]
Nicole Lapin
So members of Congress are not great at following the rules. Interestingly, neither are judges. Federal judges are also required to file annual financial disclosures and are barred from ruling on cases where they have a financial interest. But a bombshell Wall Street Journal investigation in 2021 found that 131 federal judges violated this rule. Cases involving companies in which they or their families own stock. So that's a little under 10% of all federal judges. That triggered a pretty significant response. In 2022, Congress passed the Courtroom Ethics and Transparency act, which requires judges to file trade disclosures within 45 days, just like Congress. And then, surprisingly, it gets actually a little more lax for the most important judges in the country, the Supreme Court justices. Recently, SCOTUS didn't have to follow the same code of conduct as other federal judges. They're now technically bound by a code of ethics adopted in late 2023 but it's toothless. There's no enforcement mechanism and it's mostly voluntary. And in terms of financial disclosures, they do have to file annual reports, but there's no real time trade disclosure requirement like there is for Congress or lower court judges. So if justice so and so is holding stock in, say, Chevron and the court is hearing a major environmental case, well, there's no law stopping them from weighing in unless they choose to recuse themselves. And as we've seen, recusal is rare. As I'm talking about this, President Trump's Meme Coin might come to mind, right? So here are the rules for him, the president and also the Vice president and high level executive branch officials are subject to broader ethics laws than members of Congress. High level executive branch officials have to file detailed annual financial disclosures and are generally prohibited from participating in decisions where they have a personal financial interest. But there is no law that explicitly bans the president or vice president from owning individual stocks. You might remember that during his first term, President Trump refused to divest from many of his business interests, raising major questions about his conflicts of interest, especially when government policy could impact his bottom line. He claimed to have handed over operations to his sons, but that's not the same as full divestment. And now there's Trump. Not Trump himself, but the ticker T R U M P President Trump's Meme Coin the President launched the coin in January of this year, and since then it's estimated that the coin has generated more than $324 million in trading fees for the Trump Organization. This week, the webpage for the coin announced that the top 200 ish holders of Trump Coin will get to have dinner in Washington with the that announcement sent the value of the coin up 50%, and now its total market value is 2.7 billion. The coin's website discloses that the Trump Organization and affiliates own 80% of the coin supply. So at the total market value of 2.7 billion, the Trump Organization and allies have gained over $2.1 billion from the meme coin. Whether this dinner invite will result in some sort of ethics probe remains to be seen. And while Trump is certainly push levers to increase the value of the coin, it is not insider trading. But there are more straightforward stories of insider trading. You've probably seen the famous examples in the news lately. In the days before Trump rolled back the Liberation Day tariffs, Marjorie Taylor Greene bought between 10,000 and $150,000 worth of stock in companies like Adobe, Apple and Nvidia 11,000 between 11,000 and 165,000 between 11,000 and $165,000 of stock in Amazon, FedEx, JPMorgan Chase, Lululemon, Nike, Qualcomm and Tesla and also sold between 50 and $100,000 worth of US treasury bills. Last year, Nancy Pelosi's husband sold 150k worth of stock in Visa right before the Justice Department announced an antitrust lawsuit against the company, which saved the Pelosi's a whole lot of lawsuits. In both cases, the politicians have denied any wrongdoing. Marjorie Taylor Greene said that these investments were initiated by her financial advisor and to be fair, a lot of financial advisors were telling people to buy the dip and also hi, I told you to buy the dip too. In the case of Nancy Pelosi's husband, she denies that she shared any sensitive financial information with her husband. But no matter the excuses on either side of the aisle, it is clear just through the performance performance of the portfolios of Congress members alone that insider trading is happening. And I hate it. The stock market is supposed to reward research, patience and strategy, but when people who write the laws can also profit off them before we even know what's coming, that's not a free market. That is a rigged game. And the truth is you don't need to break the law to beat the market. But when lawmakers are allowed to do both, the system needs a serious reboot. Again, I'm obviously not recommending that you try to DIY insider trading that is illegal, but you can take cues from money moves in Washington to get insight into what members of Congress are buying and selling. You can use platforms like Capital Trades, which aggregates stock disclosures from lawmakers in near real time. And to get even more tactical, you could filter for trades made within 48 hours of closed committee meetings or classified briefings. That's a major tell. You could also track unusually large options activities, especially zero day trades on platforms like Unusual Whales or Cheddar Flow. That's how the spy trade that I mentioned at the top of the show got flagged. You can look for these big plays and cross reference the timing against the political calendar to try and infer whether these moves that you're seeing are being made by players in Washington. And if you really want to go next level, you can create a Google News alert for SEC filings. Look specifically for Form 4 insider filings or 13D disclosures. Both will often drop subtle hints of market moving intel before the news breaks. But if you are not trying to Nancy Drew it. Here's today's tip you can take straight to the bank. There are ETFs that mimic the stock trades of politicians in Congress. Like for example, the ETF that follows Democratic stock trades with the ticker symbol nanc or the ETF that follows Republican stock trades. Kruz, Nancy and Kruze. Get it as in Nancy Pelosi and Ted Cruz. If you like them, you could add these ETFs to your portfolio or you could just add them to your watch list and check out how the holdings of these ETFs are being bought and sold so that you can follow the money trail.
- [14:04]
Kirsten Gillibrand
Foreign.
- [14:08]
Nicole Lapin
Rehab is a production of Money News Network. I'm your host, Nicole Lapin. Money Rehab's Executive producer is Morgan Lavoy. Our researcher is Emily Holmes. Do you need some Money Rehab? And let's be honest, we all do. So email us your Money questions money rehaboneynews network.com to potentially have your questions answered on the show or even have a one on one intervention with me. And follow us on Instagram, MoneyNews and TikTok MoneyNewsNetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.