Last week, we learned that most members of Congress are multi-millionaires. While it’s not surprising, it’s definitely frustrating. There’s a new twist, though, and if this plays out like many are hoping, things could get a bit sticky for many of those wealthy career politicians.
As you read this, remember one very important fact: Only 11% of bills made it past a congressional committee and only about 3% of new laws across the board were enacted between 2011 and 2013. This will be important a bit later.
Congress by the Numbers
The Center for Responsive Politics announced last week that it had analyzed the personal finances of the 534 current members of Congress. It found for the first time the average net worth of those resting easy in their ivory towers is just more than $1 million.
But don’t let that tiny “1” ahead of the word “million” fool you: the reason that average is not higher is due to several of those in Congress who have no concept of budgeting their money. Many are in the red, including Rep. David Valadao (R-Calif.), who has an average net worth of negative $12.1 million. It’s said that the reasons are due to the many loans his family’s dairy farm owes.
Meanwhile, Darrell Issa (R-Calif.), chairman of the House Oversight Committee, made millions in the automobile industry. He’s the wealthiest with a net worth of a whopping $464 million. Many Congress members have similar net worth amounts.
Stay with me – this all links together…
In 2009, the IRS formed what it refers to as the Global High Wealth Industry, or GHWI. Its sole purpose was to increase the focus on those considered “high income earners”. The Commissioner of Internal Revenue was clear and his line drawn in the sand was definitive at that time, “Many high wealth individuals make use of sophisticated financial, business, and investment arrangements with complicated legal structures and tax consequences. Many of these arrangements are above board. Others mask aggressive tax strategies.”
According to Pricewaterhouse Coopers:
The focus of this group is primarily the IRS targeting hedge funds, private equity firms, real estate funds and venture capital funds (collectively, “Managed Funds”).
One guess as to what the investment of choice is for most of our elected officials. Turns out, the politicians are dropping big money back into the stock market. Their focus is mutual funds and managed portfolios, according to The Center for Responsive Politics.
Here’s the kicker – remember all of those banking scandals that dominated the news in recent years? We’ve not heard much about them or their unethical CEOs and other financial leaders for one reason: the president’s healthcare reform was the priority. As such, that’s what the media focused on. You can be sure none of those scandals have been resolved; they’re quietly simmering in the background. Or maybe not. Take a look at this chart (which you can see in its entirety here):
As you can see, the three biggest banks in the nation, Wells Fargo, Bank of America and JPMorgan Chase, all make the top ten most popular assets for those in Congress.
It’s not illegal, but it’s troublesome, especially when you consider:
Has there been a single week in the past few years that didn’t include news of yet another lawsuit against JPM? There are civil and criminal investigations that continue in the London Whale scandal. There’s another investigation into illegal energy trading in California, still another one in China over bribery accusations and, of course, the huge mortgage scandal that continues.
Don’t forget the harm done directly to its credit card customers. The bank was ordered to refund close to $310 million to those customers along with having to pay $80 million in fines due to identity theft protection that its card customers did not want. Just last week, the bank was ordered to pay a whopping $2 billion in its role with the Bernie Madoff scandal. These examples are the ones off the top of my head; you can be sure there are many more. See my infograph on JPMorgan and Jamie Dimon here.
Bank of America
Not to be outdone by its competitor, BoA has its own list. It includes big fines for minority discrimination. This was ordered when it was proven the bank charged higher fees and forced minorities into subprime loans when they might have qualified for better rates.
In 2009, it was fined nearly $3 million for overbilling its credit card customers. It then attempted to mislead an investigation into its contracting processes and was fined $137 million. Again, this is just a few of the recent scandals for BoA.
WF was hit with its own $85 million fine for “pushing subprime loans” to minorities. It was also fined for “selling complex investments without disclosing the risks”. The judge in another suit ruled “Wells Fargo engaged in reprehensible systemic accounting abuses in its mortgage division”. And let’s not forget the money laundering scandal with Mexico’s drug cartel (this investigation continues).
Knowing all of this, you can’t help but wonder how much focus the GHWI is placing on these multi-millionaires. The short answer: very little. The IRS won’t disclose specifics, but what it does say is that there have been a grand total of 36 audits since its inception in 2009. Many of those audits turned up no wrongdoing, though the agency won’t provide hard data on those specifics, either. Still – 36 audits since its inception? What are the odds that even one member of Congress is part of that total?
Bringing it full circle, reconsider: Only 11% of bills made it past a congressional committee and only about 3% of new laws across the board were enacted between 2011 and 2013.
We have multi-millionaires, who are consistently adding to their wealth in jobs that their performance is significantly lacking and who are not held accountable – on personal or professional levels. Meanwhile, tax dollars continue to fund an arm of the IRS that refuses to release hard numbers on the job its doing.
What’s next? Who knows. Priorities are a mess and worsening, the media is busy redefining the role of journalism and the rest of us are in this constant state of frustration because we’re the ones shouldering the massive burdens – someone has to pay for the millions of dollars in fines, salaries and bailouts, after all.