“Captain Gains” on Capitol Hill

Study’s Main Finding and Interpretation

• Core result: members who later become congressional leaders trade like peers before promotion but beat matched non-leaders by up to 47 percentage points annually after ascension.
• Commenters stress this is outperformance relative to other members, not necessarily relative to the market or index funds.
• Some see this as near-direct evidence of systematic insider advantage; others note small sample size, potential confounders (age, wealth, risk tolerance, sector bets).

Evidence of Advantage and Its Limits

• Prior work has found rank‑and‑file members often underperform the market; this paper focuses on leaders vs peers, not vs S&P 500.
• One commenter calculates recent aggregate congressional returns as essentially equal to SPY in 2023, arguing there is no broad market-beating “Congress alpha.”
• Others counter that leadership‑level gains and event‑timed trades (e.g., COVID briefings, defense contracts) still look like classic insider/trust‑abuse patterns, even if not beating broad indices.

Stock-Ownership Rules: Bans, Trusts, Index-Only

• Very broad support for prohibiting individual stock trading by lawmakers; common proposals:
  • Mandatory divestment into broad index funds or government bonds.
  • Transfer into blind trusts, though many argue these are easily gamed via winks, relatives, and post‑office rewards.
  • Some call for converting all equity into Treasuries or total‑market ETFs upon taking office.
• Critics note loopholes via family, friends, private companies, and real estate; complete elimination of conflicts is seen as unrealistic.

Disclosure and Enforcement Ideas

• Current disclosures are delayed 30+ days and often late; by then the move is “too late” for copy‑trading and too obscure for real oversight.
• Proposed fixes:
  • Real‑time or T+1 public disclosure for members, families, and key staff, possibly via a special exchange.
  • Pre‑scheduled 10b5‑1‑style plans and cooling‑off periods for all trades.
  • Immediate forced sale and profit forfeiture for late reporting.
• Some argue universal real‑time disclosure of all insider‑sensitive trades (not just Congress) would let markets arbitrage away much of the insider edge.

Pay, Incentives, and Corruption

• Split views on pay:
  • One camp: raise salaries sharply (up to $500k–$1M+) and then tightly restrict investing; point to Singapore and corporate practice as models to attract talent and reduce bribery.
  • Another camp: current ~$174k is already high; higher pay won’t cure greed and risks drawing even more “money‑maximizers.”
• Several suggest indexing compensation or pensions while heavily taxing or capping additional gains during and shortly after service.

Term Limits, Sortition, and System Design

• Strong contingent arguing for strict term limits to reduce long‑run influence networks, insider access duration, and “career politician” incentives.
• Others warn term limits would just shift power to unelected staff, lobbyists, and bureaucrats and destroy institutional knowledge.
• Sortition (randomly selected legislators, jury‑style) is floated as a way to break the donor–party–career loop; critics point to competence, susceptibility to lobbying, and authority‑legitimacy issues.

Broader Democratic and Campaign-Finance Concerns

• Many see insider trading as just one symptom of a larger capture: unlimited campaign spending, long campaign seasons, and post‑office lobbying jobs are treated as the primary corruption channels.
• US two‑party structure, gerrymandering, and first‑past‑the‑post voting are blamed for weak electoral accountability; proposals include approval/STAR voting, nonpartisan redistricting, and public campaign finance.
• Some emphasize that other democracies restrict campaign timing and money more tightly, and appear to avoid this level of brazen financial self‑dealing.

Public Reaction and Cynicism

• Heavy moral outrage that behavior which would get corporate employees jailed is tolerated, even normalized, for lawmakers.
• Several note ETFs and trackers (e.g., products following congressional trades) exist but lag disclosures and often don’t clearly beat simple low‑fee index funds.
• Thread has a strong fatalistic undercurrent: many doubt Congress will ever meaningfully restrict its own ability to profit, absent massive public pressure or structural electoral reform.