Every year on June 15 (unless given an extension), lawmakers release disclosure reports revealing their personal finances for the public to inspect. This year, in the wake of revelations that two Senators received preferential loan treatment from lender Countrywide Financial, the release of these reports highlights the failures inherent in the personal financial disclosures requirements.
Portfolio magazine recently revealed that Banking, Housing and Urban Affairs Chairman Chris Dodd (D-Conn.) and Budget Chairman Kent Conrad (D-N.D.) received favorable loans from Countrywide Financial on houses they owned as part of a VIP program. The two Senators financial disclosures should have provided this information, but a loophole allows lawmakers to exclude from disclosure any residence and loans that do not provide an income to the lawmaker. Dodd failed to list his home or the VIP mortgage he received from Countrywide. Conrad lists the mortgage, but not the Delaware beach home that he needed a loan to fix up. There was no way to check the conflict of interest inherent in these loans prior to Portfolios reporting.
The case of Rep. Laura Richardson (D-Calif.) also shows that the current reporting requirements are inadequate. Richardson is currently embroiled in a scandal involving a foreclosure and two defaults on three of her homes. The Los Angeles Congresswoman failed to properly report a loan that she eventually defaulted on despite the fact that disclosure rules require the reporting of loans, even on personal residences, that exceed the value of the home itself.
These scandals signal a failure of disclosure in Congress. The documents that lawmakers file must be made more transparent and accurate. Luckily, the Senate Ethics Committee has taken the step of introducing an amendment to the current housing relief bill to close this loophole. If enacted, it would serve as a small victory in fixing the financial disclosure system. However, there are more problems than simply the personal residence loophole.
Another failure in financial disclosures is the use of dollar ranges instead of exact figures when reporting assets and debts held by lawmakers. Assets are assigned a range $15,001 to $50,000 or $1,000,001 to $5,000,000 masking the real value of a lawmakers holdings. When reporting in ranges, improbable and contradictory outcomes occur. Speaker Nancy Pelosis (D-Calif.) 2006 net worth ranges from a minimum of negative $9,292,881 to a maximum of $86,371,990. Because of ranges, there is no way of telling whether the Speaker is about to file for bankruptcy or has pockets bursting at the seams.
Recently, similar controversies surfaced surrounding the obfuscation of assets through the use of limited liability partnerships, the failure to list the amount of stock held in a company, and the failure to disclose property in a way that an ordinary person could find it on a map.
As one lawmaker recently said, Congress must make personal financial disclosures more transparent and accurate. All of the manners in which lawmakers obscure their finances must be eliminated. Exact dollar figures must replace ranges. Loopholes for residences that do not generate income should be closed. Lawmakers must reveal how much stock they own, show who they are doing business with when engaged in a partnership, and list property in a more transparent manner. Personal financial disclosure reports must live up to the desire of Congressional leaders to operate in an open and honest manner.
Ellen S. Miller is executive director of the Sunlight Foundation.