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Market Plunge Could Affect Campaigns

Tom Williams/Roll Call

The aide added that Schumer — who serves on the Banking and Finance committees — does not have any conflicts of interest because he does not decide which securities to buy.

“The investment decisions are made independently and without the knowledge of the Senator or his senate staff,” the aide said.

Campaign finance experts say candidates and lawmakers should be careful when investing their extra cash on hand.

“If you put your money in an asset that is risky, be prepared to lose the money,” said Jan Baran, who is a senior partner at the Wiley Rein law firm and specializes in campaign finance. “And if you lose the money, be prepared to answer to your donors.”

Baran said lawmakers’ desire to invest in the market is exacerbated by current interest rates, which pay very little on certificates of deposit and savings.

These investment choices can have a lasting effect on campaigns if the market turns. For instance, when the mortgage crisis hit the stock market in 2008, Rep. Joe Barton lost $700,000. But the Texas Republican has been more profitable in 2011, netting more than $64,000 so far this year, even though he lost nearly $25,000 during the second quarter.

The campaign of Rep. Spencer Bachus (R-Ala.) lost $168,000 on investments during the 2010 campaign cycle, the most of any House Member. The Financial Services chairman has yet to report any major investment transactions during the 2012 cycle.

A few weeks ago, the campaign of former Rep. Robert Wexler (D-Fla.) reported losing $150,000 during the second quarter of 2011 from a real estate deal that went sour. Instead of a CD, the campaign invested money in a Palm Beach house.

But about two and a half years ago, the house went into foreclosure, said Eric Johnson, Wexler’s former chief of staff.

“Finally, after time was exhausted looking at legal options to recoup it, he just decided he was not in Congress anymore so he just finally wrote off the loss,” he said. “This investment was a loss, but the campaign over the course with this investor did quite well.”

Money markets, savings accounts and certificates of deposit appear to be common investment choices since 2009 as about 200 candidates and lawmakers have reported millions of dollars in interest and dividends.

Some of those with significant interest earned during the past two and a half years include: Sen. Richard Shelby (R-Ala.), who made $964,000 from interest on a campaign account that now exceeds $17.2 million; Sen. John Thune (R-S.D.), who listed $163,000 from CDs and interest; and Sen. Harry Reid (D-Nev.), who has made $148,000 since 2009.

Like Wexler, a number of campaigns of former lawmakers are no longer actively soliciting contributions for elections but are still making significant funds though investments.

Just this year, for instance, the campaign of former Rep. Joseph Kennedy (D-Mass.) made more than $50,000 from securities, while former Rep. Mark Foley (R-Fla.) raised $28,000 and former Rep. Chip Pickering (R-Miss.) garnered more than $14,000 through investments.

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