Editorial: STOCK Act would link Congress to fair trades

The U.S. House of Representatives takes up the STOCK Act this week. Members should make short work of a bill that was propelled out of the Senate on a 96-3 vote.

The Stop Trading on Congressional Knowledge Act has been on a fast track since a Nov. 13 “60 Minutes” segment based on the work of conservative Peter Schweizer, author of “Throw Them All Out.” The exposé, which suggested House Speaker John Boehner and predecessor Nancy Pelosi were among those who had benefited from their positions, reinforced public perceptions that their senators and representatives were in cahoots with Wall Street, and maybe making a little on the side.

STOCK would forbid trading on nonpublic – insider – information and require online disclosure of the purchase or sale of securities within 30 days.

So anxious were senators to clear their collective name that many set about tightening STOCK’s disclosure provisions, and applying the law’s provisions to thousands of executive branch employees. For example, one amendment requires disclosure of all residential mortgages. That requirement might have illuminated the sweetheart mortgage deals a few members got from Countrywide Financial, one of the lenders that took on thousands of borrowers without the means to pay off their loans, helping inflate the housing bubble that triggered the 2008 financial crisis.

And, speaking of mortgages, the law would block bonuses to the chief executives of Fannie Mae and Freddie Mac.

Of course, a few senators tried to add earmarks that had nothing to do with the bill, and everything to do with business as usual. Senate Majority Leader Harry Reid, no friend of reform, put a stop to that.

There are problems.

The Senate bill, in a single provision, applies the provisions to 28,000 executive branch members, and/or just 2,000 members. Another provision sweeps in “political intelligence” gatherers always on the look for tips that might have value if whispered in the right ear, for the right price. Some fear whistleblowers may hold their breath if a potential alert might come under scrutiny because it moved the market. There could be occasions when a congressional staff member discusses information with no idea it could influence Wall Street behavior.

Those are issues that can be resolved when the Senate and House versions of STOCK are reconciled in a conference committee.

For Congress, this is a good time to do something positive before the news gets lost when the debate extending the payroll tax credit resumes, the Republican primary comes to a pitch and other developments happen.

STOCK will not be perfect. It may overlap other laws the U.S. Securities and Exchange Commission says already apply in many cases. As always, details count, as does who will be minding manners once the law is enacted.

With enough disclosure, voters can handle that.