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Editorial: Inaction on inside trades may not be an oversight
That Congress has blind spots should not surprise anyone, and yet ….
On Sunday, Steve Kroft of “60 Minutes” did a segment exposing the wide-open opportunity for members of Congress and their staffs to capitalize on financial information not yet in the public’s hands. The report noted several examples involving members of both parties who were privy to pending testimony, or legislative action, that could move an individual stock or group of stocks. They made thousands of dollars on trades, some executed within hours of a particularly opportune disclosure.
The most egregious: A September 2008 investment by Rep. Spencer Bachus, R-Ala., in an index fund that amounted to a bet against the stock market. The $7,800 he invested was worth more than $13,000 when he liquidated his holdings days later.
Whether it took any particular insight to short the market nearing the cusp of an epic meltdown is a legitimate question. Lehman Brothers had declared bankruptcy just four days prior. But how many other investors were present as Bachus, then ranking member of the House Financial Services Committee, was briefed by Federal Reserve Bank Chairman Ben Bernanke and Treasury Secretary Hank Paulson?
Current Speaker of the House John Boehner did well for himself buying insurance company stocks after congressional infighting made clear a single-payer health plan that would have pushed them out of the health insurance business was not going to fly. Boehner says his investment manager made the call on his own.
The “60 Minutes” piece, based on research by conservative author Peter Schweizer, also makes a less sticky charge against Boehner’s predecessor, Nancy Pelosi, whose wealthy husband was among the favored when Visa shares were allotted during its initial public offering, after which the price bounced substantially. The Pelosis subsequently twice bought additional shares at higher prices.
Some of these actions may violate famously flexible House ethics rules, but they do not violate the law. There is nothing on the books that bars insider trading by members of Congress. A bill that would correct that oversight has been all but radioactive.
The Stop Trading on Congressional Knowledge (STOCK) Act would require members of Congress and the executive branch, as well as staff members, to disclose stock, bond and commodity trades. Trades by outsiders based on nonpublic knowledge obtained from legislative and executive branch members would be prohibited.
An exception is provided for those who place their holdings in a blind trust over which they exercise no control.
Former Rep. Brian Baird, D-Wash., was one of two sponsors of the bill in 2009. Out of 435 representatives, all of six signed on as co-sponsors. The measure did not die in just one committee. It died in four.
Tuesday, desperate Texas Gov. Rick Perry said congressional insider trading should be a jailing offense. He would also slash the $174,000 salaries representatives and senators make. He’s starting to make sense.