Is Insider Trading Just Another Congressional Perk?
Last Tuesday, Houghton Mifflin Harcourt published Peter Schweizer's "Throw Them All Out." Normally, 224-page tracts by political think-tank fellows sink without a trace.
But this one got the full "60 Minutes" treatment on CBS Sunday night, as if it were some kind of celebrity or political tell-all. Which, in a way, it is.
John Boehner! Nancy Pelosi! John Kerry! Spencer Bachus! And more, Republicans and Democrats alike, all with inside information about pending government actions, all of whom, Schweizer suggests, benefitted from amazingly well-timed investment decisions tied to those actions.
"There are all sorts of forms of honest grafts that congressmen engage in that allow them to become very, very wealthy," Schweizer told Steve Kroft of "60 Minutes." "So it's not illegal, but I think it's highly unethical. I think it's highly offensive and wrong."
We'd have to agree with him.
So many scams, so little time. It turns out that members of Congress are exempt from the kind of insider-trading rules that could send lesser mortals to prison. So are their staffs. So are lobbyists.
So it was entirely legal for Congressional leaders to make personal investment decisions after attending a critical meeting in September 2008 when Treasury Secretary Henry Paulson warned them that Wall Street was about to collapse.
Boehner's financial disclosures indicate that the very next day, he cashed out of a fund designed to profit from inflation. Sen. Dick Durbin's, D-Ill., records show that he cashed out $40,000 in mutual funds and parked the money with Warren Buffett's Berkshire Hathaway Co.
All later said no tips were involved. As if an apocalyptic warning from the Treasury secretary isn't a tip.
What's more, an entire industry called "political intelligence" has grown up around this phenomenon. Former members and former staffers prowl the halls, schmoozing with their former colleagues and picking up tidbits that they then turn around and sell to corporate clients for as much as $25,000 a month.
Alan Ziobrowski, a business professor at Georgia State University, analyzed more than 6,000 stock transactions by members of Congress going back up to 15 years. He reported in 2009, "I mean they do better down market, up market. They just outperform the average ... We have every reason to believe they are trading on information that the rest of us don't have."
Since 2006, a bill has been kicking around that would ban members and their staffs from trading on inside knowledge. The Stop Trading on Congressional Knowledge (STOCK) Act has gone nowhere, under two Republican speakers, Dennis Hastert of Illinois and Boehner, and one Democratic speaker, Pelosi, of California. All three are featured in Schweizer's book as having benefited from inside knowledge.
Not everyone is convinced the STOCK Act is a good idea. Alternatives would include full and immediate disclosure of every trade by members and their staffs, or a requirement that all investments be placed in fully blind trusts.
We suspect there's nothing nefarious involved here. Rather, it's a sign of how insulated Congress is from the real world. It's like free airport parking — just a little perk that proves how special they are.
The right and left alike should be able to agree: It's time to hear the debate and call the roll.
REPRINTED FROM THE ST. LOUIS POST-DISPATCH
DISTRIBUTED BY CREATORS.COM