Our capital markets’ reputations have suffered due to a rash of insider trading. It’s not tolerated, and using secret information undermines the very integrity of our markets.
If you trade on non-public information, you get in trouble. It’s something the government should investigate … unless they’re doing it. Congressional trading on non-public information is surprisingly common.
In November “60 Minutes” reported that Financial Services Committee Chairman Spencer Bachus made investments right after closed-door briefings on the economy. John Boehner dabbled in insurance stocks during the health care debate, and Nancy Pelosi took part in an exclusive Visa IPO while considering legislation on credit cards. Also, several members of the House Itty Bitty T---y Committee are shorting the over-the-shoulder-boulder-holder market.
The “60 Minutes” report made some real waves on Capitol Hill, and members vowed action.
“We should not be shielding Congress from laws that apply to other Americans,” said Sen. Susan Collins, R-Maine.
Yes, Congress should obey the same laws as everyone else. I believe that was in the No S--- Sherlock Act. That’s why Congress recently passed something called the Stop Trading on Congressional Knowledge (STOCK) Act.
It was designed to prevent members of Congress or their staff from benefiting financially from information they learned in the course of being in Congress. You would think if you’re on the Senate Banking Committee you wouldn’t be able to trade bank stocks, but that’s not the case.
To fully appreciate the size of Congress’ balls and the bill’s lack of them, you’ve got to look at another provision dealing with “political intelligence.” Political intelligence is a $100 million industry of former congressmen and staffers that scour the halls of the Capitol gathering valuable non-public information and selling it to hedge funds.
Here’s an example of how political intelligence works: A few years ago a firm called JNK Securities set up a meeting between several hedge funds and Sen. Chris Dodd — you remember, the guy that wrote all the financial legislation. The senator told them he wouldn’t be pursuing a provision to cap debit card fees.
No one outside the meeting had that information. Then the hedge funds that were there bought more than 300,000 shares of Visa. If that same type of activity happens in the regular non-Congress economy, people are found guilty of conspiracy, insider trading and fraud.
I bet Martha Stewart finds this juxtaposition hysterical, laughing away as she takes a reclaimed barn wood baseball bat to a shelf of vases she crafted from recycled New England lobster traps.
The Senate version of the STOCK Act dealt with these political intelligence people. It didn’t ban them from shuttling information from Congress to hedge funds, but it did require them to register just like lobbyists.
Make them register like lobbyists — now they’ll never be able to get in to see congressmen. I guess it’s better than nothing and gives people a little transparency. Who could object to that?
“House Republicans rejected a provision that requires so-called political intelligence firms to register the same as lobbyists,” reported Hari Sreenivasan of “PBS NewsHour.”
Oh, well. Thank you for taking a crap on our chests.