The following editorial first appeared in the Dallas Morning News:
Psst. Got a hot stock tip. XYZ Mega Corp. will get a big government contract. Buy its stock. I know this because I’ve been sitting in on the meetings.
Let’s say you were an executive of XYZ Mega Corp. and authored this tip; you would be in violation of insider trading laws. But if you were a member of Congress, you’d get to skirt the law that would land constituents in jail.
Well, so much for public trust and fairness.
The duplicity, chronicled in a recent “60 Minutes” report, ought to make voters’ blood boil. House Speaker John Boehner, R-Ohio, Rep. Spencer Bachus, R-Ala., and former House Speaker Nancy Pelosi, D-Calif, and her husband are featured prominently in the report in regard to questionable stock trades each conducted, presumably with information obtained from their positions in public service.
When confronted on camera, Boehner and Pelosi denied wrongdoing and seemed incredulous that their activities would raise questions about financial conflicts and insider trading; Bachus’ office issued a statement also denying that the congressman did anything improper.
But Brian Baird, a former congressman from Washington state who lost several legislative battles to end insider trading in Congress, says it best: “There should only be one thing in your mind when you’re drafting legislation: ‘Is this good for the United States of America?’ That’s it. If you’re starting to say to yourself ‘how’s this going to affect my investments?’ you’ve got a mixed agenda and a mixed purpose for being there.”
It’s not too much to require senators, representatives and their staffs to abide by rules that apply to the rest of us. School board members, corporate executives, public workers and others are supposed to adhere to certain rules to avoid financial conflicts. So what makes senators, representatives and their staffs so special? We dare say it is because Congress gets to write the rules, and the enforcement agencies, which depend on Congress for funding, don’t have the stomach for a hard-to-prove political fight. And it is also clear from the lack of enforcement that congressional ethics committees don’t have the stomach to take on their own, either.
Some legal experts contend that lawmakers have duties of trust and confidence to constituents who also may be shareholders in the companies, which means that lawmakers violate existing insider trading laws whenever they trade on nonpublic information. In any event, lawmakers should have investments in blind trusts, be explicitly barred from trading on privileged information, and mandated to report stock trades in a timely manner to avert such conflicts.
Last week, Sen. Scott Brown, R-Mass., introduced a bill to prohibit members or employees of Congress, as well as executive branch employees, from using nonpublic information obtained through their public service for investing or any attempt at personal financial gain. Sen. Kirsten Gillibrand, D-N.Y., and others have plans for similar proposals which, among other things, would require individuals to register as lobbyists before contacting legislative and executive branch employees to acquire market intelligence regarding a proposed rule, regulation or legislation.
Those are good starts, but let’s see whether Congress moves quickly on serious reforms or scuttles these measures as well. Congressional trading on privileged information must end.
While House minority leader, Boehner traded stock in health insurance companies as he railed against the Obama health care legislation.
Rep. Spencer Bachus, then the ranking Republican member on the House Financial Services Committee, may have used information from confidential Federal Reserve meetings to take profitable positions while global financial markets imploded.
While House speaker, Nancy Pelosi, and her husband, participated in at least eight initial public stock offerings, including one in 2008 from Visa while Congress was considering legislation to curb credit card practices.