The following editorial appeared in the Chicago Tribune:
Everyone knows Congress has its share of wheeler-dealers, but stock traders? Yes, maybe more than we thought. Media reports have raised questions about whether elected representatives, along with their families and staffs, wring trading profits from information gleaned in backroom sessions on Capitol Hill.
A recent “60 Minutes” segment highlighted the trading activity of Republican House Speaker John Boehner, of Ohio, Democratic Minority Leader Nancy Pelosi, of California, and Rep. Spencer Bachus, R-Ala., chairman of the House financial services committee.
Example: “60 Minutes” reported that Pelosi and her husband participated in an initial public offering from Visa in 2008, just as credit card legislation started moving through the House. The Pelosis bought 5,000 shares at the IPO price of $44 a share. Two days later, the shares traded at $64. The legislation, which was likely to cut credit card company profits, went nowhere that year. It passed two years later.
The Wall Street Journal reported that Bachus made more than 200 trades in stocks and options during 2008, the year of the financial crisis. His recent activity included bets on Apple Computer, the Nasdaq 100 index and a portfolio of Chinese stocks.
Bachus told The Journal he never took advantage of insider information. But to avoid any appearance of impropriety, he said he has stopped trading. Bachus also helped revive a long-dormant bill that would place additional restrictions and disclosure requirements on Congress beyond established insider-trading laws.
That sounds like damage control. Members of Congress already are required to disclose investments. And, contrary to some news reports, the Securities and Exchange Commission has affirmed that members, their families and staffs are subject to the anti-fraud provisions of the law governing insider trading.
Ambiguity exists because SEC enforcement staff and Justice Department prosecutors approach these cases differently.
Legislation aimed at clarifying the rules for Congress picked up momentum in the U.S. House and Senate after the “60 Minutes” report. But the measures under consideration strike us as window dressing.
It sure does seem that being a member of Congress carries benefits beyond the salary. The New York Times reported this week that the median net worth of the members rose 15 percent from 2004 to 2010, when the median net worth for all Americans dropped 8 percent.
But spare us a phony effort to “reform” the rules. The public won’t buy it. And the public has even greater reason to be disgusted with Congress, starting with a national debt of $15 trillion and climbing.
Lawmakers and their staffs are going to have discussions with company officials or finance experts from the private sector to make effective policy. There’s no reason members of Congress shouldn’t invest in the market — as long as they follow existing laws on dealing with insider information. If more elected officials experienced how market forces work to establish prices, respond swiftly to new developments and discipline those who get greedy, America would profit.
If members of Congress engage in illegal insider trading, enforcement tools are available to the SEC and Justice Department. Let’s use them.