[Infowarrior] - OT: Congressional Panic over insider trading feedback

[Richard Forno]

November 28, 2011, 6:00 am
Lawmakers Look to Rein In Their Investing

By CARL HULSE

http://thecaucus.blogs.nytimes.com/2011/11/28/lawmakers-look-to-rein-in-trading/?hp

The coverage was hard-hitting and shocking to some: Members of Congress received special opportunities to get in on the ground floor of stock offerings, and were actively trading in shares of companies “whose prosperity they influence and whose conduct they help to regulate.”

Those words weren’t from this month’s “60 Minutes” piece raising questions about the Wall Street dealings of top lawmakers or a new book exploring the same issue. They appeared in the 1968 exposé “The Case Against Congress” by the muckrakers Drew Pearson and Jack Anderson, who laid out dubious financial maneuvers by lawmakers seeking to enrich themselves using their powerful positions and inside knowledge.

Finger-pointing over shady stock dealing in the hallways of the House and Senate is almost as old as Congress itself — the infamous Crédit Mobilier scandal of the 1870s was partially about members of Congress cashing in on discounted railroad stock. Efforts to do something about it have never gained traction, leaving in doubt whether members of Congress and their well-informed staff advisers are subject to laws governing insider trading or free to profit from it.

But in this era of Occupy Wall Street protests and public loathing of Congress, the sentiment toward any nexus between Congress and Wall Street seems to have changed considerably. In the wake of the “60 Minutes” story on Nov. 13, about 90 House members of both parties have been racing to sign on to legislation limiting Congressional trading, which Representative Louise Slaughter, Democrat of New York, has been introducing since 2006 to little effect.

“My colleagues are really starting to understand that light needs to be shed on insider trading and political intelligence which has been creeping into the halls of Congress for years now,” Ms. Slaughter said after the Financial Services Committee agreed to hold a hearing on the measure. “There are 535 of us privileged enough to serve in this Congress, and the fact that any one of us would think to personally profit off the information that’s shared with us upsets me greatly.”

The bill she drafted with Representative Tim Walz, Democrat of Minnesota, would prohibit lawmakers from trading on knowledge gained from their status; prevent them from sharing that information; and establish new requirements for reporting transactions of $1,000 or more within 90 days.

The Dec. 6 hearing in the House was scheduled by Representative Spencer Bachus, the Alabama Republican who chairs the committee and was one of the lawmakers who came under scrutiny from “60 Minutes,” though he challenged any suggestion that he traded improperly.

In the Senate, the Homeland Security and Governmental Affairs Committee is set to convene a hearing Thursday on new bills very similar to Ms. Slaughter’s “Stop Trading on Congressional Knowledge” or Stock Act.

Senator Scott P. Brown, the Massachusetts Republican who faces a difficult re-election bid, has introduced one; Senator Kirsten Gillibrand, the New York Democrat who is also up next year, is taking the lead on a competing bill that would change Congressional and Senate rules to ban insider trading.

“When members of Congress personally benefit from the legislation that they shape and vote on, there is a clear conflict of interest, and its effect on legislation can be corrosive,” Mr. Brown wrote in a letter to his colleagues.

Top lawmakers appear ready to get on board even if they might not be totally up to speed on the legislation.

“I’m not familiar with the details,” Representative Eric Cantor, the Virginia Republican and House majority leader, told reporters recently about the Stock act, saying his sense was that it required more disclosure.

“If there is any sense of impropriety or any appearance of that, we should take extra steps to make sure the public’s cynicism is addressed,” he said.

Given the political environment, members of Congress appear eager to insulate themselves not only from the suggestion that they have some market advantage over average Americans but also from what they expect could become a potent campaign charge in a year when many usually safe incumbents could face a challenge.

Sarah Palin provided the contours of the political argument in an opinion article she published in The Wall Street Journal after the “60 Minutes” report, asking how “politicians who arrive in Washington, D.C., as men and women of modest means leave as millionaires?”

“The corruption isn’t confined to one political party or just a few bad apples,” she wrote. “It’s an endemic problem encompassing leadership on both sides of the aisle. It’s an entire system of public servants feathering their own nests.”

Many members of Congress say the problem is being exaggerated and that the vast majority of lawmakers play by the rules and would not take advantage of their position for financial gain.

But at a time when many American families are struggling financially and when anything Wall Street carries a negative connotation, members of Congress have evidently decided that even if there is no insider trading, they’d better do something about it.


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