What’s interesting about the STOCK Act is why it passed all. It only became a priority after a 60 Minutes investigation, which aired a few months ago, suggested that insider trading among members of Congress and their aides was widespread.
In November, CBS News’ Steve Kroft’s began his segment: “Most former congressmen and senators manage to leave Washington – if they ever leave Washington – with more money in their pockets than when they arrived.” And he wanted to find out why.
Kroft interviewed Peter Schweizer, a fellow at the Hoover Institute, a conservative think tank at Stanford University. Schweizer had reviewed financial disclosure records and he found that congressmen and senators who had insider information were far more adept at trading on the stock market.
In the run-up to the 2008 economic meltdown, both Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke briefed congressional leaders behind closed doors that a global crisis loomed. At least some of them, according to the report, used that information when buying stocks.
“I mean, talk about a stock tip,” Schweizer told Kroft.
And all of this, at least according the report, was perfectly legal. Meanwhile, if the rest of us engaged in similar activity we could be charged criminally and perhaps even imprisoned. But it doesn’t end there.
That insider information pertains to earmarks as well. Politicians know where government projects will be located and can also steer them. Subsequently, they have a knack for making a bundle of money on land deals.
Both Republican House Speaker John Boehner and Democratic Congresswoman Nancy Pelosi were included in the story. Boehner’s office said his inclusion was “idiotic” and Pelosi’s characterized it as a “right-wing smear.”
Nonetheless, the U.S. Senate passed the STOCK Act with a 96-3 vote last week, even as many senators were publicly questioning its worth. “The people think it’s a serious problem, and sometimes you just have to respond to what the people think to get some credibility,” Sen. Ben Nelson, D-Neb., told Politico. The “people” apparently don’t like it that as their 401Ks tanked, many politicians made money.
Montana’s congressional delegation supports the legislation. Sens. Max Baucus and Jon Tester voted in favor of the bill and Tester introduced an amendment that requires financial disclosures filed by members of Congress to be made available online. Congressman Denny Rehberg sponsored a House version of the STOCK Act in November.
But the idea to pass a ban on congressional insider trading is not a new one. Democratic New York Rep. Louise Slaughter has been pushing the STOCK Act for about six years, according to National Public Radio, but it never gained any traction. That is, until the 60 Minutes report made it very popular.
It’s hard to know whether this legislation will actually prevent members of Congress from making bets on information they gain from closed-door meetings. After all if, as many politicians claim, this bill simply overlaps existing rules, then why haven’t more of them been charged with insider trading? Are we supposed to believe they are simply lucky?
The U.S. House also passed a version of the STOCK Act, which was touted as a “rare show of bipartisanship.” But members of Congress will continue to cash in for life after moving to Washington, D.C., regardless of whether they win elections. They can simply cash in at a lobbying firm.
Sen. Rand Paul, R-Ky., had proposed a modest amendment that would strip former senators of their pensions if they became lobbyists. He dropped the request under pressure from his colleagues. Thus, getting elected to Congress still assures a job for life to those with insider information.