Has trading on inside information now come to an end in Washington?
Congress will pat itself on the back and trumpet the passage of the STOCK Act as an indication that Washington has heard the hue and cry of the people to stop insider trading by the sycophants—that is, our elected representatives and their staffs— in and around Capitol Hill. The vote of 96-3 in the Senate was a strong indication as to how important it was to pass this legislation.
Now that the legislation has passed, should we assume that Congress is no longer in the business of personally profiting from trading on inside information? Not so fast.
The STOCK Act may have passed but let’s look a little harder to see what it does not cover and where our sycophants can continue to navigate in insider information. The Fiscal Times provides a harder look at this legislation in writing, New Insider Trading Law Winks at Some Violations,
A bill banning insider trading by federal officials that the President is expected to sign does not go far enough to prevent government workers from trading on the confidential and proprietary information they glean from their jobs. The lawmakers’ modest step clamps down on some of their own financial transgressions — members of Congress, White House officials, their staffers, and many federal employees will be punished for bolstering their own investment portfolios through insider trading.
However, the bill ignores the larger questions regarding how lawmakers are more tempted than ever in an election year to capitalize on information they offer to lobbyists, businesses and members of Super Pacs for political gain.
“It’s true that insider trading is a problem,” said Norm Ornstein, a resident scholar at the American Enterprise Institute, “But it’s a fact that the many money-related, perhaps more relevant, dubious practices that take place in the lawmaker community, that go way beyond insider trading, are left unaddressed.”
The House stripped out two components of the original Senate insider trading ban, which would have made more wide-reaching strides in stamping out government corruption, Ornstein said.
One would have required any individual or business selling inside information to lawmakers and their staffers to register with Congress like lobbyists, who document their dealings online under federal law. So-called political intelligence firms have blossomed in recent years, collecting information to sell to hedge funds, private equity firms, and high-roller investors.
Angela Canterbury, Director of Public Policy for the Project on Government Oversight echoed Ornstein. “Prohibiting insider trading gets at the subject of public servants using information for their own financial gain, which will lead to more people getting caught on stock trades, which I think is useful,” she said. “But what’s missing now is more the sunlight on the financial gain of those soliciti (C)ng information from public servants, and how that in turn lines public officials’ campaign interests.”
The House also nixed a provision making public corruption criminal laws more punitive, and affording federal public integrity prosecutors heightened power to probe public officials. It’s become more difficult to bring a case against a public official after a 2010 Supreme Court decision undid a section of the law that enabled prosecutors to target state and federal officials on charges that they acted in their own financial self-interest rather than for the public good.
“Lawmakers honestly don’t feel they have a lot to fear from the public integrity section of the Department of Justice, and that could really turn into a huge problem,” said Melanie Sloan, Executive Director of Citi (C)zens for Responsibility and Ethics in Washington. This bill was one of the few changes to change that pattern, Sloan said. “But over in the House, they’re just not anxious to let prosecutors more anxiously target public corruption and give the public a window into their dealings with the private sector,” she said. “If you’re a legislator, why do you want to make it easier for prosecutors to go after you if you’re going to do something illegal?’
Not a lot to add to that. The incestuous relationship between the sycophants in Washington and those who will pay for inside info on Wall Street continues. Crony capitalism at its best.
Will we have to wait another half decade or so and hope 60 Minutes will do a documentary on this practice in order to clean up the stench emanating from this corner of the sty?
Sense on Cents/Related Commentary
Profiting from Political Intelligence; February 16, 2012
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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.