Think that stock trading shenanigans are limited to Wall Street? Think again. In his new book “Throw Them All Out” and a subsequent “60 Minutes” report, author Peter Schweizer has uncovered information about how members of Congress and their spouses get in on IPOs and great trade deals. Schweizer says this is thanks to their knowledge obtained from their positions, including how upcoming legislation will affect stock prices. Now after all the media attention, Congress is holding on this issue.
Yet the concept that Congressmen shouldn’t use such information to make Wall Street trades isn’t exactly a breaking story. Rep. Louise Slaughter has been the Cassandra of Congress for six years on this issue, trying to get her Stop Trading on Congressional Knowledge (STOCK) Act passed. This bill would correct an oversight in current law which bans insider trading by company officials, but does not prohibit members of Congress “from profiting on information they pick up in briefings about companies, industries or the economy,” as the Washington Post notes.
For six years, Slaughter’s bill has gone nowhere, with most fellow Congressmen uninterested in doing anything on the issue. As of November 12, she only had nine co-sponsors for the bill. Then “60 Minutes” aired a report about Schweizer’s book, and what it uncovered. And lo and behold, Slaughter’s lonely legislation became an “overnight sensation,” as the Washington Post put it. The STOCK Act now has 127 co-sponsors.
“I’ve never seen such an explosion of interest,” Slaughter told the Post. “The day after it ran, when I went through the airport, the TSA agents were asking me about the bill. Suddenly, everyone was interested.”
In addition, Sen. Scott Brown and Sen. Kirsten Gillibrand have introduced their own version of such legislation. And now Slaughter’s fellow members of Congress are also all hot to trot on holding hearings. But only one of her fellow Congressman, Rep. Barney Frank, apologized to her for not listening to Slaughter earlier and agreeing to co-sponsor the legislation years ago.
As for the hearings, first up is the Senate Homeland Security and Governmental Affairs Committee hearings on December 1. In a column for Fox News, Schweizer points out that two members of the committee – Sens. Claire McCaskill and Tom Carper – both had trading shenanigans that he wrote about in his book. He asks, “Will Sen. McCaskill explain what prompted her critically timed trade of $500,000 in Berkshire Hathaway stock?” and also wonders, “Will Sen. Carper explain his curiously timed health care trades? Or why he trades in health care stock at all, given that he was the point man for Obamacare’s passage?”
On December 6, the House Financial Services Committee hearings will hold its own hearings. To which Schweizer wonders, will Rep. Spencer Bachus, head of the committee and “one of the most egregious stock options traders in all of Congress” get around to explaining “why he was engaged in 40 options trades during the 2008 financial crisis?” And will Rep. Gary Ackerman explain why he got “shares of stock he didn’t even have to pay for?“
Schweizer says that while “these hearings will give citizens and journalists a rare opportunity to see just how serious members of Congress truly are about cleaning up the cronyism and corruption rampant in Washington,” he doesn’t exactly seem hopeful, saying that “early indications are that both Congressional committees have stacked the decks with witnesses who will diminish the need to make members of Congress follow the same insider trading laws that citizens are bound by.”
But at any rate, the good news is that people are talking about this issue , and that Election Day – aka Judgment Day – is less than one year away. Given all the outrage about crony capitalism these days, perhaps Congress will actually feel a need to clean up its act – or at least look like it is doing so.
Lisa Swan is a Feature Writer for the Compliance Exchange. She is also a columnist for The Faster Times and a blogger for Subway Squawkers. Her work has also appeared in the New York Daily News, Yahoo Sports, Huffington Post and the books Graphical Player 2011 and Graphical Player 2010.