Sad truth about congressional insider trading

Prosecuting lawmakers for their actions will be difficult because of broad protections under the Constitution.

By Jonathan Berr Jun 27, 2012 1:49PM
Image: Washington, D.C. (© Corbis)Earlier this year, Congress passed the Stop Trading on Congressional Knowledge Act (STOCK), which backers argued would prevent lawmakers and their aides from profiting from insider knowledge obtained through official duties. But the problem continues, as discussed this week in the Washington Post.

The Stock Act wouldn't have prevented the questionable lawmaker trades outlined in the Post series, such as House Speaker John Boehner's 2008 decision to move between $50,000 and $100,000 from a more aggressive mutual fund to a safer investment after discussions with Treasury Secretary Hank Paulson about the teetering economy, notes Melanie Sloan, the head of Citizens for Responsibility and Ethics in Washington.  

Boehner and other members covered in the Post, and an earlier report by 60 Minutes, have denied wrongdoing.  

"The Stock Act really didn't do that much," Sloan told MSN Money, adding that prosecuting members for insider trading will be nearly impossible.

Members have broad protections over their conduct under the Constitution's speech and debate clause, originally designed to protect them from being arrested if they took a position that was at odds with the president. Its application related to insider trading is complex. Prosecutors would never be allowed to use as evidence the facts a member learned on a committee to make the case for insider trading.  

Practically speaking, this means that while the Stock Act prohibits members who sit on defense committees from trading shares of Lockheed Martin (LMT) or Boeing (BA) based on information they learned about the companies in the course of their duties, a prosecutor would be unable to share this with a jury, making it nearly impossible to obtain a conviction, according to Sloan.
 
Though some wealthy members of Congress place their investments in blind trusts, they are not required to. To be fair, not every politician is savvy when it comes to stocks -- witness Rick Santorum's odd investing choices -- and some studies show that lawmakers sometimes underperform the market. The Stock Act tries to address the issue of fundamental fairness, but falls short in many ways.

The other flaw in the law is that it does nothing to crack down on so-called political intelligence companies that Wall Street hires to gather information from lawmakers and aides. House Republicans stripped out a provision from the bill that would have required these firms to register, as lobbyists have to. People who hire these companies do so in the hopes of getting a heads-up on policy and legislation that could affect their investments.

The Stock Act does have its utility. Members of Congress and certain government employees are required to report some investments within 45 days after a trade, and that information will be contained in searchable databases. Maybe the prospect of public shaming by the press or their opponents will make members think twice about making questionable stock trades. Then again, shame is often in short supply in the corridors of power.

--Jonathan Berr holds no position in the stocks mentioned here. Follow him on Twitter at @jdberr.
Tags: BALMT
37Comments
Jun 28, 2012 12:54AM
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There is no doubt Congressmen have given themselves a license to steal and murder. And yet, election after election we keep re-electing them.

 

In November please elect a guy who hasn't yet learned to rob taxpayers. Considering the approval rate of Congress and considering that Congress hasn't passed a good law since 1995 we will be better served by a bunch of newbies than by a collection of competent thieves.

Jun 28, 2012 9:52AM
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This country has stopped being a Democracy for some time now.  We might as well be back in the 18 Century prior to the American Revolution.   When congress can vote in laws that protect them from cheating and when they can vote on their own pay raises and exempt themselves from austerity measures, something has gone radically wrong.  Maybe it's time to rise up again and regain our Country back from the entitled?
Jun 28, 2012 9:14AM
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its amazing that we the tax payers pay these no good sorry bastards to make laws for us to have to live by but they can do any thing they want, democrats or republicans doestn make any difference there all a bunch of damn sorry crooks out to get rich and to hell with us. the u s used to be the place to live but not any more with these crooks running it
Jun 28, 2012 9:24AM
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Our forefathers never intended for things to be as they are , politics was never supposed to be a life long job with benefits unmatched by any but the financial industry . Insider trading is older than the stock market it-self !
We elect people who have the most money , best ability to lie with a straight face , out of touch with the common experience we face and then expect some different results . 
I agree with previous statements that a war between the haves and have-nots will , in the end game , be the final solution . Dogma
Jun 28, 2012 10:06AM
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If Congress has a 9% to 13% approval rating, why on earth will 90% of these crooks be reelected time after time???  We are the problem and they are not the answer!
Jun 28, 2012 9:32AM
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Voting is pointless, at least in our present political system.


Let me give you an example of what happens when you elect someone to Congress who is NOT corrupt. It was a freshmen Representative, Scarborough I think. Gingrich wanted to go back on some of the promises in the "Contract With America" thing that the Republicans were big on at that time. Scarborough wanted to stand his ground on the promise. Guess who got projects yanked from their district?


Elect Congressmen who are not corrupt if you will. But they will lack seniority, be on no committees, have no influence, and when they try to act honestly, they will have money and projects yanked from their district. And guess what happens when they run for re-election? Their opponent can point out all the jobs that he/she lost for that district.


They will either play the corrupt game or not be re-elected. The system is rigged against honest people like a casino.

 

Once in an blue moon, you have mostly honest people run, or at least people who attempt to speak the truth (dangerous in politics). And guess what? They get called "nut jobs" and the political establishment will destroy them at all costs. Ross Perot in 1992 predicted things would go down the toilet economically for the US because of "free trade", globalism, etc, and 20 years later, his prediction about the "great sucking sound" of American jobs has been borne out.

 

Today, Ron Paul is the so-called "nut job". I wonder what the US will be like in 20 years from now or if it will even exist. If it does, it is not hard to imagine the country being a corporate-run police state, where a corporation (like in Kelo vs City of New London) can get your property if it wants through eminent domain, where jackboots can search your person anywhere and anyplace without probable cause, and where drones and cameras are everywhere and record anyone displaying an unpopular and "dangerous" opinion and they get "disappeared".

Jun 28, 2012 8:58AM
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Simply put, just vote for any and all that are running to unseat an incumbent. Voting out failure is my way to look at the problem.
Jun 28, 2012 9:43AM
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Only 2 players left in the monopoly game. Congress and wallstreet.
Jun 28, 2012 11:00AM
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You got to love a country were we let senators get rich for the same thing others go to jail for. God bless the USA
Jun 28, 2012 11:37AM
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Of course the two members called out happen to be republicans.  No mention of Pelosi who was one of the "other members of Congress" called out in an earlier report by 60 minutes or any other democrats for that matter.  If both sides are guilty of it, how about reporting it that way.
Jun 28, 2012 11:43AM
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The federal government is a cesspool of corruption and has strayed so far from the founding purpose and principles that it is not salvagable.  The problem is not the crooks in government but the idiots that keep electing them.  If not already doomed, we are certainly approaching the point.  Criminals and entitlement junkies are flourishing under this government while those that subscribe to the values that made this nation great are being vilified.  Shame on us.
Jun 28, 2012 11:54AM
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This is unbelievable - the USA is on the verge of bankruptcy.   We are being taxed to death and ye we can't afford to fund School districts.   Our corporate leaders in the private and public sector are being paid millions of dollars and heave excessive stcok benefits.  We continue to provide golden parachutes to these individuals even if they have not provided growth to shareholders and grow the business. 

We also have decided to continue to reward our Sports figures millions of dollars along with our entertainments industry while we have poverty and children suffering. 

Our economy is in the dumps with high employment, underemployment, discrimination amoung individuals over 45 in the workplace.   What is going to be done.  The Federal government is broken and a change needs to be made or all of will continue to suffer it will continue to get worse.  And yet we conitnue to pay our eleceted leaders who can't or won't work together!  After they leave office the benefits they receive are unbelivable.  Yet we continue to pay these leaders.

 

 Subject: Wages

Wages

Salary of retired US Presidents .............$450,000 FOR LIFE
Salary of House/Senate members ..........$174,000 FOR LIFE

Salary of Speaker of the House .............$223,500 FOR LIFE

Salary of Majority/Minority Leaders .....$193,400 FOR

LIFE

Average salary of a soldier DEPLOYED IN AFGHANISTAN - $38,000
Average income for seniors on SOCIAL SECURITY - $12,000

I think we found where the cuts should be made!
If you agree... Pass it on!

 

If our citizen's have entered the country legally they are legal - if they have entered illegal they are illegal. I know of no other country that allows illegals to enter regardless of circumstances to remain.   The USA provides was to enter legally and this should be enforced.  

 

My rant of the day!  America lets wake up!

 

 

 

Jun 28, 2012 10:27AM
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what a dark day, obumer care upheld, just goes to show the american worker who pays for there own insurance the lazy pothead who lives on the government tit deserves the SAME AS YOU, how sad
Jun 28, 2012 11:27AM
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What a disgrace! I long ago came to the realization that the difference between the thieves on both sides of the aisle in the House of 435 Thieves is... the aisle! The Bible states that "from he whom much is given, much is expected". It seems that the members of the government have altered that to read: "from them to which much is given, expect much more to be stolen". Damn!
Jun 28, 2012 7:52AM
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I would if we could actually find one, Old Dog
Jun 28, 2012 11:26AM
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Boehner's a crook. Hypocrisy at its finest. To date, none sent to jail for the Wall Street debacle that almost brought the country to its knees, and we have the JPM CEO being revered during testimony to Congress instead of being raked over the coals for more 'gambling' with taxpayer money. Time to end JPM's $14 billion dollar a year subsidy from the average taxpayers.

 

 

Jun 28, 2012 12:07PM
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Kick  the "corrupt" bums out of Congress!  They should be prosecuted too.

 

These bums don't care about us......this nation.........only their selfish needs. 

 

These s.o.b.'s make Nixon look like a saint!

 

They can find ways to cut every program to the bone but when it comes to stuffing wads of cash in their pockets, they are the first in line to get it. 

Jun 28, 2012 11:35AM
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Echo49 is on the ball. Every time one of these jerks get caught they should immediately be taken to jail/prison and left to rot. If I were to do this you can bet your sweet bippy I would end up in the slammer faster than you could lick your lips. NO EXCEPTIONS - PERIOD.
Jun 28, 2012 12:15PM
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They think of nothing to cut unemployment benefits for people who remain jobless and reading this about Insider Trading is an insult to every voter in this country.

 

They truly run a country club on Capitol Hill!

 

These bums need to go and go quickly.   Prosecute them and then lock them up for a long time.  Send a strong message that this criminal behavior will not be tolerated.

 

Dimon of JP Morgan should be fired.  That's all this country needs is another financial meltdown.

Why is this bum who makes $21 million  still on their payroll?

 

They want to cut the education budget and everything else they can get their greedy corrupt hands on ...so we can scrimp by while they make millions!!!  They are their to serve not become rich!

 

 

Jun 29, 2012 8:24AM
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While we can't stop them from telling their inside knowledge to family and friends, we should at least ban all active trading ability for those who work in Congress, the Supreme Court, and Executive Branch. It's clearly a conflict of interest!
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