The STOCK Act, a law that was designed to stop insider trading among government officials, was gutted last week when a key part of the law was repealed unanimously by Congress and signed by President Barack Obama. But if anything, it’s more of a surprise that Congress passed the law with such a wide margin in the first place given its ubiquity in Washington.
In an investigation a year and half ago, 60 Minutes uncovered evidence of several instances of insider trading among prominent government officials. The trades, while technically legal can hardly be considered ethical. One of these trades involved Alabama Representative Spencer Bachus, then the ranking Republican member on the House Financial Services Committee back in September 2008. Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke were holding closed door briefings with congressional leaders, and privately warning them that a global financial meltdown could occur within a few days.
“While Congressman Bachus was publicly trying to keep the economy from cratering, he was privately betting that it would, buying option funds that would go up in value if the market went down. He would make a variety of trades and profited at a time when most Americans were losing their shirts,” 60 Minutes reported.
“What we know is that those meetings were held one day and literally the next day Congressman Bachus would engage in buying stock options based on apocalyptic briefings he had the day before from the Fed chairman and treasury secretary. I mean, talk about a stock tip,” said Peter Schweizer, a fellow at the Hoover Institution, a conservative think tank at Stanford University.
And back in 2009, then House Minority leader John Boehner was also involved in some suspicious trading activity. It was Boehner who led the opposition against the so-called public option, the government funded health insurance plan that would compete with private companies that could have been a part of Obamacare. Just days before the provision was finally killed off, Boehner bought health insurance stocks, all of which went up.
And it’s definitely just not Republicans who are participating in trades. Former House Speaker Nancy Pelosi and her husband have participated in at least eight initial public offering (IPOs), or opportunities to buy a new stock at insider prices, just as it goes on the market. IPOs can be incredibly lucrative and hard to get.
“One of those [IPOs] came in 2008, from Visa, just as a troublesome piece of legislation that would have hurt credit card companies, began making its way through the House. Undisturbed by a potential conflict of interest the Pelosis purchased 5,000 shares of Visa at the initial price of $44 dollars. Two days later it was trading at $64. The credit card legislation never made it to the floor of the House,” reported 60 Minutes.
The Wall Street Journal found that at least 72 aides from both parties traded shares of companies that their bosses help oversee, according to an analysis of more than 3,000 disclosure forms covering trading activity by Capitol Hill staffers from 2008 and 2009.
If you wanted to see the financial disclosure forms for yourself, you’d have to travel to Washington and head to the Cannon House Office Building, where all the public records are kept. There, you can search a database to find the disclosure forms for those who have filed them. But even then, it’s not that easy to find what you’re looking for.
“The database itself is almost meaningless,” says Craig Holman, a government affairs lobbyist. Speaking to NPR, Holman says the only option for those who want to get a comprehensive look at what some 2,900 staffers have filed is to review the cases one by one. “And that’s just too big a job for anybody to do.”
The STOCK Act was supposed to make this task significantly easier. Records for members of Congress, the executive branch and their staffs were supposed to be posted online in a searchable, sortable and downloadable format. If you wanted to see who traded health care stock just before a committee acted on a health care bill, it would be easy—no trips to D.C. required.
The modification of the STOCK Act signed by the President last week, however, delayed “the creation of systems that enable public access” to this information until January 2014. Portions of the STOCK Act have been delayed several times already, and with eight months to go, Congress has plenty of time to delay this measure even further, or maybe even repeal it entirely.
Before the STOCK Act, insider trading was legal for government officials but illegal for everyone else. The President acknowledged this when signing the bill, arguing that “the powerful shouldn’t get to create one set of rules for themselves and another set of rules for everybody else.” But Congress, being so invested in our national security, could potentially commission another study that will justify not allowing public access to disclosure information and lead to the repeal of what little remains of the STOCK Act. And when the only ones in Washington who know whats going on are those doing the insider trading, what good will it be to have a law that that is never enforced or able to identify those involved?