November 15, 2011

Congress Pays

Marc Comtois

If you haven't already, take some time to watch the 60 Minutes piece on congressional insider trading. Taking the lead from work done by Peter Schweizer for his new book Throw Them All Out, the story delves into how so many of our elected officials manage to end up as millionaires after a few terms in Washington, D.C. Maddeningly, the practice is legal and not exclusive to members of one party. (And, according to WPRI, Rhode Island Senator Sheldon Whitehouse has apparently engaged in the practice, though he--according to a spokesman--"is not actively involved in the management of this investment account"). For example, to pick a couple high-profile individuals:

During the healthcare debate of 2009, members of Congress were trading health care stocks, including House Minority Leader John Boehner, who led the opposition against the so-called public option, government funded insurance that would compete with private companies. Just days before the provision was finally killed off, Boehner bought health insurance stocks, all of which went up....former House Speaker Nancy Pelosi and her husband have participated in at least eight IPOs. One of those 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.
Schweizer explains why he wrote the book:
This is not a book about corrupt political leaders. It is instead about a compromised political system. The purpose of the book is not to single out certain individual members, but to look at a broad pattern of financial transactions and expose possible insider trading and conflicts of interest. The book reveals a pattern of suspicious stock trading by members of congress from both parties based on their financial disclosure statements and legislative activities....the political leaders named here are the beneficiaries of these trades and were anyone else in America to engage in these sort of trading patterns, they would likely receive scrutiny from the Securities and Exchange Commission (SEC). Indeed, private citizens might very likely go to jail were they to do this as it relates to their own jobs.

The real scandal is that in our current system of government, these trades are perfectly legal. We wouldn’t tolerate professional athletes betting on their games. So why do we let our leaders do it on something far more important?

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"though he [Whitehouse]--according to a spokesman--"is not actively involved in the management of this investment account"

Why, isn't that an adorably tiny, quite ineffectual red herring!

No, the main point is not that Senator Whitehouse controls or manages these investments but that he benefits from them.

Posted by: Monique at November 15, 2011 8:57 AM

Yeah, Sheldon doesn't actively manage his account, but nothing stops him from calling his stockbroker from the cloak room, "Hey Phil, yeah, that internet commerce bill that would have really hurt Amazon and eBay? Yeah, Harry said it is dead on arrival. Not that I'm telling you what to do, since I don't actively manage my portfolio right?"

One of the first things Congress really needs to do is put in a law that says any law that gives them any special privileges over any other average citizen is null and void. From retirement packages (public service was not ever intended to be a career) to insider trading.

Posted by: Patrick at November 15, 2011 9:14 AM

I think the idea that members of Congress are actively providing insider information en masse is a bit much - largely because I think it assumes them to be more clever than they probably are. That being said, if I were a clever broker working for a politician, I would know how to get that information. Either way, it stinks to high heaven.

Incidentally, this now twice that this blog has gotten me to agree with it. Yes. I'm keeping score. Cheers.

Posted by: Ron at November 15, 2011 9:43 AM

"I think it assumes them to be more clever than they probably are"

Ron it does not take elite intellectual thinking to be greedy and a crook. The congress member simply takes privileged info (that congress creates) and passes it on to an investment counselor who invests for the crooked member in a "blind" trust,etc. This explains why Jon Corzine spent 60 milllion of his own money to become a US senator (salary=150,000 yr.) He was "investing" in his future. By the way Corzine was involved in MS Global going bankrupt recently. Another ponzi scheme. Corzine actually had the balls to ask the taxpayers for a bailout of MS. These politicians have gone hog wild with arrogance and greed. What is to stop them?...A Congressional Law??

Posted by: ANTHONY at November 15, 2011 11:23 AM

The average net worth of a Congress-person is up 25% since 2008...crooks.

Posted by: JTR at November 15, 2011 1:01 PM

And the irony in all this is some of these clowns have been shouting from the mountain tops that it's a fixed game.

No sh.., they fixed it.

Posted by: Max D at November 15, 2011 1:07 PM

"By the way Corzine was involved in MS Global going bankrupt recently."

That's putting it pretty lightly. That's like saying Barack Obama is involved in politics. Corzine was the CEO of MS Global as it went bankrupt and hid quite a bit of misdoing by the company and may have even lied at times to cover up some of the company's misdeeds.

Posted by: Patrick at November 15, 2011 1:58 PM
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