By DANA LIEBELSON
CBS News' "60 Minutes" aired a fairly condemning report on Sunday, alleging that several Members of Congress--including Reps. Spencer Bachus (R-AL) and Nancy Pelosi (D-CA)--have earned hefty stock returns thanks to inside information obtained on the job.
The report pointed out that this kind of insider trading is legal—a claim which may not even be true, according to an Indiana University law professor. Regardless, it’s making a lot of taxpayers very angry. The good news is there’s a piece of legislation already moving through the House that could stop this squeamish practice dead in its tracks: the cleverly named, Stop Trading on Congressional Knowledge (STOCK) Act (H.R. 1148).
CBS revealed why this Act couldn’t be more timely. According to the report, the day after House Rep. Bachus (R-AL), who is chairman of the House Financial Services Committee, received a closed-door briefing from the U.S. Treasury Secretary and Federal Reserve Chairman that warned of a global financial catastrophe, Bachus reportedly bought option funds that would go up in value if the market crashed—ignoring his own advice to the American people.
Bachus, as you may remember, also recently proposed draft legislation that would essentially allow the financial industry to regulate itself and raises a host of conflict of interest issues. So far, he’s denied using non-public information to inform his personal investment decisions.
House Minority Leader Nancy Pelosi has also fired back against the CBS report. She issued a statement in response to accusations that her purchase of profitable Visa shares in 2008—which occurred when legislation opposed by credit card companies began to move through the House— constituted a conflict of interest:
Congress has never done more for consumers nor has the Congress passed more critical reforms of the credit card industry than under the Speakership of Nancy Pelosi…It is very troubling that 60 Minutes would base their reporting off of an already-discredited conservative author who has made a career of out attacking Democrats.
Putting politician/journo squabbling aside for a moment—here’s a rundown of the STOCK Act, which was introduced by Rep. Louise Slaughter (D-NY) and Rep. Tim Walz (D-MN) in March. The Act would:
Prohibit purchase or sale of either securities, security-based swaps, or commodities for future delivery or swap by a person in possession of material nonpublic information regarding pending or prospective legislative action if the information was obtained: (1) knowingly from a Member or employee of Congress, (2) by reason of being a Member or employee of Congress, and (3) other federal employees.
In other words, as the Bureau of National Affairs pointed out: “The bill would level the playing field between corporate and congressional insiders.”
The CBS story may be making a lot of waves, but this isn’t a new problem. For years, researchers have shown that Members of Congress get abnormally high returns from their stocks. Incarnations of the STOCK Act have been introduced three times in the past, but no one has voted on it (POGO supported the Act in the last Congress). The time has come to stop shaking our fists at the politicians making extra bucks off of a legally grey loophole—and throw support into the solution. At present, the STOCK Act is hanging out in the House Judiciary Subcommittee on the Constitution.
Dana Liebelson is POGO's Beth Daley Impact Fellow.