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Merry Christmas: No More Insider Trading on Capitol Hill?
The other day, a couple of kids up in Kingston, NY, called 911 looking for Santa Claus. Law enforcement arrived to tell them that what they had done was naughty, not nice, but in deference to the holiday, no pepper spray was involved.
Meanwhile, on Maryland’s Eastern Shore, a guy dressed up like Frosty the Snowman -- that jolly, happy soul -- tried to thumpety-thump-thump a cop with the head of his costume. He’s also accused of kicking a police dog -- bad, Frosty, bad!
Then, of course, there are those cheery photos from Scottsdale, Arizona, of people -- including kids -- posing with Santa at a local gun club, hoisting their choice of machine guns, pistols, semi-automatic AR-15s, and grenade launchers. It’s okay, the club says, they’re not loaded, but you better not pout or cry... punk.
Welcome to Christmas in these United States, Anno Domini 2011.
Just in case you thought those three incidents were lacking in the true spirit of the season, last week the investment company PNC Wealth Management issued their annual "True Cost of Christmas" index which reported that purchasing all the items mentioned in "The Twelve Days of Christmas" costs more than ever -- $101,119.84, to be precise, up 4.4 percent from last year. The high price of gold sent retail demand plummeting so the cost of the five golden rings actually went down, but seven-swans-a-swimming rose by 12.5 percent. Pipers piping and drummers drumming "saw modest increases, both up 3.0 percent," but the cost of eight-maids-a-milking, representing the only unskilled labor, remained unchanged -- there was no increase this year in the minimum wage.
Coincidentally, Iowa Senator Tom Harkin, Democratic chair of the Health, Education, Labor and Pensions Committee, held a press conference on Capitol Hill to announce, "There will be no Christmas for Congress unless there is an extension of unemployment insurance benefits." He and some of his colleagues declared that they’ll keep the House and Senate from adjourning for the holidays if action isn’t taken.
"I hate to inform my Republican colleagues," Harkin said, "but Wall Street did not build America. But when it comes to handing out hundreds of millions of dollars, Wall Street is up front. It’s time for middle-class America to be up front."
Fair enough. But it seems that during all that time it’s been up front, Wall Street also has done all right for our do-nothing Congress (and if you want to know just how do-nothing, a couple of weeks ago, congressional lobbyist Billy Moore told NBC News’ First Read that this Congress "has enacted just 55 public laws so far this year -- and 34 of them merely extended existing laws -- compared with the average over the last 20 years of 148 public laws for a first full session").
Such idleness comes with its rewards -- apparently, many of our members of Congress could afford all of that Twelve Days of Christmas loot without lifting a manicured finger. Last month, the Center for Responsive Politics reported that about 47 percent of Congress -- 250 current members -- are millionaires, a "lofty financial status enjoyed by only about one percent of Americans."
According to the Center, "the median estimated net worth among Senate Republicans was $2.43 million, and the median net worth among members of the Democratic caucus in the Senate was $2.69 million." In the House, "the median estimated net worth of a GOP House member was $834,250 in 2010... compared to a median net worth of $635,500 among House Democrats." (Richest was California House Republican Darrell Issa, with an estimated average net worth of $448 million. Texas Republican Rep. Michael McCaul was second with an average net worth of $380 million, Massachusetts Democratic Senator John Kerry came in third at $232 million, much of it the assets of his wife Theresa Heinz Kerry.)
What’s more, the Center reports, "members of Congress might be more financially well off than we can see" because their personal financial disclosure forms don’t include government retirement accounts or any non-income generating personal property, including residences, cars and artwork. But we do know about their Wall Street investments.
"The most popular company in which members of Congress were invested in 2010 was General Electric, a company that spent more than $39 million on federal lobbying that year and ranked as the No. 3 top spender on lobbying. Seventy-five different current members of Congress held stock in GE in 2010, according to the Center's research. Collectively, these holdings were worth at least $3.6 million."
Coming in second and third were Procter & Gamble (62 lawmakers hold at least $8.7 million worth) and Bank of America (57 members, $2.8 million). Microsoft ($3.2 million) and Cisco (($1.3 million) were tied for fourth place; stock of each was held by 56 legislators. Fifth place goes to drug giant Pfizer -- 51 members held stock worth at least $2 million.
None of this, of course, includes corporate campaign contributions to members, which by all indications will hit dismayingly record heights next year.
"It's no surprise that so many people grumble about lawmakers being out-of-touch," Sheila Krumholz, the Center for Responsive Politics’ executive director, said. "Few Americans enjoy the same financial cushion maintained by most members of Congress -- or the same access to market-altering information that could yield personal financial gains."
But one of the few pieces of good holiday season news coming out of this forsaken Congress is that they may finally be doing something about "access to market-altering information," the knowledge members pick up via their privileged status and access to congressional testimony, reports, briefings and daily contacts with lobbyists, special interests and government agencies.
Five years ago, the intrepid congresswoman from western New York State, Louise Slaughter, ranking member of the House Rules Committee, introduced legislation to prevent insider stock trading by her fellow legislators. According to The Washington Post, "Most lawmakers bristled, offended by the mere suggestion that they would ever engage in such behavior." She could find but nine sponsors, only one of whom was a Republican – Walter Jones from North Carolina. It was, as the congressional newspaper The Hillreported, "a non-issue."
And yet, as that paper noted in its December 1 edition, there has been ample evidence that "consciously or not, federal lawmakers use their positions to reap better Wall Street returns than other investors.
"A 2004 study conducted by researchers at Georgia State University, for instance, found that trades made by selected senators between 1993 and 1998 produced returns more than 12 percent higher than the rest of the market. 'These results,' the researchers concluded, 'suggest that senators knew appropriate times to both buy and sell their common stocks.'
"More recently, researchers from four universities found that 300 House lawmakers trading 16,000 times between 1985 and 2001 outperformed the market by roughly 6 percent each year -- something the researchers deemed 'significant positive abnormal returns.'"
But what a difference a visit from "60 Minutes" makes. Last month, the newsmagazine broadcast a story based on the book, Throw Them All Out, by Peter Schweizer, a fellow at the Hoover Institution, the conservative think tank at Stanford University. Their report stated, "Congressional lawmakers have no corporate responsibilities and have long been considered exempt from insider trading laws, even though they have daily access to non-public information and plenty of opportunities to trade on it."
CBS was critical of both House Speaker John Boehner and Minority Leader Nancy Pelosi (they have denied any wrongdoing), as well as others, but perhaps the most damning evidence was against House Financial Services Committee Chair Spencer Bachus, Republican from Alabama, who just before the 2008 financial meltdown attended closed door briefings with Treasury Secretary Hank Paulson and Federal Reserve Chair Ben Bernanke.
"While Congressman Bachus was publicly trying to keep the economy from cratering," "60 Minutes" reported, "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." According to the broadcast, Bachus made about 200 trades and netted around $28,000. As Peter Schweizer said, "I mean, talk about a stock tip." (Bachus has said the "60 Minutes" piece had 'a disturbing number of errors" and that Schweizer’s allegations are "a total lie.")
Overnight, in the face of public outrage -- not to mention a Congressional approval rating seeming to fall more precipitously every day -- Rep. Slaughter’s legislation, the Stop Trading on Congressional Knowledge (STOCK) Act, came off life support and began acquiring sponsors faster than Santa’s sleigh on Christmas Eve. She now has at least 133, including 37 GOP members.
Last Thursday, Senators Joe Lieberman of Connecticut and Susan Collins of Maine held the first hearings on Senate versions of the legislation. Lieberman hopes to have a bill out of committee by mid-December. House hearings are scheduled to begin this week and the House Ethics Committee has sent a memo to members on the proper use of non-public information.
And all of this isn’t the only holiday cheer spreading across the Potomac. Democratic Senator Al Franken of Minnesota announced that he and more than half of his fellow senators -- 21 Republicans and 37 Democrats -- are planning a Secret Santa gift exchange. Franken told The New York Times he thought it "would be a good way to cut through the partisan divide here in the Senate. And who knows, maybe it will create some unlikely friendships."
The price limit is ten dollars, so no golden rings or partridges in pear trees this year. But the American public will be happy to throw in lumps of coal for free.
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13 Comments so far
Show All"But the American public will be happy to throw in lumps of coal for free."
LUMPS? Don't you mean tons of coal from mountaintop removal? Tons of dirty dirty coal.
This legislation actually started with my Congressman, Tim Walz, although he picked up the baton from another retiring congressman a few years ago. No one gave a crap until the 60 minutes story. My senator Amy Klobachar is writing legislation on this for the Senate. If we're lucky we'll have some legislation with at least one baby tooth (we can't expect the world).
These revealing facts by Mr. Winsap need to be spread as broadly as possible to awaken a still too much out-to-lunch citizenry. Would that as many as possible creative Occupiers gift all terminal Congressonal sellouts with a "CREATIVE" personal visit before they escape to their districts at Recess!....or encounter them in their home districts! Would'nt that be delivering Xmas Cheer with a real purpose?
Winship!
Lieberman heads the committee? Say "Bye-bye!" to any meaningful legislation.
Lieberman is just another morally challenged suit.
My sentiments exactly. It's doomed to either obsurity or a rewrite that will make it toothless. The man should not be allowed to head any committees.
This is a no-brainer!!
It should be obvious that Congress must live by the same rules that they impose on the rest of us, and that it's a waste of time talking to the voters about "fairness" until this basic foundation of fairness becomes law.
Most of us who studied the Tea Pot Dome scandal in school thought it was already law.
133 "supporters" out of the House membership of 435, frankly, isn't much to close off such a glaring ethical -- criminal? -- practice. This amendment has, however, come around before. As soon as the pressure was off, such supporting members as there might have been crawled back under their respective rocks. We need to remember that every last one of them are up for re-election in 2012 and every two years thereafter. Frankly, starting completely fresh after the November 2012 elections would be a pretty good start. At least we'd know we hadn't missed anybody. Ditto the third of the Senate that's up for re-election. We each have the same number of votes as the 1%. Really, all we have to do is cast them in the right direction. It's really in our hands.
All of them should feel as insecure in their employment as the rest of us do. I haven't voted for an incumbent in years. With rare exception. If I lived in Vermont I'd reelect Bernie Sanders. I plan on writing him in for President.
To be outraged by this means that you actually respect the institution enough to think it could be better. I am not outraged because I don't have enough regard for Congress to think it could be different. If I were to become a member of Congress I would find that I would have to be as corrupt and self serving as the members who are there now to be able to survive in the institution as it is. This is a systemic problem. We need a new system of governance to solve it. We need a combination of things to change it. In my opinion we need:
1. A parliamentary system of governance with multiple parties
2. A proportional representation system of electing those legislators
3. A public system of financing the elections
4. A national standard to assure fair and honest elections
I'll never see even one of those reforms in my lifetime. All I have is contempt for the whole fetid mess that we call our democracy.
"Though his office claims he never traded on nonpublic information, the “60 Minutes” report said that during the 2008 financial crisis, Mr. Bachus purchased and sold stock options immediately following a meeting with Federal Reserve Chairman Ben Bernanke regarding a collapse of the global financial system."
http://www.thestatecolumn.com/articles/congress-looks-at-imposing-strict-insider-trading-laws/
Surprise, surprise while we lost our jobs, savings and homes Mr. Bachus made a bundle. You can bet Mr. Lieberman and friends did as well. I never planned on buying "five golden rings" or "three maids a milking", all I ever wanted was a heated home in the winter.