Insider trading: For Congress, it’s legal

In the early days of 2008’s financial crisis, U.S. Rep. Spencer Bachus (R-Ala.) attended a secret, “apocalyptic” briefing by top federal officials, who warned that Wall Street was about to crater. The next day, Bachus invested $7,800 in an index fund that bet against the market, and soon doubled his money. Bachus, who made 40 more trades while the economy melted down, is one of many members of Congress who are now under fire for stock and financial dealings that would appear to be based on “insider information,” said Marc A. Thiessen in WashingtonPost.com. As conservative scholar Peter Schweizer details in an explosive new book, this shameless—but entirely legal—practice is widespread among both Democrats and Republicans. Former House Speaker Nancy Pelosi and her husband invested millions in a preferential Visa IPO just as the House was killing a law that would hurt the credit card industry. Rep. John Boehner bought health insurance stocks, knowing those stocks would rise in value when Republicans killed the health-care bill’s public option.

It all sounds a bit lurid, but “each of these trades does have an innocent explanation,” said Megan McArdle in TheAtlantic.com. By September 2008, it was obvious the markets were tanking, and the public option was dead long before Boehner bought insurance stocks. Pelosi and her husband are worth $40 million—exactly the kind of wealthy people who get “preferential access to IPOs.” There have also been conflicting studies about whether congressional investments outperform the market, or underperform it. For the public to know if there’s any funny business, Congress would have to be required to reveal all significant stock trades in real time. U.S. Rep. Louise Slaughter (D-N.Y.) has repeatedly proposed a law requiring just that, but “it’s never even come to a vote.”

Here’s a simpler solution, said Daniel Foster in NationalReview.com. Members of Congress should be required, like federal judges, the president, and others in the executive branch, to put their stocks and other assets in blind trusts, removing any temptation to trade on inside information. “Anyone think that’s wrong?” It may be right, but it won’t happen, said Peter J. Boyer in Newsweek. “Congress lives by its own rules.” Politicians who get rich while supposedly serving the public have no reason to change. As Schweizer put it, “The permanent political class is very comfortable. Business is good.”

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