Do Congressmen Cheat When It Comes To Stock Transactions? Oh, Yes
Jim Himes (D-CT) hasn't exactly been Mr. Populist, let alone an enemy of Wall Street, since being elected. But even he admitted that "Sometimes, Representatives and Senators are privy to information about a bill or contract that the general public does not know. The thought that public servants could use that information to buy or sell stocks is repulsive; it's like a dagger in the heart of our democratic ideals." Indeedy-do. "This is clearly unethical behavior, and it should be illegal," he continued and, man, is he right!
As you probably know by now, This week banking industry whore Richard Burr (R-NC- $3,879,228) tried filibustering a bill to stop this abuse. Burr failed; in fact, he found only one reactionary retrobate, Tom Coburn (R-OK), to join him. And then Thursday the Senate passed the bill by a whopping 96-3, General Burr, again rushing to defend the honor of those who are in bed with the Wall Street banksters. Right after it passed, President Obama reminded everyone that he's been waiting.
In my State of the Union Address, I laid out a blueprint for an economy built to last, where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules-- especially those of us who have been sent here to serve the American people.
Last week, I called on Congress to pass a bill that makes clear that Members of Congress may not engage in insider trading. No one should be able to trade stocks based on nonpublic information gleaned on Capitol Hill. So I’m pleased the Senate took bipartisan action to pass the STOCK Act. I urge the House of Representatives to pass this bill, and I will sign it right away.
And while this is an important step to rebuild the trust between Washington and the American people, there is much more work to be done, like prohibiting elected officials from owning stocks in industries they impact, and prohibiting people who bundle campaign contributions for Congress from lobbying Congress, an idea that has bipartisan support outside of Washington. These are straightforward proposals that will help eliminate the corrosive influence of money in politics.
Yes, and "prohibiting elected officials from owning stocks in industries they impact" will pass when the Republicans and Blue Dog Democrats are cut down to a point where their yipping and yapping is just a minor inconvenience and of no real consequence. The STOCK Act has a better chance to pass the House now that the Senate has acted. But will it? Powerful Members, like GOP Majority Leader and diminutive House Financial Services Committee attack dog Patrick McHenry, have been blocking it. Jim Himes is one of dozens of Members urging them to allow a vote.
If the STOCK Act becomes law, it would end insider trading in the halls of Congress. It would also require me and every other Representative and Senator to publicly disclose details about each transaction within 30 days. I have always believed in full disclosure and transparency, and I am eager to make sure that the law says Congress must play by the same rules as the American people. I welcome the STOCK Act and have co-sponsored it in the House.
...[I]n typical stonewalling fashion, the Republican leadership in the House of Representatives has blocked its progress. In December, Majority Leader Eric Cantor (R, VA) “indefinitely postponed” committee work on the bill, dooming it to languish in legal limbo... He knows there is bipartisan support for the STOCK Act. He knows the President will sign it.
... Frankly, I find it embarrassing that there's a question this bill should become law. And this week, we fought back on the House floor. Yesterday, as the Senate was passing the bill, I signed what's called a "discharge petition." If enough members of Congress sign it, we can force a vote on this important measure in the House.
Fun fact: Under House rules, lawmakers can pursue a discharge petition for legislation that has been pending before a committee for 30 legislative days. If a majority of the House sign the petition, the bill can immediately advance to the House floor for consideration. The STOCK Act falls into this category... A majority of House lawmakers, including 92 Republicans, have signed on as co-sponsors of the STOCK Act.
Senator Sherrod Brown (D-OH) introduced the amendment to prohibit Senators and staff from owning stocks (or short selling) in companies that they oversee. It failed Thursday, 73-26, most of the most personally corrupt Members of the Senate-- from John McCain, Joe Lieberman, Roy Blunt, Ben Nelson and John Cornyn to Jim DeMint, Chuck Schumer, Miss McConell, Marco Rubio and, of course, Dick Burr-- voting NO. Senators would have had to divest themselves of all individual stocks, or put their assets in blind trusts. Brown made it clear that it is important that Members are not voting out of their own economic self-interest. “The STOCK Act really only deals with insider trading-- that’s a small number of people,” Brown says. “I want to see us go further. Why should members of the Senate vote on issues that affect the oil industry while owning oil industry stock? This is pure, it’s simple, it’s clean, it’s direct.”
The Motley Fool tackled the problem this week as well. Their point is that Members of Congress of far richer than the mere mortals who elect them to represent their interests-- about half are millionaires and the median net worth of a senator is $2.6 million-- and that "many voters are wondering whether some of that wealth was built by trading stocks based on insider information that Congress members received because of their position in Washington."
A perfect example of what we're concerned about was on full display during the financial meltdown at the end of 2008. In September of that year, the crisis hit a fever pitch and Washington was front and center, pulling levers left and right in the financial sector to head off a full-blown collapse.
Here's a reminder of just a few of the major government actions during the month:
• On Sept. 7, Fannie Mae and Freddie Mac were put into conservatorship.
• On Sept. 16, the Federal Reserve swooped in with an $85 billion bailout of AIG.
• On Sept. 19, the SEC imposed an emergency ban on short-selling.
• Also on Sept. 19, the Treasury announced that it would insure money market funds.
• From Sept. 21 through the eventual signing on Oct. 3, Congress debated and eventually passed the $700 billion Troubled Asset Relief Program that funneled tens of billions to financial companies like Citigroup, Bank of America, JPMorgan Chase, and Wells Fargo.
• On Sept. 21, the Federal Reserve allowed Goldman Sachs and Morgan Stanley to convert to bank holding companies.
And I could go on.
The bottom line is that during this period, there was a significant amount of nonpublic information that lawmakers in general could have been privy to. In particular, members of the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services would have had more access than most to information that was poised to significantly impact the share prices of certain financial companies.
During a period of intense and extensive legislation like this, one might think-- or at least hope-- that Congress members would be extra prudent, avoiding any appearance whatsoever that they were trading based on material information that they may have had access to. The data show just the opposite.
From Sept. 1, 2008, through Oct. 3, 2008 (the signing of TARP), Congress members traded $6.7 million worth of financial-company shares. That compares to $1.7 million of financial-company shares traded during the same period of the prior year. That tally came as those lawmakers made a total of 318 trades in such companies, a big leap from the 115 trades that were made in the same period of 2007. And that only includes trades for which there was a specific date entered in the disclosures-- and there were plenty that didn't include specific dates.
And what of the most-informed House and Senate committees? Laudably, it appears that members of the Senate Banking Committee showed prudence and had little, if any, financial-stock trading activity during this period. On the other hand, members of the House Financial Services Committee made a total of at least 28 trades worth nearly $650,000 in total.
In 2008, Rep. Spencer Bachus, R-Ala., was the ranking minority member of the House Financial Services Committee. That would have put him right in the middle of many of the crucial discussions that had the potential to seriously swing stocks in the financial industry.
Looking back at Bachus' personal accounts during 2008 reveals that while the most serious chapter of the financial meltdown was unfolding, he was pocketing thousands by trading General Electric options. Many investors will remember that GE was right in the middle of the financial-meltdown scrum thanks to its giant finance arm.
Between Sept. 10, 2008, and Sept. 19, 2008, Bachus traded $25,217 worth of GE options through 13 transactions. Those trades earned him $5,240. Not a bad take in just over a week.
Bachus did not return our requests for comment.
Also on Thursday, I got a letter, not unrelated-- at least if you have Capitol Hill corruption in your mind (as you should)-- from Blue America candidate John Waltz, who's running against one of Washington's most egregious culprits, one-percenter Fred Upton.
Much like Punxsutawney Phil, Fred Upton has promised us all a much longer winter today with his appointment of Washington DC super lobbyist Michael Bloomquist as General Counsel for the House Committee on Energy and Commerce.
Who is Michael Bloomquist? Recently, he was the chief lobbyist for the American Natural Gas Association (ANGA). ANGA is an organization formed by Aubrey McClendon, T Boone Pickens, and other industry powerhouses who are pushing the House Committee on Energy and Commerce, Fred's committee, to provide them with billions of dollars in subsidies and deregulation by passing the Natural Gas Act.
As I have told you in the past, Fred owns millions of dollars of stock in the natural gas industry and he just can't stop using his position as Chair of Energy and Commerce to make himself and his friends richer. Fred's number one objective is to pass the Natural Gas Act which will put our nation's transportation fleet on natural gas.
I believe that we need to continue to use our fossil fuels in combination with renewables like wind and solar. This will protect our environment and help break our dependence on foreign oil. Fred's plan relies on dangerous hydraulic fracking to mine unproven reserves, and it will create a monopoly for him and his buddies-- it will also likely create another financial bubble once the reserves are proven worthless and the environmental dangers are fully acknowledged.
Waltz has already vowed to Michigan voters to "never accept a dime from the special interests and [to] never hire a lobbyist to work for me in Congress." And while lobbyists are filling Upton's campaign warchests, believe it or not, not one single lobbyist has given a cent to John Waltz. Want to help Blue America try to make up for that so he can run an effective campaign? Here's the place where we beat self-entitled social parasites and cockroaches like Fred Upton.