Collegiate Times

Insider trading is usually a serious offense. Those found guilty of it, like Raj Rajaratnam, can look forward to a long stay in prison. Though this behavior is criminal for regular citizens, Congress can get away with it. The common assumption behind the stock market is everyone starts out at a level playing field of information. People can do research, but only information released to the public can be used so that no one has an unfair advantage when trading stocks.

On Sunday night, 60 Minutes aired a special report about how members of Congress are allowed to effectively trade stocks with insider information. Democrats and Republicans are doing this. What is truly disturbing about this report is that it reveals Congress is not only above the law, but they often act to protect their own investments instead of their district’s interests. 

For example, in mid-September 2008, with the Dow Jones Industrial average still sitting higher than 10,000, then-Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke held closed-door briefings with congressional leaders and privately warned them a global financial meltdown could occur within a few days. Alabama Representative Spencer Bachus — then ranking Republican member on the House Financial Services Committee and now its chairman — was in attendance.

While Congressman Bachus was publicly trying to keep the economy from coming unhinged, he was privately betting that it would, buying option funds would go up in value if the market went down. He was set up to make money from the collapsing economy, while most Americans were on track to lose thousands of dollars. This is deeply disturbing in American politics.

When one of the congressmen in charge of fixing the American economy is betting against its collapse to further his own financial gain, that is a problem. It undermines the very democratic principles this country was founded on. While not illegal, it is certainly unethical and should not continue.  

During the healthcare debate in 2009, Congress members traded healthcare stocks, including House Minority Leader John Boehner. He led (and continues to lead) opposition efforts against the new healthcare law. Just days before Boehner successfully opposed the public option (the government funded health insurance that would compete with private health insurance companies) and it was finally killed off, Boehner bought health insurance stocks, all of which went up. 

Another example of this unethical behavior can be found with Former House Speaker Nancy Pelosi. She and her husband have participated in at least eight initial public offerings. 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 the potential conflict of interest, the Pelosis purchased 5,000 shares of Visa for $44 dollars each. Just two days later it was trading at $64, as the credit card legislation never made it to the floor of the House.

Perhaps even worse is that the CBS report notes there is an entire industry grown out of this practice. It is known as the political intel industry, employing former congressmen and former staffers to scour the halls of the Capitol, gathering valuable non-public information, and then selling it to hedge funds and traders on Wall Street who can trade on it. Gathering and selling information the public won’t have any knowledge of for months is bad because it gives established investors and hedge fund managers an unfair advantage over regular investors.  

Our democracy has come under attack recently. The Citizens United case granted corporations all the rights of a citizen, with none of the responsibilities. Now we have a system where elected leaders, who we trust to act on our behalf and do what is in the best interest in the country, are incentivized to protect their own individual investments.    

Help change this corruption. Support the passage of the Stock Act introduced by Congresswoman Louise Slaughter and Congressman Brian Baird. The bill requires Congress to report their earning every 90 days instead of once a year, and it would make it illegal for Congress to trade stocks on non-public information. Unfortunately, that is where this bill ran into trouble. With only six co-sponsors, it’s far from passing. It’s time our laws applied to all citizens, especially those in power.

A version of this article appeared in the Dec 1 issue of the Collegiate Times.