Watching Sixty Minutes last night, I was dismayed when viewing Steve Kroft’s report on how members of Congress have used insider information to make huge profits on the stock market. For the report, Kroft interviewed Peter Schweizer, a fellow at the Hoover Institution, who wrote a book about soft corruption in Washington with a team of eight student researchers. In doing the research for “Throw Them All Out” the team reviewed financial disclosure records and discovered that members of Congress were using information they gained in committees to buy and sell stock.
As an example Schweizer said, “If you are a member of Congress and you sit on the defense committee, you are free to trade defense stock as much as you want to if you’re on the Senate banking committee you can trade bank stock as much as you want and that regularly goes on– in– in all these committees.”
As we well know, anyone else who uses insider information for personal gain is subject to prosecution under SEC regulations, but the SEC apparently does not have the authority to investigate the reports of insider trading among members of Congress.
In the interview, Kroft asked Schweizer why the SEC can’t look into it, and Schweizer answered, “It’s really the way the rules have been defined. And the people who make the rules are the political class in Washington. And they’ve conveniently written them in such a way that they don’t apply to themselves.”
According to the report, the practice is perfectly legal, but it is time for the law to change. The problem is the change has to come from within Congress, since law begins there. Attempts to introduce legislation to stop this practice has hit brick walls.
Brian Baird, a former congressman from Washington state who served six terms in the house before retiring last year, spent a great deal of time trying to affect a change and establish rules governing insider trading among members of Congress. In 2004, Baird and Congresswoman Louise Slaughter introduced the Stock Act which would make it illegal for members of Congress to trade stocks on non-public information and require them to report their stock trades every 90 days instead of once a year.
The bill got very little support. Only six other members came on board to co-sponsor the bill, and when there was a congressional hearing on the Stock Act, almost no one showed up. And why is that not a huge surprise? The majority in Congress is more focused on what is good for them, or for the party, than what is good for the country at large.
I agree with Schweizer, throw them all out.