Thanks to our good friends at MegaVote, we got notification of impending bills coming to the House and Senate. Most of these are unrecognizable or inexplicable, so we can't normally post on them until after they are voted on. The good news here is we're pretty familiar with the topic, so for once, we can tell you about something BEFORE it happens...
This week, the Senate will take up bill S.2038, aka the Stop Trading On Congressional Knowledge Bill, or STOCK... Yes, Congress does love it's anagrams.. Guess Senate/House Insider Trading Bill (SHIT) wasn't considered..... What? Ohhh.... While it sounds like Congress doing something to fix itself would be a good idea, we have little hope.
For those of you unfamiliar with the issue, we'll briefly go over it. A few months ago, 60 Minutes did a piece on Congressional Insider Trading. Insider Trading is basically using private information to profit personally. Stock Brokers aren't supposed to use it, but of course they do. The part that people didn't know is that members of the House and Senate have been doing the same thing for decades. Don't act surprised...
As Gordon Gekko said, if you are not on the inside, you are on the outside. Well, there is no place more inside than being in Congress... Think about it, with all the regulation going on in DC, knowing what is going to happen is priceless. Let's say a certain airline had a crash, and a NTSB ruling were ready to come down. Or the EPA were soon deciding on Fracking for Natural Gas in an area that would benefit a particular company, how much money would that be worth? A lot...
Being in Congress is essentially being ahead of the curve on every aspect of the economy, and certain members of Congress have made assloads of money by buying or selling stock based on that advanced knowledge. It's an unfair advantage, and even Congress recognizes that. The question is, will they actually do anything about it? We don't know...
We have our doubts. The basic problem is there is no one to make rules for Congress but Congress themselves... So, the fox is definitely watching the henhouse on this one. They are very likely to pass some watered down, milquetoast bill that does little, but allows Congress to say it did something. Isn't that all that matters? Still, when Congress makes it's own rules, they very often stick little riders that allow themselves other rights more destructive than the reforms they put under themselves. In short, they very well could make things worse under the duress of 'doing something'... It happens. A lot...
Will it go to the House, then to President Obama to sign? We'll see.. It may not even last the week. The Gordon Gekko's of the world are interested to see how it goes. Until then, if you want a good stock tip, we have some advice: ask your Congressman.
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1 comment:
Mike--I cannot argue with your skepticism, but I think this is one of those times when Congress may go and make more stringent rules concerning this. The best examples can be found during the early 90's in the Congressional banking, Post Office, and Publishing scandals.
A little history lesson; in early 1992a story broke about members of Congress and their overdrawn checking accounts. A Congressional investigation would reveal that 450+ members of the House and Senate had at some point overdrawn their Congressional Bank accounts, 22 were negative for 8 months or more. The result was that in the '94 election 77members either retired/resigned or were defeated. There are other examples such as the Congressional Post Office scandal (91-95)that eventually brought down Ways and Means Chairman Dan Rostenkowski and the Speaker Jim Wright book publishing scandal that led to Wright's tearful resignation.
I think that as the issue of insider trading begins to unfold we should watch to see what members of Congress are caught up in it. First indications reveal names like former Speaker Nancy Pelosi and our own Jim Clyburn have benefited from insider information (and yes I am drooling at the thought of going after Jimbo if these charges are substantiated).
Now I will not argue that Congress has a less than stellar record for self investigation and regulation, but given the current temperament of the average American voter and this being an election year I think that we may see more aggressive legislation to curb these practices. The bigger story though lies in what will come out of the investigations, the allegations and possible prosecutions and what members of Congress are ensnared in the unfolding web....teg
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