Insider trading another reason to Occupy Congress

November 14, 2011

By Richard Beales and Reynolds Holding
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Occupy Congress has garnered far less attention than the global protest movement that started as Occupy Wall Street in lower Manhattan. But politicians helped create the financial crisis. Fresh news of U.S. lawmakers trading on inside information is further reason for mistrust.

The evidence is tough to ignore. Beyond specific examples broadcast on Sunday by TV news program “60 Minutes,” studies have found that stock portfolios modeled on those of U.S. senators and representatives beat the market each year by a whopping 12 percentage points and 6 percentage points, respectively.

It’s easy to see why that might be. Lawmakers get the scoop on bills or regulations that can send a company’s or sector’s shares soaring or plunging. But they’ve been allowed to slide under insider-trading law, partly because regulators have concluded that members of Congress don’t owe anyone a legal duty to avoid trading on what they learn in their jobs.

This cramped reading of the law may suit some watchdogs, whose wages come at the whim of lawmakers. But whatever the strict legalities, actions like selling stocks short the day after a closed-door Federal Reserve briefing on the 2008 financial collapse surely breach the public’s trust.

Meanwhile, politicians refuse to make such snappy calls with the nation’s finances. They have delayed even the smallest decisions they’re supposed to take on behalf of their constituents.

One example was the bickering over raising the cap on federal debt, which helped trigger an unprecedented credit downgrade from Standard & Poor’s. Another ongoing scandal is the failure, three years on, to even begin reforming Fannie Mae and Freddie Mac, the government mortgage finance giants that have cost taxpayers tens of billions of dollars.

Then there was the general acceptance of laxity in bank regulation in the run-up to the 2008 crunch. Protesters have been railing against the influence of money in politics, but the cash used to elect people doesn’t go straight into their pockets. Profits from insider trading once in office bridge that gap in the logic. Bankers can’t be voted out. For that reason, Occupy Congress may have a better shot of achieving change than does Occupy Wall Street.

Comments

RICO… for Gangstas and Patricians.

Posted by breezinthru | Report as abusive
 

I guess we’ll all know when to start shorting the market when Bachus gets out of the next “bank capital review committee” and phones his broker – anyone got a wiretap?!

Posted by Hinch | Report as abusive
 

Yes, another very good reason Nancy P is next!! Please don’t occupy Main Street however! Protesting your neighbors on Main Street USA is stupid! Put the pressure on the roitten apple and capitol hill where the lyin, cheatin & stealin is going on!

Posted by DrJJJJ | Report as abusive
 

How do they not figure out that we the people, are going to figure it out and they can pay now or at election time, their choice.

Why do they think that they are different than us? Oh wait a sec, they exempted themselves from Obamacare too didn’t they.

I sincerely believe that the concept of a lifetime politician never came into our founders thoughts because they figured that everyone (from then on into the future) would act honorably.

If they thought that eventually we would have a “ruling class” from life long politicians, they would have said something in the Constitution. They never figured that men without honor would be able to get a foot in the door on the hill. They also did not forsee men without honor “running” the country. Lord have mercy on our souls…

Posted by ranchoazul | Report as abusive
 

We need to remember that Congress writes the laws that pertain to themselves as well, it just needs to be said even if everyone knows that.
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There are TOO MANY unintended perks for the office of a Congressman that can keep them from considering what they were sent there to do everyday.
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This Insider trading “Racket” has to be stopped, transparency is NOT ENOUGH because that isn’t a strong enough measure to dissuade some. ALL securities owned by a Congressperson have to be placed in a blind trust, OR else simply sold that will keep things clean and may prevent the wrong people away from running for office.
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This is too much, with their insurance benefits, flight benefits, campaign funds they can keep after leaving office, special parking, Gym Privileges, Dinning Hall Pass, SLEEPING IN THEIR OFFICES, and Insider Trading?????
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It’s CRAZY!!!!!!

Posted by bootspur | Report as abusive
 

The SEC said in today’s hearing that delayed reporting of securities transactions by congress, defeats, obstructs, and impairs its use as timely evidence. This is why no Congress people were busted under the current law. If this STOCK act with long 90 day reporting times passes, it will just confirm what the people already suspect about a double standard for congressional insider trading.

Posted by Sumflow | Report as abusive
 

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