For as long as legislative and regulatory acts have moved financial markets, investors and their operatives have scrummed like Komodo dragons for first bites of the fresh laws and orders dispensed by government. The stampede for the timeliest legal and regulatory information has given rise to the “political intelligence” business, which converts Capitol Hill whispers into stock market gains, and which has now attracted the full scrutiny of Congress and the regulatory apparatus.
Although legislators and regulators previously sought to hobble political-intelligence operatives, their efforts were stoked by a Capitol Hill leak about Medicare policy on April 1 that reached Height Securities — a political intelligence outfit — which in turned relayed the information to its clients in a 75-word note about 35 minutes prior to the official announcement. Clients acted on the tip, goosing skyward the price of such health insurance company stocks as Aetna, Health Net and Humana.
The Securities and Exchange Commission has issued subpoenas about the Height Securities leak, the Government Accountability Office has white-papered the political-intelligence topic, and Senator Charles Grassley (R-Iowa) — a legislator who puts the grand into grandstanding — has started his own investigation of Height Securities and aims to introduce a bill to police the political intelligencers. (Grassley’s interest must be amplified by the fact that a former staffer turned lobbyist appears to have ferried the controversial leak to Height Securities. It’s like that horror movie cliché, in which the call is coming from inside your house. Or something like that.)
The press corps has pursued the political intelligence story with zeal. The Wall Street Journal, which broke the story, is still on it, the Washington Post series has put it on page one and Bloomberg News, Reuters, Roll Call, Legal Times and others have contributed coverage, as well.
But as is the case with other Washington “scandals,” no laws appear to have been broken by the Capitol Hill leaker, the individuals who forwarded the leak, Height Securities or its clients who placed stock market bets based on the alert. This incident is miles removed from insider trading, in which material, non-public information is used for profit and which is strictly prohibited by U.S. law.