When Congress cashes in on the market

Dr. James Joyner points us to a piece in the wapo this weekend which should probably have some blood boiling and heads exploding yet again on a now familiar story. Members of Congress – or at least some of them – are doing quite well for themselves playing the stock market. And sometimes the trades they are making involve companies they have direct effects on through legislation they must vote on.

One-hundred-thirty members of Congress or their families have traded stocks collectively worth hundreds of millions of dollars in companies lobbying on bills that came before their committees, a practice that is permitted under current ethics rules, a Washington Post analysis has found.

The lawmakers bought and sold a total of between $85 million and $218 million in 323 companies registered to lobby on legislation that appeared before them, according to an examination of all 45,000 individual congressional stock transactions contained in computerized financial disclosure data from 2007 to 2010.

Interestingly, the article points out right up front that the party breakdown of those involved in these types of trades comes in at 68 Democrats to 62 Republicans. Yet the Post lists only three names on page one… all Republicans. You have to drill down to page three of this five page opus (behind the registration wall) before you stumble across the names of any Democrats.

So is this really something bad, or does it just look bad? Joyner chimes in.

Foreign Policy managing editor Blake Hounshell, who pointed me to the story, declares, “Congress is disgusting. Americans should be outraged at this kind of stuff.” While I’m not sure I’d go that far, this is certainly a situation where an obvious conflict of interest exists and yet another case where Congress applies one set of rules to itself and another to the rest of us.

To be sure, an individual member of Congress has less influence over policy than, say, a cabinet secretary. There are, after all, 435 Representatives and 100 Senators and we have a cumbersome legislative process requiring bills to pass through both Houses in identical form and get signed by the president before becoming law. Still, committee chairmen and other Members have enormous influence. Even, even if we were to presume that all of them are of the highest integrity and would never vote against the interests of their constituents for personal profit–work with me here–it’s not right that they should be able to buy and sell stocks on inside knowledge, behavior that is criminal when done by anyone else.

Perhaps I’m a bit more jaded than Dr. Joyner, but it seems like he’s giving a slightly larger benefit of the doubt to members of Congress than is warranted. While it’s true that each individual member only gets one vote on a bill which may affect a company’s fortunes – and stock prices – the Whips know their jobs well. Both sides tend to know well in advance whether a particular piece of legislation will ever see the President’s desk and likely have sufficient time to act on that information. Further, as the original article notes, a single member can place a hold on a bill which a company may be keen to see passed and determine the timing of when it moves forward.

Sen. Tom Coburn (R-Okla.) reported buying $25,000 in bonds in a genetic-technology company around the time that he released a hold on legislation the firm supported.

Everyone contacted for the article from both parties told the same story: the timing was all a coincidence. They pass a lot of bills, so overlap is bound to occur. Or the always popular, “my wife/husband makes those trades. I don’t really pay attention to it.” Somehow that doesn’t sound like a very convincing argument, and if they faced the same legal problems the rest of us would for doing it, I doubt it would generate much sympathy from the judge.

Yes, the Stock Act was passed, but as the author notes, it only forbids “trading on inside information” acquired on the Hill. It doesn’t say a word about trades in companies which may be affected by legislation as outlined above. So let’s put it up for discussion here: is it time for all members of Congress to either get out of the market or put their money into a blind trust like presidents must while they are in office? Or, failing that, do we really expect them to pass a law which could wind up with a significant number of them being arrested? Color me skeptical.