Congressional leaders are suddenly buzzing over new legislation regarding insider trading restrictions for lawmakers. Reforms were proposed in both federal chambers this week in the wake of a CBS 60 Minutes investigation.
60 Minutes: “The buying and selling of stock by corporate insiders who have access to non-public information that could affect the stock price can be a criminal offense, just ask hedge fund manager Raj Rajaratnam who recently got 11 years in prison for doing it. But, congressional lawmakers have no corporate responsibilities and have long been considered exempt from insider trading laws, even though they have daily access to non-public information and plenty of opportunities to trade on it.”
Senator Scott Brown, a Massachusetts Republican, has called for an in-depth examination of insider trading allegations amongst congressional leaders and has scheduled a hearing before the Senate Committee on Homeland Security and Governmental Affairs.
In the House, separate legislation banning lawmakers from enacting stock trades with non-public information is gathering fresh attention. Despite public assumptions that congressional leaders are held to the same insider trading rules as corporate employees, the CBS investigation pinpointed peculiar coincidences among leaders on both sides of the political aisle. For example, former Speaker of the House Nancy Pelosi and her husband invested in the financial services company, Visa, shortly before proposed reforms of credit card regulations collapsed in the House.
Kroft: You participated in the IPO. And at the time you were speaker of the House. You don't think it was a conflict of interest or had the appearance--
Pelosi: No, it was not--
Kroft: --of a conflict of interest?
Pelosi: --it doesn't-- it only has appearance if you decide that you're going to have-- elaborate on a false premise. But it-- it-- it's not true and that's that.
Current House Speaker John Boehner, an Ohio Republican, also faced scrutiny for acquiring health care stocks shortly before the so-called government public option for health insurance was taken off the table.
Kroft: You made a number of trades going back to the health care debate. You bought some insurance stock. Did you make those trades based on non-public information?
John Boehner: I have not made any decisions on day-to-day trading activities in my account. And haven't for years. I don't-- I do not do it, haven't done it and wouldn't do it.
Despite lawmaker insistence that they either do not control trading accounts or have simply not acted improperly, there is growing interest inWashingtonand across the country to tighten congressional trading laws. The public push has even caught on in the Republican Presidential primary campaign as Texas Gov. Rick Perry declared jail time for lawmakers that violate potential new rules.
PERRY WEB VIDEO: “Congress certainly can’t be trusted to watch our money. And now its clear they can’t be trusted with theirs.”
While reforms currently seem aimed at equities trading, it remains to be seen what impact, if any, will be felt in other markets like commodities and derivatives.
Legislative committees could begin hearings on the issue after the Thanksgiving holiday but any bill faces an uncertain future amidst daunting budgetary decisions from the congressional super committee in the weeks ahead.