If there are any television sets in Zuccotti Park, I hope they were tuned last night to “60 Minutes.” If so, the Occupy Wall Street protesters might have learned another reason to think the political class is at the heart of the problems against which OWS rails. See the video here:
CBS’s weekly news-magazine show did well to highlight the problem of members of Congress doing what, if done by anyone else in America, might be described as illegal insider trading. Now, there are those who will argue that insider trading should be legal, usually on the premise that people make trades because of information, and that trades based on inside information will help make that information public more quickly, and expose other kinds of fraud. But I would hope they’d agree that, while it’s also in our best interests for “Washington insider” information to become public quickly, the potential for corruption among lawmakers is too great. And the solution seems fairly simple: Require lawmakers to put all or most of their assets in blind trusts while they’re in office. They would still have political incentives for their inside information to become public information.
However, there were a few significant holes in the “60 Minutes” story that would have helped us, the viewing public, understand how big a problem this is, and whether it should take priority as a financial matter over, say, unwinding Fannie Mae and Freddie Mac:
1. “60 Minutes” reports that Spencer Bachus, the Alabama Republican and chairman of the House Financial Services Committee, “made money trading General Electric stock during the [2008 financial] crisis, and a third of GE’s business is in financial services.” OK, but how much money? And, by definition, there’s twice as much GE business outside financial services as in it — was that ratio higher before the financial crisis? Should we consider GE a financial services firm for the purposes of examining Bachus?
2. Both Speaker John Boehner and his predecessor, Nancy Pelosi, are shown at press conferences being asked by CBS’s Steve Kroft about trades they made, perhaps based on inside information. (Pelosi’s trade, taking part in Visa’s IPO while legislation that would have hurt Visa was pending — and which was later withdrawn, only to be reintroduced by the Senate and passed two years later — seems more serious than insider trading.) In both cases, we’re told they bought stock — Boehner’s purchases were of unnamed health insurance companies, during the Obamacare debate about a public options — and that the prices of those shares rose. But we’re never told whether they sold the shares and actually made any money. Or, if they still hold the shares, whether the prices have fallen. (In Visa’s case, at least, the price has continued to rise.)
And, as with the Bachus case, if they made money, how much was it? And when? By contrast, we were told Pelosi’s predecessor, Dennis Hastert, made $2 million from transactions involving land adjacent to a future highway for which he secured federal earmarks.
3. Former Rep. Brian Baird, D-Wash., is held up as an example of someone who tried to fight this practice in Washington by sponsoring the “Stock Act,” which would tighten rules on trading and increase transparency. We’re told the bill had only six co-sponsors, a pitiful number (although Baird’s hypothetical of 100 co-sponsors for a “National Cherry Pie Week” bill is not very useful: Of course a noncontroversial bill would get more co-sponsors). But there’s a revealing exchange during a montage of Kroft chasing down members of Congress:
Male voice: I would have no problem with that.
Male voice: But then again I am a big fan of, you know, instant disclosure on almost everything.
Kroft: They’re looking for co-sponsors.
Male voice: And yet, I’ve never heard of it. (emphasis added)
It’s hard to say, based on Kroft’s report, whether the Stock Act is something Baird really pushed or, as the closing line by the “male voice” seems to suggest, it’s the kind of bill members of Congress introduce for the sake of saying they introduced it, but which they never seriously pursued.
4. And how about some overall numbers? Kroft interviews an academic who has been studying this issue. How many trades have there been, and over what period of time? How much money was involved in them?
All in all, it was a good report on an apparent problem — but not quite good enough for us to know just how big of a problem.
– By Kyle Wingfield