The STOCK Act to ban insider trading by members of Congress has sailed through the Senate, 96-3, and many members of the U.S. Senate were no doubt kicking and screaming as they voted for it. Heck, some of the most prominent cosponsors were people that I identified in my book, Throw Them All Out: How Politicians and Their Friends Get Rich Off Insider Stock Tips, Land Deals, and Cronyism That Would Send the Rest of Us to Prison, as having stock-trading activities that correlated nicely with their legislative work.
But let’s not let any of that sour the moment. The U.S. Senate has finally passed an important piece of legislation that reminds us all that members of Congress should abide by the same rules the rest of us do, including those involving insider trading.
I’ve made a lot of enemies in Washington over the past three months. I’ve been called names (by members of both political parties) and threatened with litigation. (My response was “go right ahead.”) But let’s take a moment to talk positively about some of those who made a difference in making this happen. After all, the American West was won by wagon train, and it took a team of dedicated and courageous people to bring us to this point.
The media: There were three news outlets that were determined to get to the bottom of this story regardless of who they ticked off: one on TV, another in print, and a third online. 60 Minutes producers Ira Rosen and Gabrielle Schonder, as well as correspondent Steve Kroft, got a lot of heat when they were working on this story. But despite distorted attacks by very powerful people in Washington, who took an “attack the messenger approach,” they didn’t blink. Bravo. Newsweek’s Peter Boyer (The Daily Beast is the online home of Newsweek magazine) was equally committed to getting to the truth and fought for this story to get out and took a lot of ground fire for it. If these individuals don’t win journalism awards for their work, there is no justice. Online, Andrew Breitbart (with whom I work), was all over this story from the beginning and was willing to go wherever it led, which meant going after both Democrats and Republicans, conservatives and liberals. He was essentially alone on this story. The actions of all of these individuals stand in stark contrast to many members of the Washington media who simply ignored the story or actually attacked it in an effort to curry favor with the Washington establishment. Unfortunately, there are a lot of lapdogs and too few watchdogs.
The politicians: The STOCK Act was introduced several years ago, but could never garner more than nine co-sponsors. Congressmen Louise Slaughter (D-NY), Walter Jones (R-NC), Tim Walz (D-MN) , and Brian Baird (a Democrat who represented Washington state, but who has since left) were doing the early lifting on this bill. They were against congressional insider trading before it was cool. They should be applauded. Once the battle was on, Sen. Scott Brown (R-MA) introduced a similar bill and became one of the most fierce in making sure the issue would not go away. Another warrior is Rep. Sean Duffy, a freshman from Wisconsin who recognizes that the STOCK Act is not nearly strong enough by itself and has proposed the RESTRICT Act, which must be passed next.
The American public: In all the people I spoke to about this problem, not one thought that members of Congress should be allowed to do this. And there were plenty of people who went further than simply being angry: they took action. In Birmingham, Ala., more than 100 Tea Party protesters showed up at Rep. Spencer Bachus’s office to protest his stock-options trading. Within two hours of doing so, Bachus declared his desire to hold hearings on the matter. He is now facing a serious primary challenger.
The passage of the STOCK Act in the Senate is just the first battlefield victory in this war for reform. The STOCK Act makes congressional insider-trading illegal. But let’s be clear: it alone doesn’t go nearly far enough to deal with the problems of cronyism and corruption that we face. It deals only with publicly traded stock, not equity buys in private companies. It does nothing to close the sweetheart deals involving IPO shares that can make politicians more money in one day than a bribe ever could. And insider-trading cases are very hard to win. On top of that, the Securities and Exchange Commission and Justice Department are unlikely to go after a powerful politician. Just look at what happened to the FBI when they were investigating Rep. William Jefferson, who famously took bribes and put the money in his freezer. There were threats to cut the FBI budget!
In all the people I spoke to about this problem, not one thought that members of Congress should be allowed to do this.
We need to also pass Duffy’s RESTRICT Act, which gives politicians a choice: put your assets in a blind trust or disclose within three business days any financial transactions. Transparency is the key here. That is how we hold them accountable.
And let’s not limit our efforts to Congress. What about the executive branch and the White House? More than 10 members of President Obama’s 2008 National Campaign Finance Committee and at least a dozen bundlers own companies that have received stimulus green-energy loans and grants, involving billions in taxpayers’ money. I’m glad President Obama mentioned congressional insider trading during his State of the Union address. But he had nothing to say about the corruption in his own house.