While you were sleeping, insider trading got a whole lot easier in Congress
About a year ago, 60 Minutes aired a story about Congressional insider trading. The story made such an uproar that a bill called “the STOCK act” (Stop Trading on Congressional Knowledge) was quickly passed by Congress and signed by President Obama.
The President made a speech praising the bi-partisan effort and said that all Americans, including Congress should be held accountable under the same laws, including insider trading. The lopsided vote showed lawmakers desperate to regain public trust in an election year, especially when the public approval rating of Congress had sunk below 15 percent.
Now that it’s 2013 and the election is over, things have reverted back to the way they were. Eric Cantor, the House Majority leader from Virginia gutted the requirement for high level Congressional leaders and staffers who earn over $120,000 to disclose stock trades based on non-public information. The STOCK Act had required high-ranking federal employees to disclose their financial information online.
The legislative process on Capitol Hill can be slow and grinding. There are filibuster threats and floor debates, but when Congress wants something that benefits them, they move at lightning speed.
This bill was presented late Thursday evening and passed with a fast track procedure called “unanimous consent.” Eric Cantor passed the bill in 31 seconds Friday afternoon (10 seconds in the Senate and 14 seconds in the House) at approximately 12:30 p.m., a time when few are paying attention. The bill passed with a typically empty chamber without debate or objection.
President Barack Obama signed the bill Monday, April 15 as the country was distracted by the events unfolding in Boston.
Insider trading is still illegal of course, but now the curtain has been brought back up in front of the public and media. Congressmen and staffers can once again line their pockets with government information without the worry of the public finding out.
Craig Holman is the government affairs lobbyist for public citizens. He explained that “The records are kept in the basement of the Cannon House office building for those who can handle traveling to Washington, D.C. If you want to look up financial disclosure forms submitted by high level Congressional staffers you have to come to this office and search one by one through the 2,091 records which is nearly impossible for news agencies and the general public. The database is meaningless and it’s too big of a job for anyone to do.”
For instance, right before the Affordable Health Care Act (ACA) passed, if you wanted to see who traded health care stocks, it would have been easy to verify with a few clicks on a computer, no trips to the basement of some erroneous building required.
An independent study stated that Congress and the President had delayed the online posting portion of the act from going into effect three times already. The ultimate repeal came after the National Academy of Public Administration, a non-profit group, found that publishing the information would create an “unwarranted risk to national security and law enforcement, as well as threaten agency missions, individual safety and privacy.” The group suggested that the online posting requirements should be suspended indefinitely and recommended changing the law.
The White House and Cantor cited that study in justifying the changes. Unfortunately, Congress through Cantor went too far using over-broad excuses to gut the bill.
Lisa Rosenberg of the Sunlight Foundation, a non-profit group advocating for government transparency, said that the repeal “sets an extraordinarily dangerous precedent suggesting that any risks stem not from information being public but from public information being online.”
Rosenberg raises an interesting point in questioning how disclosing these trades online are a threat to national security; how does this bill help anyone besides the officials making the trades? Does public information of these trades help terrorists?
Like I said, insider trading is still illegal, reporting disclosures of stock trades over $1,000 are still required to be reported within 45 days, but getting the information is again next to impossible.