Government
Congress Insider Trading: Rep. Spencer Bachus, You're Up
As Washington works on finalizing a Congress insider trading ban, Rep. Spencer Bachus, R-AL, could be the first member to be penalized for profiting from power.
The Office of Congressional Ethics is investigating Bachus, the chairman of the House Financial Services Committee, for possibly violating insider trading laws, The Washington Post reported Thursday.
Activity disclosed on Bachus' annual financial disclosure forms triggered the investigation, which started late last year.
This is the first insider trading case involving a member of Congress. It was announced days after the House approved the Stop Trading on Congressional Knowledge (STOCK) Act, which basically says that members of Congress must obey insider trading laws.
The House voted 417-2 to approve the bill; the Senate approved it last week in a 96-3 vote. It took more than two months to get the bill through both houses. The House amended the Senate bill, meaning the process still has to go through another step: a conference to produce a common version.
Bachus issued a statement Thursday.
"The Office of Congressional Ethics has requested information and I welcome this opportunity to present the facts and set the record straight," Bachus said in a statement released by his spokesman, Tim Johnson.
This Defense Company has 24% Upside – Even with the Pentagon's Spending Cuts
When George W. Bush was first sworn into office on January 20, 2001, shares of defense contractor Lockheed Martin Corp. (NYSE: LMT) traded for $31.
By the end of his first term, they had doubled to about $60. And by mid-2008, prior to the October crash, Lockheed Martin had climbed to nearly $120 a share.
Those were the boom years – not just for Lockheed, but for most defense contractors.
Northrop Grumman Corp. (NYSE: NOC) shares doubled in the period stretching from December 2000 to January 2008, and General Dynamics Corp. (NYSE: GD) surged more than 133%.
But times have changed.
The last U.S. troops left Iraq in December and forces are expected to end combat operations in Afghanistan next year.
Meanwhile, the Pentagon is looking to cut spending by a half trillion dollars over the next 10 years. And war spending, which is funded separately by Congress, will likely fall from $115 billion this year to $88 billion in 2013.
Indeed, it's a new, leaner military that's taking shape amid talks of belt-tightening and austerity.
"Capability is more important than size," is the way General Martin Dempsey, the chairman of the Joint Chiefs of Staff, put it.
That means a change of tactics is in order for defense companies.
Some will rely on share buybacks and dividend increases, but that still might not be enough to fortify their stock prices. True success will only be accomplished by adapting to the new military's changing needs.
And right now there's only one company that fits the bill. We're talking about…
Insider Trading Ban: Congress Really Wants You to Like Them
In an attempt to end plunging approval ratings – and win favor in an election year – the Senate passed an insider trading ban yesterday (Thursday) preventing Congress members from profiting from non-public information.
The Senate passed the bill in a 96-3 vote. U.S. Rep. Eric Cantor, R-VA, said the House would consider the bill next week. U.S. President Barack Obama pledged to sign it immediately.
Congress members hope the new law will change growing American disgust with Congressional perks and partisanship, which has hammered approval ratings down to the teens.
"The numbers of people who have a favorable impression of this body are so low that we're down to close relatives and paid staff. And I'm not so sure about the paid staff," Sen. Joe Lieberman, I-CT, said earlier this week.
Insider Trading Ban Run Down
The insider trading ban prevents members of Congress, top aides, and administrative officials from using non-public information when trading. Any stock bought or sold must be disclosed in a public report online within 30 days.
Several last-minute amendments added to the insider trading ban include:
Monday's STOCK Act Vote Could End a Major Congressional Perk
Members of Congress could be one step closer this week to losing one of their most profitable perks, thanks to the STOCK Act (Stop Trading on Congressional Knowledge Act).
The Senate will hold a procedural vote today (Monday) on a bill that prohibits Congress members from using nonpublic information to make stock transactions – known as "insider trading" when conducted by corporate insiders. Today's vote could put a time limit on passing the bill, which the Senate will continue debating this week.
Congress has faced increasing backlash lately for its growing list of financial advantages over the Americans it represents. A CBS News' "60 Minutes" program in November 2011 exposed Congress insider trading – elected representatives trading stocks related to hot topics being debated in Congress before information had been disclosed to the public.
How Presidential Candidate Ron Paul's Campaign Could End the Fed
Led by presidential candidate Ron Paul's "end the Fed" mantra, Republicans have made their attacks on the U.S. Federal Reserve into an election year rallying cry.
It's one that could turn ugly in November if the GOP manages to score big.
Where Paul has been the lone voice in the wilderness criticizing the central bank for years, others in the GOP recently adopted the Fed as a scapegoat for the financial crisis of 2008.
Many of the Republican attacks include calls to fire Fed Chairman Ben S. Bernanke and to scale back the Fed's mandate – or in Paul's case, eradicate it altogether.
And while Paul – who actually wrote a book called "End the Fed" in 2008 – has little chance of becoming the nominee, his campaign does have a larger philosophical objective.
"It is Paul's goal to permanently establish within the Republican Party a group that is dead set on not having the Fed," Douglas Holtz-Eakin, chief economic adviser to Sen. John McCain, R-AZ, during his 2008 run for the presidency,told MarketWatch. "This is not going away."
Ron Paul Scores Big With Younger Voters
Although Paul's overall support generally hovers in the low double digits, his message is very popular among younger Republican voters.
Paul won 48% of the under-30 vote in Iowa, 47% of the under-30 vote in New Hampshire and 31% in South Carolina. It's a demographic every candidate covets.
Paul's resonance with young voters, combined with the public's dim view of the Fed has set off an all-out GOP assault on the central bank.
For added juice, Republicans in general have sought to tie their criticisms of the Fed to U.S. President Barack Obama and the Democrats.
"If you are a [Republican] running for Congress – those freshmen in the House – they thought that Bernanke was walking around talking about buying assets for Obama to make it easier for him to spend," Holtz-Eakin told MarketWatch. "It lit the fuse."
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Restoring the Dream: State of the Union Pitches an Economy "Built to Last"
In a speech before the nation last night, President Obama's State of the Union Address spoke of a new American economy that is "built to last."
Of course, in the wake of the dot com bubble, the subprime mortgage fiasco and the funny money of the last decade, that's certainly an objective all of us can heartily agree with.
The American Dream is in need of repair.
The good news is that with one exception the President's State of the Union Address did outlined some useful steps that could be taken to help boost the economic recovery.
Naturally though, I think the details could use a little tweaking!
The Worthy Goals in the State of the Union Address
To start off with, the President outlined his primary strategy to help bring manufacturing jobs back to the United States. That's an entirely worthy objective.
What's more, this goal actually has a decent chance of being met— at least partially.
Here's why…
Chinese manufacturing costs have been rising rapidly over last few years, since its workforce is now demanding a larger share of the profits in the country's new found prosperity.
Also the President was correct when he claimed that there are several intrinsic advantages to manufacturing here in the states. As a result, the cost equation has been swinging pretty rapidly in favor of bringing manufacturing jobs back home.
His example of the Master Lock plant in Milwaukee running at full capacity for the first time in fifteen years is just part of a greater trend.
The President's proposal to lower corporate tax rates, while eliminating the loopholes that allow companies like General Electric to pay almost no U.S. taxes, will also undoubtedly help to bring even more manufacturing jobs back home.
Not only is this sensible, the President's proposal is politically clever as well.
After all, it's always pretty smart to call for something already starting to happen. That way your success is almost guaranteed!
Unfortunately, some of the President's other ideas were less satisfying…
The Verdict Is In: End Congressional Perks
Three-day workweeks. A full pension. Retirement benefits. Gym memberships. Car service. Free flights to anywhere in the world and travel allowances worth thousands of dollars…
With so many Americans struggling to just find a job, isn't time we put an end to Congressional perks like these?
That's the question we put to you just a few short weeks ago. And we're happy to say the response has been overwhelming.
We've been inundated with comments and responses. Here's just a small sampling:
How Super PACs Are Choosing Your Next President
It's no secret that the rich use their money to influence the ballot, but in this year's election cycle they have a created a new, more insidious way to do it.
They are called super PACs and they are choosing your next President.
Super PACs (political action committees) have drawn attention in recent months because of their outsized influence on the Iowa caucuses and the New Hampshire primary.
Case in point: One super PAC that supports former Massachusetts governor Mitt Romney called Restore Our Future spent more than $3 million in Iowa attacking former Speaker of the House Newt Gingrich with great effect.
The month-long blitz of negative ads played a major role in knocking Gingrich from first to fourth in the polls. As late as Nov. 30, Gingrich lead in Iowa with 31% to Romney's 17% according to a New York Times/CBS poll.
However, when the caucuses were held on Jan. 3, Gingrich limped to the finish line with just 13% of the vote while Romney took 25%.
But the Romney campaign is not the only one benefiting from super PACs. Every major presidential candidate has a super PAC working on their behalf
These organizations can raise and spend unlimited amounts of money, with the only restriction being that the super PAC cannot "coordinate" with the candidate.
In a super PAC, individual donations of $500,000 to a $1 million or more are not uncommon.
"The sky's the limit,"Columbia Law Schoolcampaign-finance expert Richard Briffault told USA Today. "We are back to the pre-Watergate era of unlimited amounts of money."
Although the law does require disclosure of the donors and how much they give, the use of tax-exempt entities has created loopholes that donors can hide behind.
After a brief period when the Internet made it possible for less well-heeled candidates to mount successful grassroots fundraising campaigns by tapping large numbers of small donors, the super PACs have dramatically increased the ability of the wealthy to sway elections.
"It's just proven to be a vehicle for getting around contribution limits," Michael Malbin, a scholar at the Campaign Finance Institute, told The Washington Post. "It's made for people who've already maxed out."
Created by a 2010 Supreme Court decision, Citizens United vs. Federal Election Commission, super PACs provide what may be the most devious way yet around 40-year-old campaign finance laws designed to prevent unlimited fundraising.
In fact, the country is worse off because of the ill-conceived precaution that the candidates cannot coordinate with the super PACs.
Instead of preventing bad behavior, the new rule actually enables it.
Can "Santorumnomics" Clinch Another Second Place Finish in the
New Hampshire Primary?
The battle for second place is heating up ahead of the New Hampshire primary tomorrow (Tuesday), testing whether Rick Santorum and his "Santorumnomics" ideas supporting tax cuts and credits can win over voters.
The former Pennsylvania senator snagged second place in the Iowa caucuses with 24.5% of the vote. Mitt Romney is expected to again capture first after winning Iowa by a narrow 0.1% margin.
Another second-place finish for Santorum in the New Hampshire primary is far from a sure thing, with various polls showing fellow presidential hopefuls Ron Paul, Newt Gingrich and Jon Huntsman Jr. gaining support for the runner-up spot.
Santorum's better-than-expected performance in Iowa's election kickoff last week has led many voters to become more familiar with his economic policy – "Santorumnomics," as Bloomberg's editors referred to it – ahead of the New Hampshire primary. Instead of heading straight to South Carolina, where there are more of Santorum's target demographic of social and religious conservatives, since Iowa Santorum has been campaigning hard in New Hampshire.
Tomorrow will determine if those efforts worked, or if Santorum's Iowa finish was just a lucky start.
Wealthy Congressmen Don't Feel Your Pain
When you're as wealthy and comfortable as members of Congress are, it's tough to identify with people who are barely making ends meet.
The median net worth of Congress soared 15% from 2004 to 2010, with the average Congressman worth $913,000. Meanwhile, the median net worth of all Americans fell 8% over the same period to $100,000.
Nearly half of the members are millionaires.
Even America's richest 10% haven't fared as well as the typical member of Congress – their net worth in that time span has remained about even.
"There's always a concern that they can't truly understand or relate to the hardships that their constituents feel – that rich people just don't get it," Sheila Krumholz, executive director of the Center for Responsive Politics, told The New York Times.
In fact, the trend of Congress members growing disproportionately wealthy stretches more than two decades.
According to a Washington Post study of Congressional financial disclosures, the median net worth of a member of the House – excluding home equity – more than doubled between 1984 and 2009, from $280,000 to $725,000. Meanwhile, the comparable wealth of the average American fell from $20,600 to $20,500.
The Post excluded home equity because it is one of several items not reported, or underreported, in congressional disclosure forms.
For example, members need only disclose a maximum of $1 million of assets belonging to a spouse, regardless of how much that spouse may be worth.
Take John Kerry. His wife, Teresa Heinz, inherited the vast Heinz family fortune estimated at about $500 million. That figure never appears higher than $1 million on his disclosure form.
And members don't have to disclose at all the value of their government retirement accounts and any personal property not considered an investment, such as automobiles and artwork.
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