Six years after the bill was introduced, the House joined the Senate today (Thursday) in approving the STOCK Act, which basically says that members of Congress must obey insider trading laws.
The House voted 417-2 to approve the STOCK Act; the Senate vote last week was 96-3.
You'd think that lawmakers wouldn't need prodding to obey laws that apply to everyone else, but their behavior has said otherwise.
By the legislators' own admission, an insider trading law shouldn't even be necessary.
"The STOCK Act has been characterized ... as to prevent insider trading by members of Congress, as if members of Congress are allowed to participate in insider trading today, and they are not," Rep. Bob Woodall, R-GA, told The Hill.
ACBS News "60 Minutes" report last November found that many legislators, including Speaker John Boehner, R-OH, and House Minority Leader Nancy Pelosi, D-CA, had traded stocks based on information learned on the job.
If not for that report, the STOCK Act may have languished forever.
Once the "60 Minutes" report broke, however, passing the STOCK Act should have been a no-brainer.
But it has taken more than two months to get the bill through both houses. And because the House amended the Senate bill, the process still has to go through another step: a conference to produce a common version.
Each version is tougher on some transgressions than others. The final version of the STOCK Act could easily end up as feel-good legislation with no teeth whatsoever.
The "Pelosi Provision'
For example, the House version added the so-called "Pelosi Provision" that would tighten rules regarding participation in initial public offerings (IPOs). The "60 Minutes" report noted that Pelosi's husband bought 5,000 shares of Visa Inc. (NYSE: V) at the same time Congress was debating credit-card legislation.
The House bill also broadened disclosure rules to include officers and staff in the Executive and Judicial branches. But the House bill covers only 30,000 higher-ranking officials, while the Senate version includes 300,000 government employees.
Trades would need to be reported within 30 days in both versions.
The biggest disagreement is over "political intelligence consultants," people who gather information on market-moving legislation from lawmakers to sell to Wall Street.
The Senate version would require such consultants, mostly hedge fund managers, to report their activities much as lobbyists do. The House reduced that to a mere study of the issue.
"It's astonishing and extremely disappointing that the House would fulfill Wall Street's wishes by killing this provision," Sen. Chuck Grassley, R-IA, said in a statement. "If Congress delays action, the political intelligence industry will stay in the shadows, just the way Wall Street likes it."
STOCK Act Won't End the Disapproval
If the final version of the STOCK Act ends up so watered down as to become meaningless, it won't stop insider trading. Lawmakers will simply find less obvious ways to do it.
In fact, the whole exercise could turn out to be a big waste of time.
"You have to ask that question, 'What are you trying to solve and will this fix it?'" Rep.Scott Garrett, R-NJ, a senior member of the Financial Services Committee, told USA Today.
Even as a public relations ploy, the STOCK Act is likely to fail.
"With any legislation, you would hope that what you're trying to solve is not just public relations, but substantive problems," Garrett said. "Even if we pass it, if you did a poll, the public will still think that we did not pass a bill that actually solved the problem."
Coincidentally, a Gallup poll released yesterday showed Congressional job disapproval at a high of 86%, tying the record set in December.
"Eighty-six percent of the public thinks we're not worth a warm bucket of spit," Minority Whip Steny Hoyer, D-MD, told USA Today.
News and Related Story Links:
- Money Morning:
Monday's STOCK Act Vote Could End a Major Congressional Perk
- Money Morning:
While the Middle Class Suffers, Congress is Getting Richer - With Help From Legal Insider Trading
- Money Morning:
Are You Outraged Yet?
- Money Morning:
It's Not Just Congress - the System Has Failed
- Money Morning:
Your Vote Will Help Us Put the Squeeze on Congress
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.