In his State of the Union address, President Obama urged lawmakers to reduce the "deficit of trust" between Washington and the rest of the country, in part through a series of institutional reforms. At the top of the list: banning insider trading by members of Congress and limiting elected officials "from owning stocks in industries they impact."
Those are two related ideas, but they're not quite identical. The "STOCK Act" is already pending in the Senate, and it's a companion measure to a House bill intended to restrict insider trading on Capitol Hill. But Sen. Sherrod Brown (D-Ohio) told Greg Sargent today about a plan to expand the legislation considerably.
Senator Brown tells me he is introducing a measure in the Senate today that would require all Senators to divest themselves of any stocks in companies that are impacted by their actions as a Senator. The idea is that members of Congress -- who are suffering historically low approval ratings while enjoying historically high levels of personal wealth -- have some work to do in building confidence that the institution is representing the public interest, rather than the interests of the wealthy and well-connected, some of whom are, well, them. [...]
Brown says he supports the STOCK Act, but that it isn't good enough. His proposal would formally prohibit members from owning individual stock in any companies directly affected by any of their official duties. This rule already applies to committee staff and executive branch employees, but not officials elected to the legislative branch.
Brown's amendment would add some pretty significant teeth to the existing STOCK Act. A ban on insider trading would be a step forward, but it would limit a fairly small number of members. As Greg explained, the "far more pervasive situation" in one in which lawmakers cast votes "that directly impact companies they have a financial stake in."
There's no word yet on whether Brown's idea would face opposition from his colleagues, but if reducing the "deficit of trust" is the goal, it's a worthwhile proposal that Hill watchers should keep an eye on.
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I see this stuff as a distraction and sideshow with no real broad impact. All it will do is cause the politicians to be a little more discrete.
It is only intended to distract us from serious issues like campaign finance reform. That is the real problem that needs to be addressed.
I agree that campaign financing is THE issue, but I also think restrictions like this, if severe enough and enforced (two big "ifs," I know) will reduce the overall level of corruption. It's past the point where we can expect ethical behavior from elected officials; if we have to treat them like little children who'll do anything that's not strictly prohibited, then I'm for all the cracking down we can get. On the distraction scale, this rates pretty low to me.
They can throw all the money at this primary and their chosen candidate that they want to. It will all come to nothing. The reps are their own worst enemy in this election. Obama will over come.
I agree (if anyone is interested) that this isn't the main issue. It isn't owning stock in companies that influences members of Congress the most, it's the campaign contributions that industries make which are the real problem. Removing corporate money from elections is itself only a partial solution, however. Strict public funding of elections is required, along with severe criminal penalties when anyone makes or accepts private contributions. And an absolute prohibition of any kind of political activity on the part of corporations. Plus, I'd like a pony.
What investments aren't directly impacted by congressional actions? And isn't insider trading already illegal? The real question is enforcement. A critter with an IQ higher than a cow would be able to find a loophole in any of these proposals.
It's not illegal for them. Elected officials conveniently exempt themselves from insider trading laws.
This is the first thing I have heard from anyone in government that addresses "enforcement", in a very practical and measurable way: GET RID OF YOUR INSIDER TRADES NOW. It doesnt right the wrong, maybe, but it does prevent it from being swept under the carpet and continuing. Actions speak loud.
I have soooo much respect for Senator Brown. He's always trying to do the right thing in D.C. It can't be easy. He deserves our praise and support.
I agree with Muggle (above): Sherrod Brown is one of the best Senators we have today and deserving of everyone's respect and admiration regardless of which side of the aisle they are on.
As for Sen. Brown's proposal to force members of Congress to rid themselves of any stocks in companies over which they have authority. I agree. After all, if journalists at ethical media outlets are banned from owning shares in companies they cover, why should Representatives and Senators (and their families) not meet the same standards. Same for all federal judges, as a matter of fact.
Neither the STOCK Act nor Sen. Brown's proposal are perfect but they each represent an important first step in eliminating real, potential and perceived conflicts of interest among our elected officials and federal judges.
Another layer of bandaids won't solve any problems when it's the government itself that is corrupt, the whole damn thing.
Sort of like getting a pedicure when the real problem is you've got a gangrenous leg.
Wow, here is a common sense piece of legislation which speaks directly to OWS and there are those cynics here who just bitch, bitch, bitch and are never happy. Yes, insider trading among company insiders is illegal, but until this new legislation is passed whether its the existing Stock bill or Brown's bill, it is not illegal for congressmen to profit from stock trades which they have information which regarding pending legislation.
At least this is chipping away at the link between big business and politician's pockets. Lets all support this direction of reform.
Aye!
While I appreciate Sherrod Brown because he is fighting for working Americans, I would also like to see that "revolving door" between former government employees jumping into the "private sector" that they wrote rules & regulations for!! This is another area where "former members of Congress & their staff" have "profitted enormously!!
Zora, I think you are right on with that notion.
Ok, this still leaves a lot to be done. But for heaven's sake, can't we appreciate a baby step toward more honesty in government.
If you keep moving the goal line, everyone gives up.
Absolutely Zora!
The legislators investments should be in blind trusts to eliminate the possibility of insider trading. But I am not sure the law deals with the legislators family, friends and business acquaintances. You can catch people doing insider trading if they communicate by means other than in person. And that is the flaw with all insider trading laws.
Sen Brown is my hero!
I wholly agree with Senator Sharrod Brown (D-OH) the STOCK ACT is a tiny step in the right direction. However, financially divesting oneself from a company that they have interest in, and morally and ethically being able to commit to the hard decisions are two different things.
There is a little thing called human nature that comes into play, and the last I knew even members of Congress are human. A quick example of this insatiable ability to squelch ones self-interest is Richard Cheney and Halliburton (KBR). Remember Vice President Cheney divesting his interest from Halliburton, but what company gained the most from our Iraq incursion?
It takes more than legislation to force humans to do the right thing. It takes personal integrity, which appears to be a commodity even more rare than the black gold/Texas tea that drives our government today.
You can't legislate morality/ethics. Getting a majority of 535 members +2 to identify the need to put country over their own personal gains is the conundrum that Plato discovered in "The Republic". Some days it seems the further ahead we teeter; the further back we totter.
Now just add public funding for federal campaigns. No stick. No carrot. No cake. No corruption.
The cynicism is thick, but it's easy to understand why. It's hard to imagine the bill having any teeth at all if they don't have to divest; so what if they can't buy a stock that they know may increase in value because of their vote; their votes can still be influenced by stocks they already hold.
Mike is right - there are many ways around insider trading laws, but let's at least put elected officials on the same playing field as corporate employees, stock brokers, etc. It will be interesting to see what they can agree on; after all, these folks get to vote for their own pay increases. It seem unlikely that theywould vote for something that hurts their own pocketbooks.
Technically, members of Congress cannot vote for their pay increases. In 1989, Congress passed a law that made pay increases for House members and Senators automatic... so they would not have to have those inconvenient votes on the books. In return, they gave up the right to charge speaking fees. However, there is a mechanism that can stop the automatic pay increase and it has been invoked each year since 2009.
A financial regulation bill that isn't completely toothless? I'll hope, but I won't hold my breath.
Congress should be held to no less than the same basic standards that many US government employees are currently held. These employees must recuse themselves from any potential conflicts of interest. If not and they are found to have had any perceived or direct conflicts of interest they can be possibly bound over for administrative, civil or criminal punishment and or dismissal . It is clear and simple and not up for debate. US government employees under these standards must submit to yearly reviews and full financial discovery. I know I was one of these US government employees for 25 years.
Sen. Brown is dealing with a universal principle that tends to destroy democracies.
People will vote for themselves to have more money without working for it every time they are given the opportunity to do so.
It needs to be illegal for government officials to do that for themselves.
Not having real time disclosures of securities trades is the loophole, which gives members of congress and legislative staffers immunity from enforcement of insider-trading laws. The delayed reporting of securities transactions by congress, defeats, obstructs, and impairs their use as timely evidence. Insider-trading cases are hard to prove, because the trades must be tightly linked to the events or information on which they are allegedly based.
About one hour and eight minutes into the Senate hearing on insider trading http://goo.gl/mW3Qv. I think it might have been Robert Walker who told congress why blind trusts are not a workable solution to insider trading. These kinds of trusts cost a lot of money. “They are only blind is so far as .. they are not blind what you put into them initially, they are only blind if you put in cash, or after a period of time the assets are sold down to a particular level, then you are notified that you do not have those any more.”
The first blind trust used in modern times was that of President Lyndon B. Johnson. He knew what was in the trust and it was managed as he wanted. It would have been public information had the assets been sold. Anyone with half a brain can get around a blind trust. The way to catch these people is to have real time disclosures. Their constituents can send them back, or throw them out. If they fail prompt disclosure, put them in jail, just like corporate insiders. They can inside trade as much as their voters allow, the enforcement that will work is failing to disclose.
The SEC, which conducts most insider-trading investigations, urged faster disclosure of stock trades by members of Congress on electronic, searchable forms. This is why no Congress people were investigated under the current laws. Trades need to be disclosed in "real time or near real time," so that the memories of potential witnesses are fresh and suspects do not have time to cover up their actions.
Blind trusts are not blind, only the people who think they are. See: The problem with blind trusts. http://goo.gl/iuCkO