We learned yesterday that it’s very, very difficult for members of Congress to vote to effectively legalize insider trading for themselves. If it wasn’t for that meddling 60 Minutes, this wouldn’t be an issue. But that highlighted the fact that members of Congress could freely trade on information gained during their official duties, even in stocks of the corporations that they directly oversee. And it’s somewhat difficult to vote to keep that going. So difficult, in fact, that the motion to proceed on the bill stopping the practice passed 93-2 yesterday.
The Stop Trading on Congressional Knowledge Act, or Stock Act, easily passed a procedural vote 93 to 2, clearing the way for a debate and amendment process that insiders said they expected would lead to passage by week’s end.
The measure would require members of Congress and high-ranking staffers and federal employees to abide by insider trading rules that apply to everyone, and also would require members of Congress and top aides to report significant financial transactions within 30 days.
“The American people need to know that their elected leaders play by the exact same rules that they play by,” said Sen. Kirsten Gillibrand (D-N.Y.), a lead sponsor. “They also deserve to know that their lawmakers’ only interest is what’s best for the country, not their own financial interest.”
“This is a measure the American people are clamoring for,” said Sen. Scott Brown (R-Mass.), marking bipartisan support for the bill.
Eric Cantor actually blocked a similar bill from the House Financial Services Committee late last year, but he also had to promise that it would come up for a vote at some point in 2012. And the President has jumped on the legislation. In a statement from the Press Secretary, he said that “While there’s more work to be done to eliminate the corrosive influence of money in politics, this is an important step to repair the deficit of trust between Washington and the American people.”
Actually, this isn’t that important a step. Obviously, insider trading among members of Congress should be banned. You could go further and mandate that every member of Congress put their investments into blind trusts, which this legislation does not do. But this looks more like anti-corruption theater. Only a truly stupid individual would place massive stock trades on the companies they oversee, and expect to get away with it. The real corruption in Congress comes in the casual trading of political favors for campaign contributions, in the revolving door between K Street and Capitol Hill, in the “legislative subsidy” that comes from a dearth of information and expertise in Congress, forcing them to rely on partisan outside lobby shops. There are a host of issues with how Congress conducts its business, of which stock trading is only a small part.
And there’s quite a road to travel to even get this passed. The Senate will have an open amendment process on this bill, and like any popular piece of base legislation, expect a lot of message amendments and attempts to string favored bills onto it. In the House, Eric Cantor wants to expand the legislation to cover the White House. So there’s plenty of opportunity for even this legislation to get bogged down and falter, allowing for legalized insider trading to continue.