Colorado senators should support the STOCK Act
While 14 million Americans suffer unemployment, members of Congress never had it better. Sixty-six percent of senators and 41 percent of House members are millionaires. Many of these legislators made their fortunes by using inside knowledge gained through their official duties to make advantageous stock sales and purchases.
The Stop Trading on Congressional Knowledge (STOCK) Act would clarify the law on securities trading by government insiders by explicitly prohibiting use of knowledge gained through their offices to make advantageous stock sales or purchases.
This act also ensures greater oversight of the growing “political intelligence” industry that trades on close relationships with government officials to obtain information that can be peddled to individuals or businesses that can profit from foreknowledge of market-changing legislation.
Introduced in two versions by Sens. Kristin Gillibrand, D-N.Y., and Scott Brown, R-Mass., the STOCK Act is necessary to clarify limits on insider trading by members of Congress and the executive branch. Such comity is rare in the Senate these days.
As defined by Craig Holman and Lisa Gilbert in a Roll Call article, “Insider trading is the practice of trading a company’s stocks or securities for personal gain by individuals with access to nonpublic information about the company or financial markets. It is illegal in almost every industrial country in the world, and it poses real dangers to the integrity of companies, the economy in general and overall public trust in our system.”
While there is some debate as to whether the insider trading laws apply to Congress or not, there is no doubt that that some legislators are taking advantage of their positions to advance their own fortunes.
According to Holman and Gilbert, “about a third of the Senate and half of Congress are active traders,” many of whom trade stocks of businesses they oversee. “More than a dozen senators on the Armed Services Committee, for example, own stock in businesses they regulate.”
Both senators and congressmen have remarkable successes as investors. They often enter Congress with middle-class incomes, but leave as millionaires. Senators enjoy a rate of return on their investments 12 points above average market returns, while House speculators must make do with only a six-point higher return.
Contrary to appearances, the STOCK Act is not a knee-jerk response to the disrepute Congress finds itself in today. It has been floating around the House since it was first introduced in 2006. It has been introduced in every House session since, but failed to get out of committtee because of the lack of sponsors. By Nov. 4 this year, the House bill had only eight co-sponsors.
That changed quickly, following a Nov. 13, broadcast by “60 Minutes,” exposing members of Congress who are alleged to have personally profited from inside information.
The House version of the STOCK Act gained 84 additional House co-sponsors in the five days following release of the report. Before House Majority Leader Eric Cantor cancelled the vote, the STOCK Act had gained 219 co-sponsors, a bipartisan majority of the House of Representatives.
Immediately after the House bill was pulled, Sens. Gillibrand and Brown filed competing bills to control insider trading by government officials, including Congress, staffers and other government employees privy to knowledge not available to the public.
“There ought to be a law that explicitly deters such unethical, illegal behavior by members of Congress and punishes it when it happens,” said Sen. Joe Lieberman, the independent from Connecticut and Chairman of the Senate Homeland Security and Government Affairs Committee.
“If it gets to the Senate floor I would guess it would pass and pass overwhelmingly,” said Sen. Charles Schumer, D-N.Y., who supports the STOCK Act. “People lose trust in the system if they feel their Congressmen or Senators have a greater advantage than they do in making money in any way,” Schumer said.
Neither of Colorado’s centrist senators has signed on to cosponsor the STOCK Act, which has 16 Democrat, four Republican, and one independent sponsors. Sens. Mark Udall and Michael Bennet should add their names to the growing list of legislators from both parties who are prepared to stop this abuse of privilege that enables politicians to get rich using information that would put ordinary citizens in jail.