Saturday, May 28, 2011

Members of Congress Are Exempt from Insider Trading Laws and Make 9% Per Year Trading on Inside Information

I wasn't aware of this, but apparently the damn hypocrite members of Congress are exempt from insider trading laws, when they vote on legislation that will impact their portfolio and as a result of knowledge they gain from their Congressional activities. Nice that the bastards have exempted themselves.

Valerie Richardson at the Washington Times reports:
Strict laws ban corporate executives from trading on their insider knowledge, but no restrictions exist for members of Congress. Lawmakers are permitted to keep their holdings and trade shares on the market, as well as vote on legislation that could affect their portfolio values.
Not surprisingly, the data suggest that Congressmen are using this insider edge to profit. Here's Richardson again:
It’s no secret that members of Congress qualify as political insiders, but a new report strongly suggests that they also may be insiders when it comes to trading stocks.

An extensive study released Wednesday in the journal Business and Politics found that the investments of members of the House of Representatives outperformed those of the average investor by 55 basis points per month, or 6 [sic] percent annually, suggesting that lawmakers are taking advantage of inside information to fatten their stock portfolios.

“We find strong evidence that members of the House have some type of non-public information which they use for personal gain,” according to four academics who authored the study, “Abnormal Returns From the Common Stock Investments of Members of the U.S. House of Representatives.”

To the frustration of open-government advocates, lawmakers and their staff members largely have immunity from laws barring trading on insider knowledge that have sent many a private corporate chieftain to prison.
It should be noted that this study only took into account trading that has been disclosed. I suspect that the more egregious trading is done in a manner which is not reported.

In general, there is nothing wrong with insider trading, but when it comes to Congressmen personally benefiting as a result of legislation they shape and vote on, there is a clear conflict of interest. Thus, while insider trading laws should be eliminated for the general public, it is a pretty good idea to shackle Congressmen with insider trading regulations, so that the conflicts they face are eliminated, and also on the general principle that Congressmen should be tied up in bureaucratic red tape as much as possible, so that they have less time to harass the rest of us with new legislation.

One bill prohibiting insider trading by members of Congress has been written. Richardson reports:
...concerns about members of Congress enriching themselves based on inside information has prompted at least one House bill, the Stop Trading on Congressional Knowledge (STOCK) Act, which would limit the ability of lawmakers to buy and sell stock shares.

First introduced in 2006, the bill has yet to reach the House floor. Its sponsors, Reps. Louise McIntosh Slaughter, New York Democrat, and Timothy J. Walz, Minnesota Democrat, reintroduced the bill in March.
Slaughter and Walz are two of the most aggressive interventionists in Congress, it's good to see them baring their fangs inward against their fellow congressmen. I fully support the Stop Trading on Congressional Knowledge Bill.


  1. Oh come on. its not insider trading, its just a token reimbursement for expenses incurred in helping out constituents.

  2. This is no surprise at all.

  3. Congress should only be allowed to buy US debt while in office.

  4. 43 mil on food stamps, 50% pay no taxes. This pond scum then votes to have us groped by the TSA for another four years, and they ram and jam us at every opportunity. The rock and roll and country and western crowd are asleep. Prison is too good for these crooks and thieves. You could not shame them, that is how low they have sunk.

  5. @Scarlett

    I have always advocated that the President and his cabinet, most of Congress, the Supreme Court and the Fed, along with the corporatist welfare queens -- in short, all the crooks and tyrants in high places -- be expropriated and their wealth distributed to the long-victimized productive segment of the public; then they be tarred and feathered; then deported to one of the countries they've bombed/invaded, like Afghanistan.

    Then I'd be satisfied.

  6. Preach on, Scarlett!

    I heard about this months ago and it blew me away. How can people believe these creatures are less than 100% corrupt?

  7. Economists have started to dig into "insider trading" by the power elite via their wholly owned subsidiaries, also called the government. Some pioneering work by methodologically mainstream economists with discussed here and here. Economist Steven Bainbridge has an academic journal article on the STOCK proposal accessible online here, see "One Click Download" at top of page to access the PDF file.

  8. Instead of passing laws that apply insider trading laws to representatives and senators, which they won't follow anyway, why don't those reps and senators who really do want to curb this abuse start a blog and release all interesting information as soon as they are aware of it? Massive publicity will heavily reduce their ability to profit off of what in the private sector would be considered insider information.

    Rand and Ron Paul? Dennis Kucinich? Anyone else?

  9. There's a reason that although not a millionaire when entering congress, they certainly are when they leave. They've got information, and vested interests taking care of them.

    It stinks.

  10. IN a year when the common man is struggling mightily, Pelosi's wealth grows immensly.

    Other members of congress as well. There should be absolute rioting in the streets of DC right now. Every one of them should be dragged out of the capitol, tarred and feathered, drawn and quartered.

  11. I want to see the bill that exempts congress from insider trading laws and I want to know who in congress voted yes to pass this injustice to the American people.

  12. Our Constitution states: "All men are created equal". Law giving Senators and Congressmen right to trade stock with insider knowledge, makes it unequal and unfair. I see that Orwell is correct: "all animals are equal, but some animals are more equal than others".