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.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.
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.
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.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.
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.