Imagine my shock.
As many as a dozen members of Congress and their aides took part in insider trading based on foreknowledge of market moving information on Capitol Hill,former Washington lobbyist Jack Abramoff told CNBC in an interview.
Abramoff said the amounts members of Congress earned trading off their inside knowledge ranged from as little as $2,000 to, as much as "several hundred thousand dollars."
"It was more, 'Look at me, I'm a real great stock trader,'" Abramoff told CNBC of the congressional bragging. "All of a sudden somebody from a background maybe in law, maybe in some other unrelated business area, all of a sudden is picking winners and losers in the market."
My long held contention is that insider trading should not be illegal. However, I stop that view at the steps of Congress. Congressmen have the ability to influence legislation, so it is not as much that they can benefit from insider information they have, but that they can influence legislation based on what will be profitable given stocks they may have just bought for their portfolio.
I believe the greatest abusers of this type of activity were not congressmen, but advisers to governments.
My suspicions are that John Maynard Keynes along with Bernard Baruch loaded up with gold stocks because they advised FDR (for personal gain) to confiscate gold from private owners and then encouraged FDR to prop up gold by having the Reconstruction Finance Corporation buy it. Keynes even wrote an open letter that was published in the New York Times calling on FDR to fix the dollar at a higher gold price---which FDR did only months after Keynes' letter.
Starting in late 1933, everyday, FDR would meet with advisers and set the gold price--driving the price up (when every other commodity price was collapsing). Finally, in April 1934 as part of the Gold Reserve Act of 1934, the price of gold was fixed at $35 an ounce--67% above its pre-1933 price. Keynes and Baruch made huge profits, since they had both loaded up on gold stocks. Of course, the average American had his gold confiscated and ended up with zilch.
Oh, btw, don't expect any insider charges to be brought against any congressmen discovered trading on legislation they were working on, congressmen are exempt from insider trading laws related to their congressional work.
Is there a solid, up-to-date enumeration of laws which U.S. citizens are obligated to follow that our elected representatives are exempt from?
ReplyDeleteSome that have been brought up (and possibly refuted at times):
* SS taxes
* Healthcare regulations
* Insider trading
They may be exempt by law but perhaps we can make their reelection difficult by publicizing their hypocrisy.
ReplyDeleteInterestingly, the founding of our first central bank (Bank of the United States) was awash with insider trading by those close to the legislation, they knew that the bank would buy the war debts, so they bought up all the war debts on the cheap and sold them to the bank at almost full, face value.
ReplyDeleteI agree that being against insider trading is really an illogical position to have, because one cannot objectively judge the barometer of which it is measured; how much information is too much, how many industry friends is too much, what information is too specific? Sure, if evidence of intent to defraud is present, then you have a case. Absent that, there is no measure.
Insider trading laws are promoted by the insiders. They do two things
ReplyDelete1. They get to pretend that insider trading does not go on so the average investor will keep on trading. If the average investor knew that the cards were marked then they would not play
2. It allows the management of the insider firms to use insider trading laws against rogue employees of their own firms such as Raj Rajaratnam and the others