Friday, February 10, 2012

Rep. Spencer Bachus Faces Insider-Trading Investigation

WaPo reports:
The Office of Congressional Ethics is investigating the chairman of the House Financial Services Committee over possible violations of insider-trading laws, according to individuals familiar with the case.

Rep. Spencer Bachus (R-Ala.), who holds one of the most influential positions in the House, has been a frequent trader on Capitol Hill, buying stock options while overseeing the nation’s banking and financial services industries.

The Office of Congressional Ethics, an independent investigative agency, opened its probe late last year after focusing on numerous suspicious trades on Bachus’s annual financial disclosure forms, the individuals.
On Sept. 18, 2008, at the height of the economic meltdown, Bachus participated in a closed-door briefing with then-Treasury Secretary Hank Paulson and Federal Reserve Chairman Bernanke. At the time, he was the highest-ranking Republican member of the Financial Services Committee. According to a book Paulson would later write, the topic of the meeting was the high likelihood of decline across the entire economy if drastic steps were not taken.

The next day, Sept. 19, Bachus traded put options, betting on a broad decline in the financial markets, and collected a profit of $5,715. Also that day, he cashed out options in which he had bet that General Electric stock would rise, and collected a $12,713 profit, before GE’s stock price started to tumble, WaPo found.

The real problem with Congressional insider trading is that congressmen have influence over the outcomes of legislation that will impact individual stocks or the overall stock market. They can take positions in stocks (or options) and influence legislation that will make their position profitable.

If Bachus understood, or could influence the timing of a bailout, and traded on that, it's a serious offense.


  1. Using his position for personal gain is corrupt as he is one of the elite that makes the rules. Now he'll spend more than $17K on legal fees. I guess this is a case of unintended consequences. He helped make the rules and now he's getting hoisted on his own petard. I'll take bets he gets off :-))

  2. The only ones who should have regulations surrounding their financial goings ons should be those in the government. Upon accepting a job in the government all employees should have to convert all assets into either cash or treasuries, under penalty of death. Execution at dawn if they are found to have not converted any financial instruments into either cash or treasuries within a reasonable timeframe (maybe 1 week).