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60 Minutes - Congressional Insider Trading

By Anthony - Saturday, November 19, 2011 No Comments
UPDATE: The Stop Trading on Congressional Knowledge (STOCK) Act is an Act of Congress designed to combat insider trading. It was signed into law by President Barack Obama on April 4, 2012. The bill prohibits the use of non-public information for private profit, including insider trading by members of Congress and other government employees. It confirms changes to the Commodity Exchange Act, specifies reporting intervals for financial transactions.

This episode of 60 Minutes highlights how Congress can legally trade stocks with what would otherwise be considered insider information. But at the time of broadcast of this episode, insider trading by members of Congress is totally legal.

The show hits a wide swath of lawmakers, from House Speaker John Boehner (R-Ohio) to House Minority Leader Nancy Pelosi (D-Calif.). Perhaps the most egregious example: Rep. Spencer Bauchus (R-Ala.). Bauchus, who now chairs the House Financial Services Committee, was sitting in meetings with Fed Chairman Ben Bernanke and Treasury Secretary Hank Paulson during the early stirrings of the financial crisis and then making big bets that the stock market would tank.

But isn’t this already illegal? Amazingly, no…

MYTH: Even if congressional insider trading is not covered by current insider trading laws, congressional insider trading is illegal under other laws.

FACT: In 1958, the House of Representatives adopted the Code of Ethics for Government Service into its Ethics Rules. Clause 8 of the Code of Ethics states that “Any person in Government service should…[n]ever use any information coming to him confidentially in the performance of governmental duties as a means for making a private profit.” However, this is a House Rule, enforceable only by the House Ethics Committee on an internal basis, and NOT A LAW UNDER WHICH A MEMBER OR STAFFER CAN BE PROSECUTED.

In addition, the Code of Ethics for Government Service has not been adopted by the Senate and therefore does not apply to Senators or Senate staffers.

Finally, House Rules do not have any effect on those outside of the House. The Code of Ethics for Government Service has no impact on “political intelligence” firms who gather information from Members of Congress or their staffers and share that information with outside investors…


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