'60 Minutes' Blows The Lid Off Congressional Insider Trading

This might be old news but it doesn’t hurt to post it again. :slight_smile:

http://www.youtube.com/watch?v=x95uC_wzUX4&feature=results_main&playnext=1&list=PL9101B79F152DCA4D

I like the part at the end that says “Go to 60minutes dot com and see more on… …sponsored by Lipitor.”

Although I agree in principle with the outrage, I also suspect that Congress would need a unique set of rules to constrain them. The issue is that it is difficult to think of *any* trade a congressperson could do that would not be in some way tainted by material nonpublic information. So perhaps the solution is to say that congresspeople cannot have any investments while they are in office. Corporate insiders at least have the advantage that there are plenty of investments that they can believably say that they have no material nonpublic information about. And then, what about the families of the congressionals. Perhaps they can’t invest either. Sisters, cousins, aunts… how far does it stretch. I don’t know what the answer is, but it is not as simple as making standard insider trading law identically applicable to members of congress. Even prohibiting investments to index funds can make market timing decisions possible. I suspect it may be something like that investments have to be managed by a few particular investment RIAs that are carefully monitored for information leakage, and who can only invest in things like indexes.

The solution has been brought up many times: Blind Trust.

Congress people absolutely should not be allowed to place personal trades in situations where they might have insider information. Imagine if you could short finance stocks, and then vote yes on Dodd-Frank. If, like bchadwick says, there are no situations where insider information in unavailable, then Congress people should not be allowed to trade at all. The problem is that such trading regulations would have to be approved by Congress. Furthermore, the groups - SEC/financial institutions - that might lobby for such regulations are too busy wiping the asses of Congress to care about this. So, it’s unlikely that this will happen any time soon.

Congress is an open body and the information they deal in is not material non-public information as codified in the exchange rules. Congress people don’t have a better idea of how a vote will go than any other analyst who follows politics. Just look a votes that are brought to the floor but do not pass (first tarp, recent payroll holiday extension, etc.).

Uh, you don’t think that the information that lobbyists give Congressional representatives and senators is nonpublic? Just because the house and senate floor are on C-SPAN doesn’t mean that that’s where deals get made. And Congressionals definitely have a better sense of how a vote is going to go than political analysts. It might not be a perfect sense, but it’s still better than outsiders. Just ask yourself if company management has a better sense of what decisions they are likely to make vs the wall street analysts that follow the company. Do you really think political analysts are so much better as to be just as good as the insiders themselves?

As long as their trades are immediately made public, I’m fine with them being able to trade on non-public information.

Wait, how would that help? They would still be trading ahead of everyone else.

In an ideal world, I’d abolish all insider trading in general, but that’s another thing altogether. How long do you think someone would stay in office if they frontrunned important pieces of legislation? Especially if the bill being passed was unpopular to begin with. They’re not going to be reelected if an opponent can easily point to several deals that appeared to be done for personal gain. In fact, I’d bet we’d see very little trading going on at all. Everyone in congress would be too afraid of the perception. The key is full disclosure. With out it it wouldn’t work.

Given that there is so much compliance that I can barely trade for my own account, I would have no problem with banning congress members from trading. Just let them have their publicly disclosed, static investments set when they enter office; at least then you know where they stand. If that is going to deter certain people from politics then that is probably a good thing…they’re getting into it for the wrong reasons.

BS!

3 Senators will not get re-elected for sure! http://www.cnn.com/2012/02/02/politics/senate-insider-trading/index.html?eref=mrss_igoogle_cnn

Legislation is often brough to a vote specifically so it does fail. What a person voted against is just as important as what he/she voted for come campaign season.

they can stick a couple of lines in a bill at the last minute which affects specific companies