Motive of Congress suspect after passing insider trading bills
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Overwhelming passage of two versions of legislation targeting those who would convert political capital into the real thing demonstrates there's no time like an election year for lawgivers to find religion.
By a 417-2 margin, the U.S. House of Representatives last week approved the Stop Trading on Congressional Knowledge Act, legislation that had gone nowhere until a "60 Minutes" piece in November detailed the stock trading habits of House Minority Leader Nancy Pelosi, D-Calif., and other members of Congress. The CBS report relied on "Throw Them All Out," a book by Peter Schweizer that documented how often the investments of members of Congress coincide with knowledge they obtain on the job.
It didn't take long for Congress, burdened by a public approval rating in the single digits, to respond.
Co-sponsors quickly signed on to legislation first introduced in 2006.
The latest bill, introduced in March by Reps. Tim Walz, D-Minn., and Louise Slaughter, D-N.Y., would prohibit members of Congress and federal employees from making investment decisions based on nonpublic information they obtain as part of their jobs. It would also put restrictions on the "political intelligence" industry, firms that hedge funds and other investors commission to access the wealth of nonpublic information available in Washington. That intelligence can be used to improve their investment decision making.
Similar legislation was introduced in the Senate and approved by a 96-3 vote on Feb. 2.
However, there is a major difference between the House and Senate versions that must be resolved before the bill can be submitted to President Barack Obama, who has promised to sign it.
The Senate version requires political intelligence operatives to register and disclose their activities, something lobbyists are currently required to do.
Those requirements would be more onerous for political intelligence operatives than they are for lobbyists. An operative would only have to make one call to be subject to the provisions of the Senate bill, according to an advisory sent to the clients of Wiley Rein, another Washington, D.C., law firm.
"The unprecedented -- and potentially far-reaching -- regulation of 'political intelligence activities' may soon be in place," the firm has advised its clients.
Covington & Burling, a Washington, D.C., law firm, told clients that a hedge fund that calls a Congressional staff member in order to determine the prospects of legislation that would affect the fund's investments may need to register. The same could be true of a company that contacts sources in Congress or regulatory agencies about a potential government response to a merger or acquisition.
"The effect of these changes would be quite significant for the business community," the law firm cautioned clients.
The disclosure provisions are good news to Common Cause, Public Citizen and other groups. They are upset that the political intelligence provisions were excised from the House version of the legislation by Majority Leader Eric Cantor, R-Va.
Craig Holman, a lobbyist for Public Citizen, a consumer advocacy group, said Mr. Cantor's revision "is a gift to the financial interests." He said hedge funds, private equity funds and other investors who trade on knowledge gleaned in the halls of governments do not want to have to disclose details of their intelligence gathering.
Mr. Cantor "is cynically counting on the fact that no member of Congress can afford to vote against legislation that purportedly combats Congressional misconduct, toothless as it may be," said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington.
An organization that tracks campaign contributions said Mr. Cantor and House Speaker John Boehner, R-Ohio, have received more money than other House members from interest groups representing the securities and investment industry donors, an industry that has a big stake in which version of the insider trading law is sent to the White House.
In the two-year period ended June 30, Mr. Cantor received $629,350 and Mr. Boehner received $830,700 of the $18.8 million securities and investment industry donors gave to House members, according to MapLight, which analyzes campaign contribution data compiled by the Center for Responsive Politics.
Election-year politics is enough of a reason to suspect that whichever version is approved, the outcome will have more to do with making voters think Congress is doing something about the problem rather than reforming behavior that Mr. Schweizer characterizes as "business as usual" in Washington.
Speaking of business as usual, when was the last time this Congress adopted such a blatantly bipartisan approach to an issue? That's another reason to be skeptical of the unusual Congressional urgency to approve some kind of bill.
Those who want a tougher measure are pinning their hopes on a House-Senate conference committee restoring the Senate provisions. But whichever version becomes law, the question remains: Is this an act of self-preservation or a matter of 535 members of Congress getting -- and keeping -- religion?
First Published February 12, 2012 12:00 am