Why Congress Is Warming Up to Ban on Insider Trading

Article excerpt

On Tuesday, the House Financial Services Committee launched a hearing on legislation that would explicitly ban members of Congress from insider trading.

Legislation to bar members of Congress and staff from trading on insider information, sidelined in Congress since 2005, is suddenly on a fast, bipartisan track.

A new book by conservative author Peter Schweizer and a CBS "60 Minutes" expose on Nov. 13 have given the issue a sharper profile - featuring examples of lawmakers who appeared to use insider information to score unusually high profits on Wall Street in ways illegal to other traders.

On Tuesday, the House Financial Services Committee launched a hearing on proposed legislation known as the Stop Trading on Congressional Knowledge Act (STOCK). By next week, the Senate Homeland Security and Governmental Affairs Committee expects to mark up legislation to strengthen a ban on insider information.

For the past half decade, Rep. Louise Slaughter (D) of New York never attracted more than a handful of sponsors willing to endorse her bill to explicitly ban members of Congress from insider trading. Now, the STOCK bill has more than 170 sponsors and counting.

Sens. Kristen Gillibrand (D) of New York and Scott Brown (R) of Massachusetts, both up for reelection in 2012, are also sponsoring bills to outlaw the practice.

Moreover, Rep. Spencer Bachus (R) of Alabama, a target of insider- trading charges, is proposing legislation that requires all members to place their stocks, bonds, commodities, futures, and other forms of securities in blind trusts run by independent managers.

Representative Bachus, chairman of the Financial Services Committee, disputes claims that his profits during the financial downturn were due to insider information. In a letter citing factual errors in "Throw Them All Out," Mr. Schweizer's book, Bachus he says that he does not trade in companies related to the jurisdiction of his committee, and that claims in the book to the contrary are "unfair and untrue."

"While laws that prohibit insider trading already apply to Congress, this bill [proposing blind trusts] sets a higher standard of public service," Bachus said in a statement. "It is an extra step that will strengthen accountability and, hopefully, the public's trust that no Representative or Senator benefits financially from non-public information."

Some witnesses at Tuesday's hearing pointed out that members of Congress are already subject to insider-trading laws. …