By Kevin Binversie
All of a sudden members of Congress are getting religion when it comes to transparency on how they enrich themselves while in office.
They’re dusting off the perennial Stop Trading on Congressional Knowledge Act, or "STOCK Act," which just gained a scrambling clutch of cosponsors.
Amazing what a book and a “60 Minutes” expose will do.
Thanks to the publication of Hoover Institute scholar Peter Schweizer’s book Throw Them All Out, and a Nov. 13 piece by CBS News based on the book, members of the U.S. House of Representatives and Senate are scrambling to close a nearly 80-year-old loophole to the 1934 Securities and Exchanges Act.
But Wisconsin's own freshman U.S. Rep. Sean Duffy, R-7th District, has a better, tougher idea — the Restoring Ethical Standards, Transparency, and Responsibility in Congressional Trading, or RESTRICT Act.
The initial law that helped to establish the Securities and Exchange Commission and created government oversight over the financial institutions of Wall Street against financial malfeasance, such as insider trading, exempted Congress.
This meant if you had inside information about a company or industry and tried to profit off of it, the SEC could indict you faster than you can say Raj Rajaratnam. Yet, according to Schweizer’s book, if you were a member of Congress, or a congressional staffer, and you hear the same thing in a one-on-one meeting with the head of a company, in a low-key subcommittee hearing, or the like, you can be on the phone to your broker faster than you can change the very policy that would affect that company or industry.
Two legislative proposals are pending on insider-trading and increased financial transparency for elected and appointed officials.
Members and staff of the House, Senate, as well as all political appointees of the Obama Administration, must file annual financial disclosure forms with either the Clerk of the House, the Clerk of the Senate, or the Office of Personnel Management depending on where they work. These disclosures offer few details on specifics investments or the time they took place, and are measured in wide ranges like “$500,001 to $1,000,000.”
Most news reports are circulating around various versions of the “STOCK Act”, a legislative retread by New York's U.S. Rep. Louise Slaughter, D-28th District.
Proposed to every Congress since 2006, STOCK would make members of Congress culpable for insider trading for every transaction greater than $1,000. It also requires all financial transaction greater than $1,000 to be disclosed within 90 days. Prior to the airing of the “60 Minutes” story, the bill had nine co-sponsors; as of today it now as 153, 84 of whom jumped on in the five days following the story.
On Friday, Duffy introduced the “RESTRICT Act.” All members of Congress, their staffs, the president, senior White House staff and Cabinet levels appointees must either form blind trusts and have someone else manage their investments while they’re in office or disclose all financial transactions of any denomination within 72 hours, or three business days.
If Congress were truly serious about increasing its financial disclosures, it would pass both bills for a nice one-two punch to support transparency. For far too long, members of Congress of both parties have been able to skirt their own financial disclosure rules for their own personal wealth. For example, it’s OK to be a member of the Senate Armed Services and own stock in defense contractors — meaning members of the very committee that decides the fate of a number of military programs could be making decisions to line their own pockets.
Something has to change.
If Congress has to pick one, it should be Duffy’s RESTRICT Act. It has more teeth than the STOCK Act. For starters, Duffy’s bill doesn’t just hit Congress, it covers the White House, its staff as well as Cabinet agencies. The blind trust requirement right off the bat eliminates any potential conflict of interest, and it has a much tighter disclosure rule to target all financial transactions no matter the size, not just those over $1,000. Also, experts question the STOCK Act’s enforceability.
Duffy put it best in his “Dear Colleague letter” on what’s at stake if Congress wastes this opportunity given to it by Schweizer’s book and the “60 Minutes” piece. He wrote: “In order to end any real or perceived insider trading among elected officials, we must hold ourselves to a higher standard. We are here to serve the people, not grow our own personal wealth.”
Congress got itself into its most recent public relations mess. It should find a responsible way to get itself out, or it should rightfully face the wrath of angry voters in November who feel lawmakers governs under one set of laws for the rest of us and prospers under another for themselves.
Kevin Binversie is a Wisconsin native who has been blogging on the state’s political culture for more than eight years. He has served in the George W. Bush administration from 2007-2009, worked at the Heritage Foundation and has worked on numerous Wisconsin Republican campaigns in various capacities, most recently as research director for Ron Johnson for Senate. Contact him at firstname.lastname@example.org.