Most people understand that insider trading is illegal. However, what most people probably aren’t aware of is that Congress is exempt from that law. Senators and congressmen are legally able to trade stock based on the private information they have received from their official positions. According to CBS News’ “60 Minutes” that aired Sunday night, Congress utilizes this power to the best of their ability.
The program exposed various congressional leaders for their alleged unethical trades. The program was based on a book by Peter Schweizer titled Throw Them All Out: How Politicians and Their Friends Get Rich Off Insider Stock Tips, Land Deals, and Cronyism That Would Send the Rest of Us to Prison. Schweizer is also a scholar for the conservative think tank, Hoover Institution.
“The reason for the exemption is presumably separation of powers, not wanting executive agencies that Congress oversees to have leverage over members of Congress – along with the idea that members have the check of balance of elections, have to disclose their holdings, and can recuse themselves,” said Norman Ornstein, scholar at American Enterprise Institute, to The Christian Post.
Minority Leader Nancy Pelosi and House Speaker John Boehner’s investments were questioned in the segment as it was revealed that they bought stocks around the same time that Congress was making laws that would affect those companies. However, no proof was provided that the two committed any unethical violations.
According to CBS, Pelosi and her husband bought a lot of shares in Visa in 2008. Two days later, the stock went up dramatically. It is reported that around this time a piece of legislation, that was opposed by credit card companies, was being voted on in the House.
Boehner also caused speculation in the segment when it was revealed that he bought health insurance stocks in 2009. All of his stocks increased in value after the GOP killed the public option portion of the legislation, according to CBS.
Both Pelosi and Boehner deny any wrongdoing.
"I have not made any decisions on day-to-day trading activities in my account – and haven't for years. I don't – I do not do it, haven't done it and wouldn't do it," Boehner said to CBS.
Pelosi’s spokesman, Drew Hammill, was also on the defensive after the CBS segment. Hamill released a statement saying: “Congress has never done more for consumers nor has the Congress passed more critical reforms of the credit card industry than under the Speakership of Nancy Pelosi. It is very troubling that 60 Minutes would base their reporting off of an already-discredited conservative author who has made a career of out attacking Democrats.”
Both Pelosi and Boehner seem to have escaped the public angry. However, Rep. Spencer Bachus of Alabama is not so lucky.
CBS unearthed that in September of 2008, Bachus was a ranking member on the House of Financial Services. He met with the Treasury Secretary and Federal Reserve Chairman amid the collapse of the global economy. After that meeting, the segment revealed, Bachus bought and traded stock options.
Business Insider received a copy of Schweizer’s book that goes into detail about Bachus’ trades: “The next day (after his meeting), September 19, Congressman Bachus bought contract options on Proshares Ultra-Short QQQ, an index fund that seeks results that are 200% of the inverse of the Nasdaq 100 index. In other words, he was shorting the market. It was an inexpensive way to bet that the market would fall. He bought options for $7,846 on a day when the Dow Jones Industrial Average opened at 8,604. A few days later, on September 23, after the market had indeed fallen, he sold the options for over $13,000 and nearly doubled his money.”
Due to these accusations, many are calling for Bachus to step down. Conservative pundit Andrew Breitbart is one.
“I want to see these people taken down. I want them to suffer Anthony Weiner’s fate. I want them to step down. I am calling for Spencer Bachus to step down, not [just] from being the chairman of the House finance committee. I think he should be in Joe Paterno-ville, he should be in exile,” said Breitbart Sunday evening in an interview with the conservative Media Research Center, according to Politico.
“His constituency should surround his district office and call for him to be there, with pitchforks. What he did was egregious.”
“It is clear that [Congress needs] some additional accountability here, at least through clearer ethical standards and enforcement by their ethics process,” said Ornstein.