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Hill Staffers Profit Thanks To Insider Info

From the Wall Street Journal:

Congressional Staffers Gain From Trading in Stocks

October 11, 2010

WASHINGTON—Chris Miller nearly doubled his $3,500 stock investment in a renewable-energy firm in 2008. It was a perfectly legal bet, but he’s no ordinary investor.

Mr. Miller is the top energy-policy adviser to Nevada Democrat and Senate Majority Leader Harry Reid, who helped pass legislation that wound up benefiting the firm.

Jim Manley, a spokesman for Mr. Reid’s office, initially defended Mr. Miller’s purchase of shares in the company, Energy Conversion Devices Inc. He said the aide had no influence over tax incentives for renewable-energy firms, and that other factors boosted the stock.

But on Sunday, Mr. Manley added: "Mr. Miller showed poor judgment and Senator Reid has made it very clear to Chris and all his staff that their actions must not only follow the law, but must meet the higher standards the public has a right to expect from elected officials and their staffs."

That will show him!

Mr. Miller isn’t the only Congressional staffer making such stock bets. At least 72 aides on both sides of the aisle traded shares of companies that their bosses help oversee, according to a Wall Street Journal analysis of more than 3,000 disclosure forms covering trading activity by Capitol Hill staffers for 2008 and 2009.

The Journal analysis showed that an aide to a Republican member of the Senate Banking Committee bought Bank of America Corp. stock before results of last year’s government stress tests eased investor concerns about the health of the banking industry. A top aide to the House Speaker profited by trading shares of Freddie Mac and Fannie Mae in a brokerage account with her husband two days before the government authorized emergency funding for the companies. Another aide to Republican lawmakers interested in energy issues, among other things, profited by trading in several renewable-energy firms.

The aides identified by the Journal say they didn’t profit by making trades based on any information gathered in the halls of Congress. Even if they had done so, it would be legal, because insider-trading laws don’t apply to Congress.

A few lawmakers proposed a bill that would prevent members and employees of Congress from trading securities based on nonpublic information they obtain. The legislation has languished since 2006.

Isn’t that a coincidence, given that the Democrats took control of Congress is January 2007?

"Congressional staff are often privy to inside information, and an unscrupulous person could profit off that knowledge," says Vincent Morris, a spokesman for Rep. Louise Slaughter (D., N.Y.), a leading backer of the "Stop Trading on Congressional Knowledge Act," or STOCK Act. "The public should be outraged there is no law specifically banning this."

When the bill was introduced nearly five years ago, just 14 other lawmakers endorsed it. The current version of the bill has fared worse: Only nine lawmakers support it. There is no companion legislation in the Senate.

Congressional aides have ringside seats on the making of laws that affect American business. Receiving salaries up to roughly $170,000 a year, they can glean information about policies and government action before the public. They have access to information about hearings or legislation that can move stocks and markets

Perhaps we should also remember that these same Congressional aides are the people who actually write the legislation that will affect stock prices in the first place. Often, their bosses don’t even read the bills that they supposedly sponsor.

Terri McCullough, a 41-year-old aide to House Speaker Nancy Pelosi, had several successful trades in 2008 in a Charles Schwab brokerage account with her husband, Howard Wolfson, a former spokesman for Hillary Clinton’s 2008 presidential campaign.

Mr. Wolfson says he bought about $2,000 worth of Freddie Mac and $2,700 worth of Fannie Mae on July 11, 2008, just two days before the Fed authorized emergency funding to Freddie and Fannie

As the Speaker of the House, Ms. Pelosi was briefed by the administration and Treasury Department officials about the steps they were taking in the financial crisis

In one day Mr. Wolfson bought and sold Freddie Mac and Fannie Mae shares as the stocks jumped about 40%, for a profit of about $2,000, he said. The couple made a total of $20,000 on trading in 2008, he said. Mr. Wolfson says that he made the trades on his own, without telling his wife or getting any information from her

Somehow we suspect Mr. Wolfson has eluded Ms. Pelosi’s efforts at ‘swamp draining.’

Meanwhile, every day and in every way the power of these aides is expanded into every nook and cranny of business – and our private lives.

This article was posted by Steve on Monday, October 11th, 2010. Comments are currently closed.

9 Responses to “Hill Staffers Profit Thanks To Insider Info”

  1. GetBackJack says:

    How come the media never calls to task Democrats who make a living bashing wealth and business who have no other desire than to surmount the highest peaks of …. wealth and business?

    It seems so hypocritical.

  2. Mae says:

    “A few lawmakers proposed a bill that would prevent members and employees of Congress from trading securities based on nonpublic information they obtain. The legislation has languished since 2006.”

    Bet your bottom buck that Darrell Issa, the Ranking Member of the U.S. House Committee on Oversight and Government Reform, has got his eagle eye on this corruption and will set up investigations in January 2011 when we take back our country.

  3. Rusty Shackleford says:

    Didn’t Martha Stewart go to prison for such actions?

    Just askin’

    • Petronius says:

      Martha Stewart (like Scooter Libby and Rod Blagojevich) was convicted of making false statements to investigators.

      The law against insider trading should be repealed for the reasons first given by Prof. Henry Manne and Milton Friedman back in the 1960s.

      The real offense here is not insider trading; rather it is the one noted by Steve — the conflict of interest by Congressional personnel who write laws affecting the stock prices of the companies they regulate.

  4. NoNeoCommies says:

    Meanwhile Meg Whitman is portrayed as a criminal in attack ads for making money in less objectionable circumstances.

  5. oldpuppydixie says:

    Gee…imagine a REID man profiting improperly/illegally/ in an underhanded manner. Seems IMPOSSIBLE, doesn’t it!!

  6. Liberals Demise says:

    And Conservatives are trying to steal the election?
    This is another reason why we have got to “PURGE” their system of purging us!!

  7. proreason says:

    uh, aren’t commissars supposed to live like royalty?

  8. finebammer59 says:

    Didn’t Martha Stewart go to prison for such actions?

    no. she was convicted of lying to the feds.

    what these guys are doing is much worse.

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