Members of Congress repeatedly blocked moves to enforce insider trading laws on themselves because they don’t want to be bothered by cumbersome rules, says retired House member Brian Baird, whose unsung efforts to stop the trading are finally getting respect.
“What was troubling to me was not that they thought it wasn’t wrong, but they thought it was too inconvenient,” Baird told Newsmax in an exclusive interview. Baird welcomed moves finally to look at the issue that he pushed throughout his six terms in Congress, which ended with his retirement in 2010.
“Not only is this good policy, it’s good politics,” said Baird from his home in Edmonds, Wash. “People out there think the rules should apply to Congress too. They want it to be fair and just and consistent.”
Baird’s STOCK (Stop Trading On Congressional Knowledge) Act failed to gain traction on Capitol Hill despite four attempts to introduce it. He never got more than six colleagues to sign on as co-sponsors and the bill went nowhere.
But now, leading Republicans like Sen. Scott Brown of Massachusetts, and Sen. Joe Lieberman, the Connecticut Independent, are throwing their weight behind the anti-insider trading fervor.
Brown filed a bill to prohibit insider trading in Congress, and a key Senate committee has agreed to hold a public hearing on the measure.
The Massachusetts Republican’s bill would bar members or employees of Congress and the executive branch from using nonpublic information obtained through their public service for the purpose of investing for personal financial gain.
Lieberman, chairman of the Senate Committee on Homeland Security and Governmental Affairs, announced Wednesday that the committee would hold a hearing to examine how insider trading laws apply to Congress.
“Insider trading by members of Congress — if it occurs — is a serious breach of the public trust,” said Lieberman.
“No one in Congress should be enriching themselves based on information to which the general public has no access,” said Lieberman. “Our hearing will set the record straight about how existing laws and ethics rules apply to Congress and whether they are sufficient to prevent unethical market trading.”
In the House, Reps. Louise Slaughter, D-N.Y., and Tim Walz, D-Minn., who had already re-introduced the measure in March, issued a statement urging the bill to be taken up.
The insider trading probe gained steam with the publication of a new book, “Throw Them All Out,” by conservative author Peter Schweizer, a research fellow at Stanford University's Hoover Institution and one-time aide to Sarah Palin, who details alleged abuses by politicians on both sides of the House and Senate.
The book was heavily featured on Sunday’s "60 Minutes" with reporter Steve Kroft going after leaders of the two parties in the House on camera. Both Speaker John Boehner and former Speaker Nancy Pelosi denied they had done anything wrong.
For example, following a top secret briefing about the impending financial collapse in 2008, Congressman Spencer Bachus. R-AL, bought options that would rise as the market collapsed. That's exactly what it did.
Boehner, during the healthcare debate in 2009, allegedly loaded up on health insurance stocks just before the “public option” was removed from the Federal healthcare reform legislation.
Pelosi, D-Calif., was granted access to the Visa IPO back in 2008 while the House was considering credit card legislation that would hurt the credit card industry. Her initial $220,000 investment went up $100,000 in two days.
When asked about insider trading allegations at a press conference earlier this month, Boehner said, "I have not made any decisions on day-to-day trading activities of my account and haven’t for years. I do not do it, haven’t done it and wouldn’t do it.”
The watchdog group Citizens for Responsibility and Ethics in Washington blasted the content of the “60 Minutes” special, arguing that it “did a disservice” to Pelosi and Boehner and “undermined the case” for the Stop Trading on Congressional Knowledge Act, which was introduced in 2006.
Baird also appeared on the show, telling Kroft, “One line in a bill in Congress can be worth millions and millions of dollars.
"There was one night when we had a late, late night caucus and you could kind of tell how a vote was going to go the next day,” he added. “I literally walked home and I thought, ‘Man, if you ... went online and made some significant trades, you could make a lot of money on this.’”
Baird a Washington State Democrat who is now vice president for government affairs with shipbuilders Vigor Industrial, welcomed the announcement.
“It is a bipartisan problem and there should be a bipartisan solution,” he told Newsmax. “There are good people on both sides and people who stretch the limits on both sides, so it shouldn’t be a political issue.
“Even if it is my best friend and closest colleague who is using inside information to trade he should be punished.”
Baird said that whenever he tried to push his Bill he would be stonewalled. “There is no question whatsoever that members of Congress hold and trade stocks relevant to their committees,” he said. “That should be banned.
“Insisting on blind trusts would be the easiest way of dealing with it, but that would not solve the problem unless you ban giving information to others. For instance it is not difficult to see that it is wrong to give information to a donor that they can make money off.”
But Congress has for years exempted itself from the very rules that have put people like domestic goddess Martha Stewart and more recently hedge fund manager Raj Rajaratnan behind bars.
“It is not explicitly stated in Congress’ ethics code,” said Baird. “And we exempted ourselves from reporting requirements that apply to hedge fund managers and corporate CEOs. They have to report within 48 hours if they make a significant trade. We have to report once a year, retroactively. In fact if you make a trade in January, it doesn’t have to be reported until the following May.”
Baird said that at one point he changed his bill to allow for reporting to be delayed for 90 days in a bid to get more members to back him. But still they would not. “Really it should be 48 hours,” he said.
He quoted one example of a discussion about asbestos regulations among members that was not know to the wider public. “There are times that our discussions are non-public,” he explained.
But it leaked out from a leading senator’s office and the next day trading in companies involved in the asbestos industry doubled. “If that had happened in the corporate world the SEC would have swarmed all over it,” he said.
Georgia State University Professor Alan Ziobrowski found that senators’ stock portfolios beat the market by 12 percent annually, while those of House members were 6 percent higher. Ziobrowski called such returns abnormally high.
Even if his STOCK Act is not passed, Baird is happy that new light has been shed on the problem. “It will have a salutary effect,” he said. “Anyone who is thinking of making a trade proximate to their work wlll think twice and anyone who has made a trade in the past should be worried.
“Also it will open up a whole new realm for opposition researchers,” he predicted. “They should start looking into the trading records and committee assignments of incumbents.”
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