As Congress weighs a measure that would ban insider trading among lawmakers and federal workers, the conservative author whose book touched off a national maelstrom on the topic insists that the practice rises to the level of corruption.
“There’s no question about it. We are supposed to be a country governed by laws, not by men,” conservative author Peter Schweizer said during an exclusive interview with Newsmax.TV.
A research fellow at Stanford University’s Hoover Institution, Schweizer chronicles alleged abuses by members of both the House and the Senate in his new book, “Throw Them All Out,”
which was heavily featured on “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. But officials have been considering various measures to stop the practice, including the STOCK Act, which has attracted wide support.
“There’s no laws that are broken. They’re free to take these sweetheart, so-called friends and family IPO stock,” explains Schweizer. “One of the reforms I propose is that we need to ban them because they are doled out to friends in terms of people looking for favors.”
Schweizer says there should be a “zero tolerance policy” for any lawmaker who benefits financially from knowledge acquired through their House or Senate jobs, similar to trading rules that have existed for years with respect to corporate executives.
“In the book, what I argue is that we have in Washington a permanent political class that often times they come into office relatively modest and leave wealthy,” he explains. “So I think we need to throw those out that are engaged in self-enrichment and there are people on both sides of the aisle that do it. And I just think we need to have a zero-tolerance policy.”
In the past, he says, lawmakers have been able to hide behind a loose definition of insider trading.
“It excludes the kind of government information that they get access to but the fact of the matter is that the information that members of Congress view all the time is market-moving information,” he says. “They may have oversight of the Food and Drug Administration and find out from somebody in a phone conversation that a particular drug is going to be approved.”
It’s akin to athletes betting on sporting events.
“Now we wouldn’t let a professional athlete do that,” he says. “But they (lawmakers) do this all of the time, literally introducing a piece of information and then trading in the stock in that same sector, picking the winners and selling the losers.”
For example, Pelosi and her husband doubled their stock investment on a highly sought after Visa IPO in a matter of only weeks, according to Schweizer.
“She and her husband were given access to low price, pre-IPO shares of stock — 5,000 shares that they were able to buy for $44 apiece and then they were able to see that value go up by 50 percent in one day, and then more than double in value within a couple of weeks,” he says, adding that the deal took place during Pelosi’s reign as Speaker.
“They were given access to this stock that really hardly any other individual investors were,” he explains. “I would argue the timing was significant because they were given access to the shares at the precise time that Visa was very concerned about two pieces of legislation that would affect its bottom line. And — oh by the way — those pieces of legislation were never even brought by House Speaker Nancy Pelosi to the full house for a vote.”
He says there were at least eight other instances where Pelosi got access to IPO deals.
“There’s simply no reason that a Speaker of the House or any member of Congress should be getting preferred IPO shares of stock at a low price and making this amount of money,” says Schweizer. “It’s designed totally to curry favor. I think that if Nancy Pelosi instead of receiving these IPO shares from Visa had received a shoebox of cash, she would be facing criminal charges right now. And in my mind, it’s really a distinction without a difference.”
He points to one study that reveals a correlation between how lawmakers voted with respect to the TARP bailout in 2008 and their own investment portfolios.
“What they found was the number one determining factor in whether you vote for or against, was not whether you were conservative or liberal, not whether you were Republican or Democrat, but whether you owned stocks in the bank sector,” according to Schweizer. “If you did, you voted in favor of the bailout. If you didn’t, you tended to vote against.”
Similarly, another study by the Journal of Quantitative Economics examined 6,000 stock trades.
“They found that corporate insiders — that is corporate executives trading their own company stock — beat the stock market average by 5 percent a year,” while professional Hedge Funds traders were successful 8 percent of the time and U.S. senators topped them all with a 12 percent success rate.
“So either these guys are far more brilliant and insightful than we’ve ever given them credit for, or something else is going on,” he says. “And I would rather believe something else is going on. And I think the evidence that I present in the book is pretty compelling.”
Editor's Note: To Get Peter Schweizer's book, "Throw Them All Out," at a good price at Amazon.com — Go Here Now.
© 2013 Newsmax. All rights reserved.