As the America economy was cratering in the waning days of the Bush Administration, top lawmakers were talking with the Treasury Secretary and the chairman of the Federal Reserve and then remaking their own personal financial portfolios.
Some 34 members of Congress made changes to their financial holdings after phone calls or meetings with Treasury Secretary Henry Paulson; his successor, Timothy Geithner; or Federal Reserve Chairman Ben Bernanke, The Washington Post reported.
The disclosures are based on a Post examination of appointment calendars and congressional disclosure forms. The members of Congress, many in leadership positions in the House and Senate, changed portions of their holdings 166 times within two business days of speaking or meeting with the administration officials, according to the Post. The 34 include 19 Democrats and 15 Republicans.
“They shouldn’t be making these trades when they know what they are going to do,” Richard Painter, who was chief ethics lawyer for President George W. Bush, told the Post. “And what they are going to do is then going to influence the market. If this was going on in the private sector or it was going on in the executive branch, I think the SEC would be investigating.”
The Post analysis did not turn up evidence of insider trading but the paper said the “review shows that lawmakers routinely make trades that raise questions about whether members of Congress have an investing advantage over members of the public.”
An example cited by the Post involved Rep. Barney Frank, D-Mass. As the municipal bond market grew shaky in the summer of 2008, House Financial Services Committee Chairman Frank held hearings on the market and introduced legislation. On Oct. 17, Paulson called Frank for discussions on the $700 billion Troubled Asset Relief Program, according to the Post.
That day, Frank told his broker to raise cash and the broker liquidated nearly $93,000 in Massachusetts municipal bonds.
Frank told the Post that his conversations with Paulson had nothing to do with his personal financial decisions. Frank eventually reinvested in Massachusetts municipal bonds and the bond market survived the crisis without defaults.
Another involved then-Minority Leader John Boehner, R-Ohio, who was the Bush administration’s point man in the House on the $150 billion stimulus package. On Jan. 23, after Boehner met Paulson for breakfast, he sold between $50,000 and $100,000 from a more aggressive mutual fund and moved money into a safer investment, the Post reported.
Boehner, now Speaker of the House, declined to discuss his transactions and a spokesman said they did not pose a conflict.
Other prominent congressmen named in the story include Sens. Ben Nelson, D-Neb., Kent Conrad, D-N.D., and Mitch McConnell, R-Ky.
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