The Stock Act: A Look into Drive-by Lawmaking
Did you know that Congress and the President quietly repealed misguided aspects of the Stock Act a few days ago? I thought not.
Late in 2011, CBS’s “60 Minutes” aired a sensational news story detailing allegations that lawmakers were profiting from investments spawned by non-public information. Harry Reid seized the moment, and in a highly political calculation, brought the STOCK Act (S. 2038) to the Senate floor. The bill banned lawmakers and some aides from buying or selling stocks and other securities based on confidential information. As a means of enforcement, the bill required those effected to report stock and bond transactions within 30 days of the transaction. The bill sailed through the Senate and passed 96-3 on February 2.
Not to be outdone in the game of political grandstanding, the House passed a similar bill under suspension 417-2, circumventing the entire committee process. Differences between the House and the Senate were resolved by unanimous consent and the bill was signed by the President in March.
So in a matter of two months, Congress voted to overcriminalize the undefined and ambiguous vice of insider trading. In their mind, corruption in the legislative process was over.
The reality is that Congress overlooked the real insider trading. The real problem with insider trading is not staffers getting wind of insider information affecting their personal investments. The problem is Congress not following the Constitution and granting special interest handouts to industries and big labor in return for helping them get reelected. The blatant incestuous relationship between big labor or K street and members of Congress is much more important than a questionable ability to affect their personal portfolios with prior knowledge of specific events affecting their investments.
In fact, the idea that 28,000 top executive and legislative branch staffers (those earning more than $120,000) would have to post all of their financial information online was inane and dangerous to begin with. And after a National Academy of Public Administration study was published last month showing how dangerous such a requirement would be, Congress repealed this part of the Stock Act by unanimous consent last week.
Think about it this way. You could have two potential staffers working on the Hill. One is a 60-year-old with a wealth of experience and talent form the private sector. That individual supports the free market and would advocate that his boss vote down any special interest bill. Yet, with his years’ of success in the private sector, he has a substantial portfolio. That individual would have been forced to disclose all his finances. Hence, he would never step foot on the Hill.
On the other hand, you could have a 25-year-old politico with not much of a portfolio, but a penchant to engage in pay-for-play with big labor and K Street. He has no investment portfolio to speak of, and would have been in good shape under the Stock Act. He could then go on to work for a special interest lobbying shop the very next year, after helping secure favors for that industry. This description essentially sums up the lives of thousands of staffers who would never have been affected by the Stock Act. The average age of a staffer is already not much older than a college dorm. This provision of the Stock Act would have dissuaded the few older, more experienced, individuals from ever working on the Hill.
But the broader point is how can Congress go from passing something with unanimous consent one year and repealing it through unanimous consent the following year – without any mea culpa? Yet they refuse to learn their lesson from passing bad bills outside of regular order.
Don’t get me wrong, it’s a good thing they repealed this. They should do things like this more often. They should repeal the ethanol mandate – a true “insider trade” – by unanimous consent as well. There are hundreds of other bills that should follow the same fate. But don’t expect Congress to learn its lesson of due diligence any time soon.
Cross-posted from The Madison Project