The Wall Street Journal ran an interesting item on its front page today, explaining that some congressional Dems are proposing a ban on [tag]insider trading[/tag] on the Hill.
Amid broad congressional concern about ethics scandals, some lawmakers are poised to expand the battle for reform: They want to enact legislation that would prohibit members of [tag]Congress[/tag] and their aides from trading stocks based on nonpublic information gathered on [tag]Capitol Hill[/tag].
Two Democrat lawmakers plan to introduce today a bill that would block trading on such inside information. Current securities law and congressional ethics rules don’t prohibit lawmakers or their staff members from buying and selling securities based on information learned in the halls of Congress.
Reading the report, I kept thinking, “This is legal now?” Apparently so. Officials in the executive branch are already prohibited from trading on inside information, but in the legislative branch, there’s only a weak disclosure element. Lawmakers and their staffs can review legislation, see which companies will be affected by legislation and/or regulations, and take full advantage of their position. In some instances, they can buy and sell themselves, and in other circumstances, they may be in a position to tell other investors, possibly in exchange for [tag]kickbacks[/tag].
Of course, the concerns about congressional insider trading were prompted by actual events. Naturally, they involve Tom DeLay’s office.
The two Democrats who wrote the bill say they were motivated by the trading activity of a former top aide to Rep. [tag]Tom DeLay[/tag], the onetime Republican majority leader in the House. The aide, [tag]Tony Rudy[/tag], bought and sold hundreds of stocks from his computer in the U.S. Capitol in 1999 and 2000, according to financial-disclosure forms and other DeLay aides.
Neither Mr. Rudy nor his lawyer returned calls seeking comment. It is impossible to tell from the disclosure forms whether Mr. Rudy traded stocks based on information he gathered while working as deputy chief of staff and general counsel to Mr. DeLay, then the No. 3 Republican in the House.
Rep. [tag]Louise Slaughter[/tag], the New York Democrat who wrote the bill, said: “Top leadership aides know what is happening before anyone else. The potential for abuse there is incredible.”
Rep. [tag]Brian Baird[/tag] of Washington, the bill’s co-sponsor, said there are “hundreds of billions of dollars on the line on congressional activity. If there is a way to make a profit on that, somebody has probably already figured out a way to do it. And it’s not illegal.”
It should be. We’ll see if the congressional majority embraces the Dems’ proposal.