Last Sunday, 60 Minutes had an explosive piece about what appears to be insider trading conducted by members of Congress. It looked at various examples of when elected representatives used non-public information to buy or sell stocks accordingly, thus profiting from their privileged status.
Washington took notice of the story in a major way. It was the subject of several floor speeches this week, and bills were introduced in both the House and Senate—including one sponsored by Republican Senator Scott Brown—to bar such deals, which are currently well within legal limits and probably even within Congressional ethics rules.
The thrust of the story is that when members of Congress are allowed to have vast stock portfolios while also working behind the scenes on legislation that could affect various industries, and this might motivate members to act not in the public interest, but for their own enrichment.
It’s an important story, in some ways more ominous than 60 Minutes suggested, and in some ways much less so. There have been charges of unfairness, particularly by some liberal blogs, in relation to the accusations towards House Minority Leader Nancy Pelosi. So let’s have a look.
Where the piece falls short
The piece, reported by Steve Kroft, named a few specific examples of potential insider trading. Kroft confronts both Pelosi and House Speaker John Boehner about shaky seeming transactions. He asks Pelosi about her participation in an IPO of Visa stock, just as the House was debating a credit card reform bill that would hurt companies like Visa:
And former House Speaker Nancy Pelosi and her husband have participated in at least eight IPOs. One of those came in 2008, from Visa, just as a troublesome piece of legislation that would have hurt credit card companies, began making its way through the House. Undisturbed by a potential conflict of interest the Pelosis purchased 5,000 shares of Visa at the initial price of $44 dollars. Two days later it was trading at $64. The credit card legislation never made it to the floor of the House.[…]
Congresswoman Pelosi pointed out that the tough credit card legislation eventually passed, but it was two years later and was initiated in the Senate.
That sounds awful, and footage of Pelosi stuttering and struggling to respond to Kroft’s questions at a press conference make it seem worse. But this version of events leaves out a lot of key facts: that bill did pass through a House committee, on the very last day of votes before the House adjourned for the November elections. Kroft is heavily suggesting that Pelosi didn’t bring the bill to the floor so that she might profit on her newly acquired stock, but doesn’t mention that there was no time left to do so and that a new Congress was soon to arrive in Washington that January anyhow. Kroft also doesn’t mention that the new Congress, with Pelosi leading the House, passed the Dodd-Frank financial reforms which were deeply opposed by credit card companies, and that before she bought her stock, she helped pass the Credit Cardholders’ Bill of Rights, which was also opposed by the industry.