The US Senate burst forth from lethargy on Thursday, passing not one but two major bills with overwhelming bipartisan support. The STOCK Act, which prohibits insider trading by members of Congress and their staffs, passed 96-3, and the JOBS Act, which is supposed to make it easier to for small business to access investment cash, passed 73-26.
This might normally be a cause for celebration. But the details of each bill are a painful reminder of who is really in charge in Washington. While there are some important features to the STOCK Act, it purposefully leaves out any penalty for hedge funds or other Wall Street entities that trade in insider Congressional information. And the JOBS Act is simply a naked attempt to deregulate Wall Street even further.
The STOCK Act’s path to becoming a law is the stuff of high school civics textbooks. 60 Minutes did a report in November detailing how some members of Congress appeared to be trading stocks based what they—and only they—knew about pending legislation affecting particular industries. Politicians reacted to the ensuing public outrage; President Obama asked for legislation to combat it during his State of the Union speech in January, and both chambers of Congress quickly obliged.
The bill, which Obama is now expected to sign within days, bars members of Congress, their family, their staff and some federal employees from profiting from non-public information they learn while working for the government. (Take one example of this slimy practice: in 2008, Representative Spencer Bachus, a powerful member of the House Financial Services committee, sat in on a private meeting with Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke. He was warned the financial system was teetering on the brink of collapse, and then promptly bought option funds that would increase in value if the stock market went down. The Office of Congressional Ethics has found probable cause of insider trading.)
So the STOCK Act is a laudable change. But when it comes to insider knowledge from the halls of Congress, members dumping off a handful of stocks isn’t where the real money is being made. There’s a multimillion-dollar “political intelligence” industry operating in Washington, which seeks to gain knowledge of things only members of Congress and their staffs would know—and it sells that information to massive Wall Street hedge funds, which then makes bets on a far larger scale than any individual member of Congress.