"Insider Trading in Congress"
Sydney M. Williams
It is the hypocrisy that is so offensive. From its earliest days there has been collusion between speculators and politicians – call it cronyism, if you will. As a land surveyor, George Washington (of whom I am a big fan) acquired thousands of acres along the upper Potomac River. In 1785 after the Revolution and before he became President, he was named president of the Potomac Company. The company was formed to make the Potomac more navigable, to build canals around a number waterfalls, with the intent that the river could compete with the Mississippi (controlled by the Spanish) and the St. Lawrence (controlled by the French) for the profitable interior trade. Ultimately the company failed.
CBS’s 60 Minutes ran a segment last Sunday in which they interviewed Peter Schweizer, author of Throw Them All Out. The book’s title refers to the conclusion Mr. Schweizer reached after researching the “insider trading” being done by members of Congress. The term insider trading is in quotations because members of Congress are exempt from the rules that apply to the public regarding trading securities. In fact, Peter Schweizer referred to those entering Congress as engaging in “a venture opportunity.” “There are,” he said, “all sorts of forms of honest graft that congressmen engage in that allow them to become very, very wealthy.” The rules are based on the fact that lawmakers have no corporate responsibilities, conveniently overlooking their responsibility for writing legislation and regulations that govern these same industries and businesses.
Almost as off-putting as the sanctimonious comments made by members of Congress when pontificating about the baddies on Wall Street, was yesterday’s equally specious comment by Senator Kirsten Gillibrand (D-NY), in the wake of the 60 Minutes exposé: “The American people deserve the right to know their lawmakers’ only interest is what’s best for the country, not their own financial interests.” That statement is in sharp contrast to what she and her husband were engaged in three years earlier. In 2008, according to a May 3rd 2010 article in the Wall Street Journal, her husband, Jonathon Gillibrand, made more than 250 transactions in his E*Trade account – most of them put options, many of which were on housing stocks – while she was serving in the House. In an April 22 2010 news release on White House financial regulatory proposals, Senator Gillibrand, dripping with false piety, praised the effort to “rein in excessive risk and leverage in the pursuit of short-term profits.” Her words echoed the old saying, “Now that I’ve got mine, you can’t get yours.”
Ms. Gillibrand has plenty of company from both Parties in this ethical lapse. In September 2008, Representative Spencer Bacchus of Alabama, the then ranking Republican member on the House Financial Services Committee and now its chairman, bought put options on the market the day after a briefing with then Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke who warned of a possible global financial meltdown – a meeting so sensitive that cell phones and blackberries were confiscated. In another instance, Mr. Schweizer, in his book Throw Them All Out, writes that Dennis Hastert (R-IL) was worth a few hundred thousand dollars when he became Speaker of the House in 1999. He left the job eight years later “with a reported net worth of up to $11 million.” Nancy Pelosi, the dissembling, self-righteous former Speaker of the House, with her husband was given the right to buy 5000 shares of Visa on its IPO at $44.00 just as legislation effecting credit cards was making its way through the House. Two days later the stock, now public, was trading at $64.00 – a nice $100,000 profit! CBS correspondent Steve Kroft questioned her on the possibility of a conflict of interest; Ms. Pelosi’s response reflected her scrambled mind: “…it doesn’t…it only has appearance if you decide that you’re going to have…elaborate on a false premise. But it…it…it’s not true and that’s that.” Keep in mind, this woman, as Speaker of the House, was second in line to become President!
As the country and the world was teetering on collapse in 2008 too many in Congress were using privileged information to line their own pockets. Their activity brings to mind the notorious Albert Wiggin. When President of the Chase National Bank of New York in 1929 he shorted shares in his own bank while having the bank buy shares. The trade netted him $4 million and, since he did the trade in a Canadian shell company, he was able to avoid any tax liability. What he did was perfectly legal at the time, but that did not make it morally acceptable.
There are problems our country faces that dwarf the nefarious activities of a few greedy members. Holman Jenkins’ point is well taken when in yesterday’s Wall Street Journal column, he wrote, “After all, the real scandal isn’t what they do with their own money, but what they do with ours.” Mr. Jenkins’ position is understandable. He writes about Senator John Kerry, accused of trading in and out of healthcare stocks during the debate over Medicare in 2003, “Mr. Kerry doesn’t need to stoop to making money. He married it. His wife is worth an estimated $1 billion.”
While I agree with Mr. Jenkins that the real problem is what they do with our money, the mixture of power and money is potentially dangerous. President Eisenhower, in his farewell address, warned of the military-industrial complex. In his book, Mr. Schweizer quotes Benjamin Franklin who warned of the corruptive confluence of the mixture of money and power: “There are two passions which have a powerful influence in the affairs of men. They are ambition and avarice; the love of power and the love of money.” Separate the passions create dynamic growth; co-joined they risk malfeasance.
The other problem is that Mr. Jenkins dismisses too easily the lack of a moral compass such activity reflects. The trading of securities in which Congressional members have been engaged may fall within legal boundaries, but they fail commonsensical ethical standards. As leaders of the country, Congressional members have a responsibility to uphold basic moral standards. They have failed. Mr. Schweizer is right. Throw out what he calls the Permanent Political Class, and prevent them from taking jobs as lobbyists for at least five years.
Thought of the Day
“Insider Trading in Congress”
November 17, 2011It is the hypocrisy that is so offensive. From its earliest days there has been collusion between speculators and politicians – call it cronyism, if you will. As a land surveyor, George Washington (of whom I am a big fan) acquired thousands of acres along the upper Potomac River. In 1785 after the Revolution and before he became President, he was named president of the Potomac Company. The company was formed to make the Potomac more navigable, to build canals around a number waterfalls, with the intent that the river could compete with the Mississippi (controlled by the Spanish) and the St. Lawrence (controlled by the French) for the profitable interior trade. Ultimately the company failed.
CBS’s 60 Minutes ran a segment last Sunday in which they interviewed Peter Schweizer, author of Throw Them All Out. The book’s title refers to the conclusion Mr. Schweizer reached after researching the “insider trading” being done by members of Congress. The term insider trading is in quotations because members of Congress are exempt from the rules that apply to the public regarding trading securities. In fact, Peter Schweizer referred to those entering Congress as engaging in “a venture opportunity.” “There are,” he said, “all sorts of forms of honest graft that congressmen engage in that allow them to become very, very wealthy.” The rules are based on the fact that lawmakers have no corporate responsibilities, conveniently overlooking their responsibility for writing legislation and regulations that govern these same industries and businesses.
Almost as off-putting as the sanctimonious comments made by members of Congress when pontificating about the baddies on Wall Street, was yesterday’s equally specious comment by Senator Kirsten Gillibrand (D-NY), in the wake of the 60 Minutes exposé: “The American people deserve the right to know their lawmakers’ only interest is what’s best for the country, not their own financial interests.” That statement is in sharp contrast to what she and her husband were engaged in three years earlier. In 2008, according to a May 3rd 2010 article in the Wall Street Journal, her husband, Jonathon Gillibrand, made more than 250 transactions in his E*Trade account – most of them put options, many of which were on housing stocks – while she was serving in the House. In an April 22 2010 news release on White House financial regulatory proposals, Senator Gillibrand, dripping with false piety, praised the effort to “rein in excessive risk and leverage in the pursuit of short-term profits.” Her words echoed the old saying, “Now that I’ve got mine, you can’t get yours.”
Ms. Gillibrand has plenty of company from both Parties in this ethical lapse. In September 2008, Representative Spencer Bacchus of Alabama, the then ranking Republican member on the House Financial Services Committee and now its chairman, bought put options on the market the day after a briefing with then Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke who warned of a possible global financial meltdown – a meeting so sensitive that cell phones and blackberries were confiscated. In another instance, Mr. Schweizer, in his book Throw Them All Out, writes that Dennis Hastert (R-IL) was worth a few hundred thousand dollars when he became Speaker of the House in 1999. He left the job eight years later “with a reported net worth of up to $11 million.” Nancy Pelosi, the dissembling, self-righteous former Speaker of the House, with her husband was given the right to buy 5000 shares of Visa on its IPO at $44.00 just as legislation effecting credit cards was making its way through the House. Two days later the stock, now public, was trading at $64.00 – a nice $100,000 profit! CBS correspondent Steve Kroft questioned her on the possibility of a conflict of interest; Ms. Pelosi’s response reflected her scrambled mind: “…it doesn’t…it only has appearance if you decide that you’re going to have…elaborate on a false premise. But it…it…it’s not true and that’s that.” Keep in mind, this woman, as Speaker of the House, was second in line to become President!
As the country and the world was teetering on collapse in 2008 too many in Congress were using privileged information to line their own pockets. Their activity brings to mind the notorious Albert Wiggin. When President of the Chase National Bank of New York in 1929 he shorted shares in his own bank while having the bank buy shares. The trade netted him $4 million and, since he did the trade in a Canadian shell company, he was able to avoid any tax liability. What he did was perfectly legal at the time, but that did not make it morally acceptable.
There are problems our country faces that dwarf the nefarious activities of a few greedy members. Holman Jenkins’ point is well taken when in yesterday’s Wall Street Journal column, he wrote, “After all, the real scandal isn’t what they do with their own money, but what they do with ours.” Mr. Jenkins’ position is understandable. He writes about Senator John Kerry, accused of trading in and out of healthcare stocks during the debate over Medicare in 2003, “Mr. Kerry doesn’t need to stoop to making money. He married it. His wife is worth an estimated $1 billion.”
While I agree with Mr. Jenkins that the real problem is what they do with our money, the mixture of power and money is potentially dangerous. President Eisenhower, in his farewell address, warned of the military-industrial complex. In his book, Mr. Schweizer quotes Benjamin Franklin who warned of the corruptive confluence of the mixture of money and power: “There are two passions which have a powerful influence in the affairs of men. They are ambition and avarice; the love of power and the love of money.” Separate the passions create dynamic growth; co-joined they risk malfeasance.
The other problem is that Mr. Jenkins dismisses too easily the lack of a moral compass such activity reflects. The trading of securities in which Congressional members have been engaged may fall within legal boundaries, but they fail commonsensical ethical standards. As leaders of the country, Congressional members have a responsibility to uphold basic moral standards. They have failed. Mr. Schweizer is right. Throw out what he calls the Permanent Political Class, and prevent them from taking jobs as lobbyists for at least five years.
Labels: TOTD
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