Monday, November 21, 2011

Do as I say, not as I do

So, you want to take advantage of some information you obtained as a result of your position to make some money in the stock market? Some information that ordinary members of the public are privy to?

If you work in the private sector, just pack your toothbrush if you do because los federales will throw the book at you. Nevermind that markets operate on imperfect information and those who make money do so because they're able to take advantage of the information gap.

We can't have corporate executives taking advantage of their inside information to turn a buck on Wall Street, can we? Putting their own financial interest above that of the company they were hired to run - that just won't do.

But, if you are a sitting member of Congress, by all means, trade away. Gather up all the information you can at that subcommittee meeting. Take notes when that guy from Treasury gives you a briefing. Figure out who's going to win, and who's going to lose, under the terms of that proposed bill.

It's all okay.

After all, the rules that apply to the rest of us don't apply to the 535 men and women in Congress. Or, if they do, they sure as hell aren't applied the same way.

Take insider trading, for instance. There is no statute that makes trading on inside information illegal. Rather, when los federales charge someone with securities fraud, the allegation is generally either that the defendant breached a duty to the source of the information or to the person he traded with.

Of course congressmen have a duty, too. It's a fiduciary duty to act in the best interest of the United States of America - not in the best interests of the representative from some little town in Iowa. But when congressmen trade on the basis of information they've received solely because they're in Congress, they are violating that duty.

Now, thanks to a recent piece on 60 Minutes, the tide is turning. With congressional popularity at an all-time low, there really was no other choice. Now, for the first time since legislation was introduced in 2006, Congress looks to be on the verge of passing legislation that will ban members from trading on information obtained through their role as congressmen.

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