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Isn't "Insider Trading" supposed to be a bad thing?


There are laws against it after all...

But guess who is exempted from the laws which prevent private persons from trading on information not available to the general public?  Need a hint?  They number 535...

Excellent Guess!

Congress (both the House and the Senate) exempted themselves from the laws prohibiting insider trading.  What's more, they appear to have been trading on insider information to substantial benefit.


House members in the know score 'abnormal' stock profits, study says

 
By Valerie Richardson The Washington Times

...

An extensive study released Wednesday in the journal Business and Politics found that the investments of members of the House of Representatives outperformed those of the average investor by 55 basis points per month, or 6 percent annually, suggesting that lawmakers are taking advantage of inside information to fatten their stock portfolios.

"We find strong evidence that members of the House have some type of non-public information which they use for personal gain," according to four academics who authored the study, "Abnormal Returns From the Common Stock Investments of Members of the U.S. House of Representatives."

To the frustration of open-government advocates, lawmakers and their staff members largely have immunity from laws barring trading on insider knowledge that have sent many a private corporate chieftain to prison.


Positively Orwellian.  All pigs are equal under the law, but the law does not apply to congress pigs?  And we're not talking a small percentage of our Congress taking advantage of this exception to the law that the rest of us must abide by.

Unsurprisingly, the Senate enjoys an even greater information advantage than the House:

In a 2004 study, the same professors found that U.S. senators also enjoy a "substantial information advantage" over the average investor -- and even corporate bigwigs -- when it comes to picking stocks. The latest study shows that members of the Senate outperform their House colleagues by an average of 30 points per month.
The "surprise" lies in which party has benefited most from such insider trading:

Despite the GOP's reputation as the party of the rich, House Republicans fared worse than their Democratic colleagues when it comes to investing, according to the study. The Democratic subsample of lawmakers beat the market by 73 basis points per month, or 9 percent annually, versus 18 basis points per month, or 2 percent annually, for the Republican sample.

"Given the almost folkloric belief that Wall Street invariably favors Republicans, the superior performance of trades made by Democratic representatives may seem surprising," the study authors said.

Color me un-surprised.

Hat Tip to Mata Harley at Flopping Aces who has much more on the matter, including attempts to bring forward legislation to end the exemption. 
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Comments (17)

That's why we need somethin... (Below threshold)
TexBob:

That's why we need something like this.

Congressional Reform Act of 2011

1. Term Limits.


12 years only, one of the possible options below..

A. Two Six-year Senate terms
B. Six Two-year House terms
C. One Six-year Senate term and three Two-Year House terms

2. No Tenure / No Pension.

A Congressman collects a salary while in office and receives no pay when they are out of office.

3. Congress (past, present & future) participates in Social Security.

All funds in the Congressional retirement fund move to the Social Security system immediately. All future funds flow into the Social Security system, and Congress participates with the American people.

4. Congress can purchase their own retirement plan, just as all Americans do.

5. Congress will no longer vote themselves a pay raise. Congressional pay will rise by the lower of CPI or 3%.

6. Congress loses their current health care system and participates in the same health care system as the American people.

7. Congress must equally abide by all laws they impose on the American people.

8. All contracts with past and present Congressmen are void effective 1/1/12.

9. All congressmen must leave office by the age of 55 so that they may enjoy living under the laws they create for many years.

The American people did not make this contract with Congressmen. Congressmen made all these contracts for themselves.

Serving in Congress is an honor, not a career. The Founding Fathers envisioned citizen legislators, so ours should serve their term(s), then go home and back to work.

When I read of things such ... (Below threshold)

When I read of things such as this, I think enough is enough. Our royalty is the political class and they are a major pain in the a**

Time for very serious changes...

TexBob,How about a... (Below threshold)
Rodney Graves Author Profile Page:

TexBob,

How about a Constitutional Amendment?

The Congress shall pass no laws from which its members and their staffs are exempted.

All current laws which exempt Congress members and Congressional staff must be amended to apply to Congress members and their staffs within two years of the adoption of this Amendment. Any laws which exempt Congress members and Congressional staff will be held null and void two years and one day after adoption of this Amendment.

And I don't see any way to ... (Below threshold)
James H:

And I don't see any way to end it right now, honestly. Once upon a time, the opposition party might get elected, then lay down some new laws. These days, the opposition party just elbows aside the old majority for a place at the trough.

IMO, members of Congress and their immediate family (spouses, juvenile children, perhaps adult children and grandchildren) should be required to put their assets, other than shares in nonpublic companies, into blind trusts for the duration of their terms in office.

Democrats are quite capital... (Below threshold)
Tsar Nicholas II:

Democrats are quite capitalistic when it comes to their own money, as opposed to your money (the latter of which they view as their property too), so the results of this survey are not at all surprising.

"Democrats are quite capita... (Below threshold)
GarandFan:

"Democrats are quite capitalistic when it comes to their own money"

and while they don't mind passing taxes, they sure as hell go out of their way not to pay them.

Right Senator Kerry?

<a href="http://www.opensec... (Below threshold)
PBunyan:
Yep, looks like the Democra... (Below threshold)

Yep, looks like the Democrats actually really do understand business better than the Republicans.

Since if they're all benefiting from insider trading, that means the Republicans still do worse even with all that insider info.

Bahhh. Four legs good, two ... (Below threshold)
iwogisdead:

Bahhh. Four legs good, two legs better!!!

The right and left may actually have something to agree on. Throw them all out.

How about all assets of Congressional members (and their spouses) must be placed in T-bills. The problem with a blind trust is that the trustee is not really blind.

And, if there's a violation of this or of insider trading laws, prison!!

Then, everyone send all of their money to the iwogisdead Blind Intervivos Irrevocable Beneficial Revocable Educational Discretionary Trust and Sandblasting Company.

In other words, we're all screwed.

jim x opines:<blockqu... (Below threshold)
Rodney Graves:

jim x opines:

Yep, looks like the Democrats actually really do understand business better than the Republicans.

Since if they're all benefiting from insider trading, that means the Republicans still do worse even with all that insider info.

Because on planet "x" there is no possibility that the Republicans could engage in less insider trading than the Democrats have...

Because on planet ... (Below threshold)
Because on planet "x" there is no possibility that the Republicans could engage in less insider trading than the Democrats have...

Sure, there's that possibility. Also there's the possibility that the Republicans engage in *more* insider trading than the Democrats. Seems to me that the two possibilities balance out.

So insider trading is an ex... (Below threshold)
Bill:

So insider trading is an example of business acumen? Please.

What it really says is that... (Below threshold)
jim m:

What it really says is that the dems with all their accusations of greed and corruption are just projecting their own beliefs and tendencies on the GOP. The only reason they accuse anyone of corruption is that they assume that anyone would engage in unethical and corrupt activity if given half an chance. They assume that because they are already engaged in that very activity.

Jim x,The simplest... (Below threshold)
jim m:

Jim x,

The simplest explanation is that the Republicans engage in less unethical activity and that is exactly the conclusion you would draw were the situation reversed. Your responses demonstrate the truth of my assertion that the left actually thinks in the way they accuse the Republicans of doing. They are incapable of conceiving of the notion that anyone would think differently so they jump to tarring their opponents in the hopes of making them out to be the guilty party and to distract from their on offenses.

TexBob,You would n... (Below threshold)
Deke:

TexBob,

You would need a convention for that to happen. We might be getting closer to a call for one with the government becoming more excessive over time, take for example the heavy handed lobbying efforts by the TSA and DOj in the Texas state legislature over the "groping" bill, Federal bueracrats threating and lobbying directly state legislators, wow!

A convention could accomplish many things, with most states being controlled by conservative legislators.

1: Art 1: Term limits of 12 yrs for federal service excluding running for Pres. Taking away retirement and forcing them to live under the same laws as the ppl.

2: Art 2: Executive branch can't mandate any regulation or fees w/o approval of congress.

3: Art 3: SCOTUS and Fed Bench to be re-confirmed every 10 yrs to coincide with census and decisions can be overturned by 3/4 vote of congress. This will put a kabosh to the modern practice of legislating from the bench.

Looking at amendments some suggestions

1: Inserting English as the official language, all business shall be conducted in plain standard English, including the printing of all gov't documents, this will save millions of dollars.

2: Re-word and insert "The right of the individual citizen to keep and bear arms shall not be infringed"

The 14th can be cleaned up to include citizinship to those born here to legal residents, visitors or those brought here against their will.

Finally, prob one of the most important, a balanced budget amendment with plain language to not allow for gimmicks that will put a reign on out of controll spending.

I'm sure there are other ideas that would limit the growth and controll of the federal government and a wide open convention, the type we would see if called by the states, is, imo, just what we need.

Requiring members of congre... (Below threshold)
Tina S:

Requiring members of congress from abstaining on votes that would have an affect on any investments they hold would help.

Tina S,That would ... (Below threshold)
Rodney Graves Author Profile Page:

Tina S,

That would be a rule of the House and/or Senate which would carry with it the threat of censure...

Jail time seems much more appropriate, which is readily accomplished by making the insider trading laws applicable to Members of Congress and their staffs.




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