Don’t be fooled by noise about reforming Insider Trading rules for Congress — it’s a scam, with lots of loopholes, says Yale law prof Jonathan Macey.
First, the background:
“Members of Congress already get better health insurance and retirement benefits than other Americans. They are about to get better insider trading laws as well.
Several academic studies show that the investment portfolios of congressmen and senators consistently outperform stock indices like the Dow and the S&P 500, as well as the portfolios of virtually all professional investors. Congressmen do better to an extent that is statistically significant, according to [a 2004] study . . . The trading is widespread.
These results are not due to luck or the financial acumen of elected officials. They can be explained only by insider trading based on the nonpublic information that politicians obtain in the course of their official duties.”
Now for the kicker:
“Congress’s rules would be clear and precise. And not too broad; in fact they are too narrow. For example, the proposed rules in the Stock bill are directed only at information related to pending legislation. It would appear that inside information obtained by a congressman during a regulatory briefing, or in another context unrelated to pending legislation, would not be covered . . .
If the law passes in its current form, insider trading by Congress will not become illegal. I predict such trading will increase because the rules of the game will be clearer. Most significantly, the rule proposed for Congress would not involve the same murky inquiry into whether a trader owed or breached a “fiduciary duty” to the source of the information that required that he refrain from trading.”
Is this what is meant by “Doing the people’s business?” No wonder why Congress’s approval ratings are at 9% — a record low.
Congress’s Phony Insider-Trading Reform
WSJ, DECEMBER 13, 2011
This post originally appeared at The Big Picture and is posted with permission.