The image of the starving Congressperson who comes to Washington to help the little people, is outdated and overwhelmingly hilarious at best Congressmen As Securities Traders
With all of the attention being given to insider trading by hedge funds and malfeasance by corporate executives, itâ€™s worth reminding ourselves that the politicians who seek to impose discipline are themselves no angels.
An important study published seven years ago revealed that U.S. senators were reaping returns from stock trading that strongly suggested they were trading on an informational advantage. Profits depended on their seniority, and therefore, presumably, power to influence legislation.
This led to a legislative proposal (the STOCK Act) aimed at prohibiting this trading. Steve Bainbridge has written an article supporting this prohibition with some modifications. He argues (footnote omitted):
Congressional insider trading thus is undesirable, in the first instance, because it creates incentives for members and staffers to steal proprietary information for personal gain. The massive increase in federal involvement in financial markets and corporate governance as a result of the financial crisis of 2008 has made opportunities to steal such information even more widely available to government officials. Second, it gives members and staffers incentives to game the legislative process so as to maximize personal trading profits. Third, inside information can be utilized as a pay-off device. Fourth, it gives members and staffers incentives to help or hurt firms, which distorts market competition.
It will not surprise the cynical that the act was not swept to adoption by the regulatory fever with which Congress has been seized in recent years. Congress apparently is so worried about corruption by corporate money it canâ€™t be bothered with its own conflicts of interest
It is disturbing that those who sit in judgment of companies and their ability to do business with onerous regulations should also be in a position to benefit at all. I don’t want the rich getting richer by going to Washington, or that which is usually the way, getting more powerful. The fact that these politicians are closing the gap on freedom at the same time they rev up the wallet growth for themselves and their families is truly a taint on the body politic! There are no more Mr Smith’s however, we can certainly make sure there are more Mr West’s Awesome Congressman not more Mr Reid’s who speak in our name. Mr Reid’s have a way of getting richer, surprisingly Living Large Off Of We The People not. Whereas Mr. West’s have had the earnest desire and drive to serve, actually serve the Country. We all know the differences in the two types of politician, lets make sure we vote out the Reid types.