Washington DC, Jun 5, 2011. Most people think that insider trading rules that sent Martha Stewart to federal prison apply to everyone. Unfortunately, they don't.
Members of Congress and their staffs are exempt from these laws. They can use insider information to buy and sell stocks at their advantage. It is all perfectly legal.
This is because the SEC has no authority to regulate Congress, and the Congress has chosen not to regulate itself.
For example, Congressional aide Chris Miller nearly doubled his $3,500 stock investment in a renewable-energy firm in 2008. It was a perfectly legal bet, but it's one that no ordinary investor could make.
Mr. Miller was the top energy-policy adviser to Senate Majority Leader Harry Reid, D-NV, who helped pass legislation that wound up benefiting the firm.
Jim Manley, a spokesman for Mr. Reid's office, initially defended Mr. Miller's purchase of shares in the company, Energy Conversion Devices Inc. He said the aide had no influence over tax incentive
But eventually, Mr. Manley added: "Mr. Miller showed poor judgment and Senator Reid has made it very clear to Chris and all his staff that their actions must not only follow the law, but must meet the higher standards the public has a right to expect from elected officials and their staffs."
Mr. Miller isn't the only Congressional staffer making such stock bets. At least 72 aides on both sides of the aisle traded shares of companies that their bosses help oversee, according to a Wall Street Journal analysis of more than 3,000 disclosure forms covering trading activity by Capitol Hill staffers for 2008 and 2009.
The Journal analysis showed that an aide to a Republican member of the Senate Banking Committee bought Bank of America Corp. stock before results of last year's government stress tests eased investor concerns about the health of the banking industry.
The aides identified by the Journal said they didn't profit by making trades based on any information gathered in the halls of Congress. Even if they had done so, it would be legal, because insider-trading laws don't apply to Congress.
A few lawmakers proposed a bill that would prevent members and employees of Congress from trading securities based on nonpublic information they obtain. The legislation has languished since 2006.
"Congressional staff are often privy to inside information, and an unscrupulous person could profit off that knowledge," says Vincent Morris, a spokesman for Rep. Louise Slaughter (D., N.Y.), a leading backer of the "Stop Trading on Congressional Knowledge Act," or STOCK Act. "The public should be outraged there is no law specifically banning this."
When the bill was introduced nearly six years ago, just 14 other lawmakers endorsed it. The current version of the bill has fared worse: Only nine lawmakers support it. There is no companion legislation in the Senate.
Congressional aides have ringside seats on the making of laws that affect American business. Receiving salaries up to roughly $170,000 a year, they can glean information about policies and government action before the public does. They have access to information about hearings or legislation that can move stocks and markets.
Unlike many Executive Branch employees, lawmakers and aides don't have restrictions on their stock holdings and ownership interests in companies they oversee. Congressional rules say that requiring employees to do so could "insulate a legislator from the personal and economic interests that his or her constituency, or society in general, has in governmental decisions and policy." This means that they - like Wall Street titans - are incentivized to lie, cheat and steal.
It is perfectly legal for Members of the House and the Senate, and their staffs, to trade on insider information. But... do these generous rules extend to the executive branch as well?
Obviously, President Obama is not only "bright, articulate, and clean" but he is also a very gifted investor.
We will never know precisely how President Obama was able to make so many good investments, because the media refuses to investigate his finances.
They apply an entirely different standard to him than they did to former President Bush.