Does Congress trade on inside information?
Did you know that it's perfectly legal for members of Congress to trade on information they gather about companies in the course of their work? Not only is this legal, but research suggests that the average member of Congress earns 25 percent higher returns on their investments compared to the average investor. You can't really expect Congress to enforce laws against insider trading if Congress is not bound by the same laws.
This is why it comes as a surprise to me that someone in Congress is actually trying to make insider trading by Congress illegal. Louise Slaughter (D-NY) and Brian Baird (D-WA) have introduced legislation that would prohibit lawmakers and their staffs from trading stocks or engaging in other financial transactions based on information they learn in their jobs that is not also available to the public.
Under the proposal, lawmakers and their staff would have to disclose any stock, bond or commodity trades exceeding $1,000 within 90 days. They also would not be able to pass confidential information to outsiders.
After everything we have been through in the last couple of years, I have almost lost my ability to be shocked by anything. But with the U.S. gaining control of so many huge corporations, the potential for Congress to be an insider trading paradise looks unlimited unless this legislation passes. Who thinks it will become law?
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing.