Senators, Act Senatorially -- and Pass the STOCK Act
Salary of members of the United States Congress: $174,000.
Average annual Civil Service Retirement System benefits for retired members as of 2007: $63,696.
But the profits they can make by trading on inside information? Priceless.
Are you fed up with Congress passing laws for the rest of us, while exempting itself from these same laws? Join the club -- and join the Foolish community today in commending the U.S. Senate for taking a step to level the playing field. Last week, they passed the STOCK Act... sort of.
Highway robbery on Capitol Hill
For more than a year now, I've been writing about the STOCK Act -- a new law that would forbid congressmen and their staffers from trading on inside information obtained through their work. Since 2004, when Georgia State economics professor Alan Ziobrowski published a report on the amazing profits congressmen have been earning on the stock market -- profits the professor attributes to the lawmakers "trading with an informational advantage" -- the Act has been introduced into the U.S. House of Representatives three times... and three times killed in committee.
Last month, that changed. 60 Minutes aired an expose describing how U.S. congressmen have used their jobs doing "the people's business" as a path to profit off trading shares of Visa (NYS: V) , General Electric (NYS: GE) , UnitedHealth Group (NYS: UNH) , and others. Viewers were outraged. Support for the STOCK Act exploded.
Within days, a bill that had struggled for years to attract more than a handful of supporters in Congress had dozens of signatories. The number kept climbing, to the point where today the STOCK Act boasts an incredible 235 co-sponsors in the U.S. House of Representatives. Last week, for the first time ever, the STOCK Act received a favorable hearing before the House Financial Services Committee (before hitting a political speed bump).
What about the Senate?
Support in the Senate is also growing. Last week, Sen. Joe Lieberman's Homeland Security and Governmental Affairs Committee considered dueling versions of the STOCK Act, and merged the two into a single bill -- then in a 7-2 vote, approved the bill for consideration by the full Senate! Even better, the Senate version of the bill improves upon the House's version. It not only bans insider trading, period, but tightens up the deadline for Congressmen reporting legal stock trades to 30 days (from the once-annually requirement today).
That's the good news. Now here's the bad news: While Sen. Lieberman's committee has leapfrogged the House in moving its bill to the floor, the chances of STOCK Act approval in the Senate still look slim. In comparison to the House, where a clear majority of elected Representatives now favors passage of the Act, just 31 Senators have signed on to the Senate's versions. Here's how the bill's support looks today:
I don't know about you, but I've seen wedges of Swiss cheese with fewer holes. Over in the House, nearly every state in the Union has sent at least one Representative to Washington to support the STOCK Act. Nearly every investor in America has at least one state rep fighting to level the playing field between Congress and the people it supposedly represents. Not so in the Senate.
A picture is worth 1,000 votes
To look at the map above, you'd think it's hard getting a majority of New Yorkers to agree that insider trading in Congress is wrong. Senators from the Great State of Texas don't want to mess with business as usual, either. Indiana, Kentucky, West Virginia -- tic-tac-toe, three in a row, we're all in favor of the status quo.
Or... not. Judging from the nearly 4,000 signatures we've racked up on our Change.org petition in support of the STOCK Act, and the more than 500 Fool readers who've written us directly, expressing their support, I'd venture to say that banning insider trading in Congress enjoys a whole lot more support than the map above reflects. So what can you do to make the picture above better reflect reality?
That's easy. If you support the STOCK Act:
- First, shoot us a blank email to email@example.com to let us know that trading on inside knowledge of upcoming laws in Congress is not OK with you. We'll keep you up to date on the STOCK Act's progress, and let you know what you can do to help get it passed.
- And second, add your voice to the petition urging Congress to get off its keister and pass the STOCK Act now!
At the time this article was published Fool contributorRich Smithdoes not own (or short) shares of any company named above, butMotley Fool newsletter serviceshave recommended buying shares of Visa.The Motley Foolhas adisclosure policy.We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors.
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