By Gary P Jackson
For those corrupt politicians who thought Sarah Palin was going quietly into the good night, think again losers.
From Sarah Palin via USA Today:
Thanks to the solid new research and recent revelations in Peter Schweizer’s book Throw Them All Out and the subsequent coverage on 60 Minutes, we have concrete proof to explain how members of Congress accumulate wealth at a rate astonishingly faster than the rest of Americans and have stock portfolios that outperform even the best hedge-fund managers’. (Full disclosure: Schweizer is employed by my political action committee as a foreign policy adviser.)
From sweetheart land deals to initial public offering (IPO) stock gifts to insider trading with non-public government information, the methods of unethical wealth accumulation for our permanent political class are endless. The reaction from the Beltway establishment to the revelations concerning insider trading among members of Congress was predictable. First they denied it, then they dismissed the problem as much ado about nothing. Some said there was no need for new laws or action because the Securities and Exchange Commission could prosecute members of Congress under existing laws against insider trading.
But under current law, there is no way the SEC will ever go after a powerful congressman or senator. The SEC never has, even though insider trading prohibitions have existed since the 1930s. Here’s why: Congress sets the SEC’s budget, and senators approve the head of the SEC. Congress uses its power of the purse strings to threaten federal agencies that get in their way.
For example, in 2006 the FBI got a search warrant from a federal judge to comb former congressman William Jefferson’s office. The FBI already had evidence that Jefferson was taking bribes. Congress was furious that the FBI would dare search a fellow member’s office. Members claimed the search was unconstitutional. They even threatened to cut the Justice Department’s budget in retaliation. All this despite the fact that 86% of Americans supported the FBI raid.
A hands-off SEC
Does anyone really think the SEC under current law will have the courage to investigate the insider trading in Congress? Remember that this corruption (and failure to deal with it) encompasses both sides of the aisle. We fool ourselves thinking we can trust an agency dependent on Congress for its budget to investigate Congress.
I hate the idea of more laws, but because our politicians have shown a failure of ethical leadership, we must reassert the rule of law through strong new legislation that holds Congress accountable and prevents retaliation against whistle-blowers and regulatory agencies investigating corruption. Legislation has been put forward, but there are serious concerns that these bills contain major loopholes in stopping congressional insider trading and the gifting of IPO stocks from companies seeking to influence policy. In fact, Robert Khuzami, the SEC’s director of enforcement, testified that the bills as written only make stock transactions related to pending or prospective legislation illegal, not any other insider information trading; and they only cover stock transactions, not options trades, exchange traded funds or mutual funds.
The bills by Sens. Scott Brown, R-Mass., and Kirsten Gillibrand, D-N.Y., are particularly weak. Members of Congress should disclose all trading activities immediately, not after 90 days as their bills propose. More immediate disclosure deadlines (similar to the strict deadlines corporate executives adhere to when trading certain amounts of stock) are imperative for real transparency.
Members of Congress must be required to put their assets into blind and “deaf” trusts. Deaf because we must make it illegal both to trade on non-public government information and to pass on such information. It does no good to set up a blind trust run by a friend, family member, or acquaintance and then casually pass on information to that person. Technically, members of Congress can claim they weren’t actually making the trade or ordering another person to make the trade; they were simply “having a conversation” concerning information any competent trader would know what to do with.
The House bill by Rep. Sean Duffy, R-Wis., is a step in the right direction because it calls for every member of Congress to either establish a blind trust or abide by a three-day disclosure deadline for all trades. (Personally, I’d like to see even stricter deadlines like the ones for corporate executives.) We should insist on tougher provisions to close all insider trading loopholes and IPO stock gifts, and to protect whistle-blowers and regulators against congressional retaliation.
Other congressional ailments
Also, remember that insider trading isn’t the only corruption problem in Congress. Crony capitalism has run rampant for too long and is bankrupting our country. We need conflict of interest provisions on earmarks and other legislation to stop sweetheart land and construction deals.
Our permanent political class relies on an apathetic and uninformed public to get away with this stuff. But if there is one issue that unites Americans across the political spectrum, it’s absolute disgust with the corruption of our elected leaders. Congress and the White House need to earn the American people’s trust again. We the people are not going to give up until we get the sudden and relentless reform we deserve or, as the book says, “we throw them all out” in 2012.