At a press conference earlier this month, House Democratic Leader Nancy… (Jim Lo Scalzo / European…)
The news program "60 Minutes" and Newsweek magazine made a big deal over the weekend of claims that former House Speaker Nancy Pelosi and current Speaker John A. Boehner may have benefited financially from trading stocks on insider information.
The reports, which have been picked up by news organizations around the country, suggest that many members of Congress may be getting rich trading on information available exclusively to lawmakers.
The specific allegations have been rejected completely by Pelosi, Boehner and other members who were cited in the reports. And some longtime Congress-watchers think the current debate fails to acknowledge the reason why members of Congress -- unlike, say, a judge or a Defense Department procurement officer -- are allowed to trade freely in stocks.
The weekend news stories grew out of a book that will be released Tuesday "Throw Them All Out," which addresses the broader issue of officials getting rich through public service. The author, Peter Schweizer, a fellow at the conservative Hoover Institution, calls for an end to the "double standard" that allows members of Congress to engage in insider trading but prohibits a corporate executive from doing the same.
Here's a quick summary of the most high-profile trading allegations made over the weekend: Paul Pelosi, husband of the then-speaker, bought more than $1 million worth of Visa stock in March 2008 through an initial public offering. The House Judiciary Committee passed a bill later that year that addressed “swipe fees,” the charges assessed by credit-card companies on their debit cards. "60 Minutes" correspondent Steve Kroft asked Pelosi whether she used her power as speaker from blocking that legislation from getting to the floor, a move that presumably could have contributed to the stock's profitability.
Pelosi's allies rejected the report Sunday and today. Her spokesman, Drew Hammill, pointed out that the "60 Minutes" account “failed to note that the legislation . . . was reported out of the Judiciary Committee on Oct. 3, 2008 – the day the House was consumed in passing TARP and also the last day the House was in session before the November election." A separate statement from the chairman of the Judiciary Committee, John Conyers, said there was never any expectation that the bill would get to the floor -- and he applauded Pelosi's role in pushing consumer protection legislation to protect credit card holders.
The "60 Minutes" and Newsweek stories also cited Schweizer's finding that Boehner was trading in healthcare stocks shortly before significant changes were made in the healthcare bill then moving through the House.
“I have not made any decisions on day-to-day trading activities of my account and haven’t for years. I do not do it, haven’t done it and wouldn’t do it,” Boehner said during a Washington press conference earlier this month when Kroft asked about the transactions.
In an interview, Schweizer said he could not say with any certainty whether specific members gained improperly. "My objection was to a double standard whereby the permanent political class gets to play by different rules than the rest of us. Most of us have to abide by insider trading laws and most of us in our employment have to abide by conflict of interest rules."
The report will likely add fuel to a growing debate about whether to restrict congressional stock trading or to require more rigorous disclosure. There is conflicting evidence on the topic. An academic study released earlier this year found members receiving unusually high returns from the stock portfolios.
But another study found just the opposite. Much of the ongoing debate is summarized in the current issue of the Atlantic Monthly, in an article by editor Megan McArdle.
Stan Brand, a former House counsel who advises members of Congress on ethics matters, urges calm. There may be a need for reform, but more facts are needed. He says Congress members are explicitly permitted to trade stock -- for a reason.
"The current rules state that every member has an affirmative duty to vote on a given legislative matter, unless they have a direct pecuniary interest" that could be affected directly by the vote. "A stock trade has never been considered pecuniary" because Congress members are part of a very large voting bloc and one member has only limited ability to influence a legislative outcome.
So, in the 1970s,congressional ethics panels allowed members holding New York City bonds to vote on a bailout for the city. The same was true for members who held shares in Chrysler before the auto bailout. If members of Congress -- who were intended to be citizen legislators with private personal and business interests -- had to recuse themselves for every stock they owned, it might be difficult to get a quorum on key votes, Brand said.
In his book, Schweizer goes beyond stocks to discuss how members of Congress made gains in property deals connected to transportation earmarks that they sponsored. Recently reformed lobbyist Jack Abramoff said he heard a lot about stock trading from members of Congress.
But even his anecdotes suggested there are bigger, more sinister problems stirring in Washington's ethical swamp -- notably the influence of highly paid lobbyists and a Washington career path that promises stratospheric salaries to members of Congress and staffers after public service.
In an interview last week with CNBC, Abramoff recalled members of Congress bragging about their stock trades. "It was more, 'Look at me, I'm a real great stock trader,'" Abramoff said. "I was making far more money than they were. So I wasn't as impressed as perhaps they thought I'd be."
Watch the 60 Minutes report here: