Psst . . . pass it along: Two congressional Democrats are trying to stop insider trading in Washington.
Representatives Brian Baird of Washington and Louise Slaughter of New York last month introduced a bill that would ban members of Congress and federal employees from using nonpublic information gathered through their positions to trade stock.
“Here’s a town where information is power and money,” says Baird. “To think that people are not taking advantage of this is unbelievable.”
Baird and Slaughter cite an incident in 2005 when building materials company USG’s share price doubled overnight ahead of then Senate majority leader Bill Frist’s announcement that he would proceed with an asbestos bill that was likely to benefit the Chicago-based manufacturer.
In addition to barring government employees from trading on nonpublic information, the bill would require “political intelligence firms,” which gather congressional information for Wall Street, to register with the House and the Senate and make their client lists public. “Political intelligence is a $40 million industry that operates underground without any oversight. It’s time we shed some light on the system,” says Slaughter.
The bill’s announcement received a lukewarm reception with Washington insiders. “I think it has zero chance of passing,” says Melanie Sloan, executive director of government watchdog Citizens for Responsibility and Ethics in Washington. Congress, she notes, “can’t seem to pass any ethics enforcement.”
Harvey Pitt, former chairman of the Securities and Exchange Commission, agrees, for a different reason. He doesn’t see insider trading as a major issue in Washington and says the bill would close only a “modest loophole.”
Pitt, currently head of Washington-based business consulting firm Kalorama Partners, says, “If people trade on nonpublic information, the SEC already has enough weapons. ”
