By Peter Sullivan - 11/24/11 04:18 PM EST
Politically vulnerable lawmakers are lining up as co-sponsors of legislation that would ban congressional insider trading.
A “60 minutes” report earlier this month indicated that members of Congress have been trading stocks based on knowledge gained from their positions, a practice that does not violate the law.
Before the report, a House bill that would outlaw the practice only had nine co-sponsors. In the week following the “60 Minutes” segment, that number jumped to 92. Of the 83 additions, 19 are facing competitive reelection races as defined by the Cook Political Report.
Sen. Kirsten Gillibrand (D-N.Y.) introduced a third version three days later. She and four of the seven co-sponsors are up for reelection in 2012. Sens. Jon Tester (D-Mont.) and Claire McCaskill (D-Mo.), who both face races rated as toss-ups, are among those that have signed on.
The House bill, titled the Stop Trading on Congressional Knowledge (STOCK) Act, was first introduced in 2006 by then-Rep. Brian Baird (D-Wash.) and Rep. Louise Slaughter (D-N.Y.). The measure was reintroduced it in each Congress since then, but the bill never got out of committee and never received more than 14 co-sponsors until the “60 minutes” piece aired.
Now, both the House Financial Services and Senate Homeland Security and Governmental Affairs Committees have scheduled hearings on the legislation next week.
Politically vulnerable House members who have cosponsored the measure this month include Reps. Allen West (R-Fla.), Jason Altmire (D-Pa.), Larry Kissell (D-N.C.), Charles Bass (R-N.H.), Dave Reichert (R-Wash.) and Leonard Boswell (D-Iowa.).
Baird is not cynical about the sudden support for his bill after it languished for so long.
"I'm just happy that it's getting attention now," Baird told The Hill. "I don't want to pass judgment on the past. Let's move forward and get it passed."
House Minority Leader Nancy Pelosi (D-Calif.) and Speaker John Boehner (R-Ohio) lashed out at the “60 Minutes” report, which focused on the two House leaders, among others. Neither Pelosi nor Boehner is a co-sponsor.
Andrew Eggers, a lecturer in government at the London School of Economics, and Jens Hainmueller, assistant professor of political science at MIT, co-authored a study in June of this year finding that congressional stock portfolios actually underperformed the market index by 2-3 percent between 2004 and 2008. This result runs counter to a study by Georgia State University professor Alan Ziobrowski, cited by Brown in his hearing request, which found that in the 1990s, senators beat the market by 12 percent and representatives beat it by 6 percent on average annually.
In playing down the substantive importance of the STOCK Act, Eggers and Hainmueller also point to the fact that congressional ethics rules already prohibit the practice. The House Ethics Manual states that "all government employees, including officeholders" should "never use information received confidentially in the performance of governmental duties for making private profit."
But they told The Hill the bill does have political value.
"I think the value is sort of symbolic," Hainmueller said. "It probably will help salvage whatever credibility Congress has left."
"If I'm a member of Congress, I want to be on the side of whatever reform is being proposed, especially if I'm facing reelection," Eggers said.
The "60 minutes" report alleged that Boehner and Pelosi have traded stocks based on information gained from their positions.
The CBS News show reported that Boehner bought stock in private health insurance companies in 2009 while helping kill the public option. Boehner responded by saying he is not involved in his day-to-day trading. In addition, a House GOP aide said, "The idea that the Republican Leader in the House opposed the 'public option' — policy favored by the left of the left — for personal profit is, frankly, stupid."
The STOCK Act would bar members and their employees from using or sharing information they gain from their positions in financial trades. It requires firms that specialize in obtaining information that could be financially useful to register like lobbying firms. The measure also mandates members and their employees to report financial trades in excess of $1,000 within 90 days.
Baird hopes that this reporting requirement will be tightened to within 48 hours of the trade, which is the way he originally wrote it. In the bill's struggles before its sudden popularity, this provision changed. "I was convinced to change it to 90 days in the hope of getting more co-sponsors," Baird said. "Obviously that didn't work out."
Other members who have co-sponsored the bill and are not in competitive reelection races include Reps. Chris Van Hollen (D-Md.), Ted Poe (R-Texas) and Barney Frank (D-Mass.).