By Alexander Bolton - 01/31/12 02:07 AM EST
The White House and Democrats have seized on legislation barring lawmakers from making insider stock trades as a political weapon to use against House Majority Leader Eric Cantor (R-Va.) and his GOP colleagues.
The Senate voted 93-2 on Monday evening to advance the Stop Trading on Congressional Knowledge (STOCK) Act, which prohibits lawmakers from using non-public information for financial advantage.
The overwhelming vote came after Senate Majority Leader Harry Reid (D-Nev.) charged behind-the-scenes GOP opposition was holding up the debate. A senior GOP aide denied the allegation.
Cantor sought to head off the Democratic attack by releasing his own statement Monday night that said he was pleased the Senate was moving forward with the STOCK Act. At the same time, Cantor said, there were areas where the Senate legislation could be improved.
Democrats want to build on the momentum they gained when House Republicans initially objected to a two-month extension of the payroll tax cut. They are operating with a similar playbook on the STOCK Act by moving legislation through the Senate, where Democrats hold the majority, and then demanding that the GOP-held House act.
Senate Democrats underlined their argument on Monday by pointing to reports last fall that Cantor ordered House Financial Services Committee Chairman Spencer Bachus (R-Ala.) to cancel a markup of the STOCK Act.
“It’s regrettable that the majority leader of the House stepped in to stop the chairman of the Financial Services Committee from having a markup on the STOCK Act in December,” Sen. Debbie Stabenow (D-Mich.) told reporters on a Monday conference call. “That was very unfortunate and I hope they’ll reconsider and allow him to proceed.”
An aide to Cantor said reports that he ordered Bachus to pull back were not accurate.
The markup was postponed, the aide said, because Democratic and Republican members of the Financial Services Committee and chairmen of other committees with jurisdiction had concerns about the legislation.
“A significant number of members of the committee on both sides of the aisle have indicated a desire for additional time to study this issue before the committee moves forward with the markup that was announced for December 14,” Bachus said in a statement last month.
Cantor said he plans to move the legislation after House lawmakers strengthen and expand it. An aide to Cantor said the legislation would be changed to cover real estate transactions and members of the executive branch.
“Leader Cantor plans to move an expanded version of the STOCK Act through the House in February to make it clear that those in Congress are subject to the same laws as everyone else,” said Laena Fallon, Cantor’s spokeswoman.
“Building upon the Senate bill, this common-sense proposal will not only deal with insider trading of stocks, but also prevent all federal officials and employees from using insider information for profit in other areas in a constitutionally sound way. As Leader Cantor has said, he strongly supports increased disclosure to prevent any sense of impropriety and ensure the public’s confidence and trust in our elected officials,” she added.
Some of the initial GOP reluctance to put the bill on the fast track could stem from the fact that it is originally a Democratic bill, first sponsored by former Rep. Brian Baird (D-Wash.) and Rep. Louise Slaughter (D-N.Y.). Rep. Tim Walz (D-Minn.) has replaced Baird as co-sponsor.
The legislation has 250 co-sponsors — only five of the 34 Republican members of the Financial Services panel have signed on as supporters.
The overwhelming majority of Democrats on the Financial Services Committee — 22 of 27 — have co-sponsored the legislation.
Sensing a political advantage, President Obama has poked at Congress’s lax rules on insider trading.
“Send me a bill that bans insider trading by members of Congress; I will sign it tomorrow,” he said at last week’s State of the Union address. The White House doubled down on Monday by releasing a statement just hours before the Senate vote that urged passage.
Until late last week, Senate Democrats showed no signs of planning to move the legislation immediately. When Reid was asked about Obama’s call for restrictions on members of Congress trading stocks, the Democratic leader did not mention any intention to bring the STOCK Act to the floor.
The “60 Minutes” report on insider trading hit both Republicans and Democrats. House Democratic Leader Nancy Pelosi (Calif.) seemed especially hard-hit after the report focused on eight initial public offerings she participated in with her husband. One, with Visa, Inc., saw her investment increase by nearly 50 percent in two days, according to CBS. An aide to Pelosi called the report “a right-wing smear.”
Pelosi helped inoculate herself by quickly supporting the STOCK Act, while Republicans have been slower to sign on.
The issue has fast gained political momentum since the “60 Minutes” report aired.
When Bachus canceled the markup in December, the legislation only had about 40 co-sponsors, according to a House GOP aide.
House Speaker John Boehner (R-Ohio) was mentioned in the report for buying health insurance stocks after lawmakers realized the so-called public option health insurance plan would not be in the 2010 healthcare reform bill. That proposal could have undercut the profits of insurance companies significantly.
Boehner said he does not have any input in the day-to-day management of his portfolio.
“I have not made any decisions on day-to-day trading activities in my account and haven’t for years. I do not do it, haven’t done it and wouldn’t do it,” he told reporters last year.
The Senate bill states that lawmakers and their staffs have a “duty of trust and confidence” to the public that they would violate by trading on non-public information.
Current laws do not prohibit lawmakers from profiting from nonpublic information they learn in the course of their duties. The Senate legislation gives lawmakers a fiduciary responsibility for such information, opening them to penalties for making trades with insider knowledge.
The Senate bill also requires lawmakers to file financial disclosure forms electronically, and instructs the Ethics Committee to issue guidance on land deals.
Senate Democrats say the legislation they brought to the floor this week would cover all federal employees and land deals.
“It would be covered because basically this bill says that when you get non-public information that you have a duty to the public not to use that information to benefit personally,” said New York Sen. Kirsten Gillibrand (D).