An Open Letter to the Next Speaker of the House

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"Secrecy, arrogance, and the abuse of power have shattered the bonds of trust between the people and their elected leaders. Repairing that trust requires sweeping change…"
-- Republican House leader John Boehner, expected to be named Speaker of the House

I couldn't agree more, Mr. Soon-to-be-Speaker. And you've certainly laid out an impressive job of work for the upcoming 112th Congress. From what I hear, you're going to put an end to stimulus spending, but grow the economy. Balance the budget, but cut taxes. Curb entitlement spending, but preserve Social Security for our seniors. And of course, end the pernicious practice of legislative "earmarks."

Admirable goals all, and I wish you well in achieving them. But before tackling all of these hard issues, on behalf of investors everywhere, I'd like to ask that you take care of one tiny matter that's been bothering us lately. I'd like you to stop Congress from stealing from your constituents. Stop trading stocks on insider information, garnered from passing laws that affect the companies behind those stocks.

A particularly pernicious practice
Oh, not you, personally. I'm sure you would never stoop so low. (Right?) But if you've been paying attention to the papers lately, it seems that a lot of your colleagues have fewer compunctions. Some of them and their loved ones have been:

  • Diluting the value of the U.S. dollar by printing money to bail out AIG (NYSE: AIG  ) , Bank of America (NYSE: BAC  ) , Citigroup (NYSE: C  ) , and the rest of the alphabetical too-big-to-fail club, while simultaneously shorting the dollar by investing in the ProShares UltraShort 20+ Year Treasury ETF
  • Buying puts on Hovnanian (NYSE: HOV  ) -- essentially shorting housing -- at the same time they were talking up the strength of the U.S. housing market.
  • And generally profiting while the market plummeted, buying shares of the ProShares UltraShort QQQ ETF (NYSE: QID  ) , which pays out 2% gains for every 1% the Nasdaq declines.

They're also setting a bad example for their employees. Just last month, the Wall Street Journal reported that Congressional staffers have been following in their employers' footsteps, placing bets on stimulus legislation that would subsidize the alternative energy market, by buying shares of Sunpower (Nasdaq: SPWRA  ) and Energy Conversion Devices (Nasdaq: ENER  ) .

Can you blame them? From what I hear, your colleagues over in the U.S. Senate have gotten so good at this stuff that, at last report, they were earning average annual profits from the stock market that exceeded the S&P 500's returns by 12% a year!

Good news and bad news
Now, if you want to get up to speed on this issue, I happen to know a couple of folks who can help. While Senators know a good racket when they see it, and are showing no inclination to remove their hands from the Congressional cookie jar, it turns out the House of Representatives contains at least two Congressmen with a bit more conscience.

You may not be aware of this (since you haven't co-signed their bill), but Representatives Brian Baird and Louise Slaughter have proposed a bill that would end insider trading on Capitol Hill. Their proposed "Stop Trading on Congressional Knowledge Act" is not as strong as the disclosure requirements we have in effect here at The Motley Fool. But they're a good first step towards increasing accountability in Congress, and reminding our elected representatives that we sent them to Washington to work for us, not profit at our expense.

So far, nine Congressmen have signed on in support of the STOCK bill. But if I recall correctly from Schoolhouse Rock, that still leaves the bill a bit short of a majority. A few words of support from you might go a long way toward getting this bill the support it deserves.

Act now. This offer expires soon!
You'd better act quick. Rep. Baird will not be returning to Congress next year, since he chose not to stand for re-election in 2010. On a brighter note, I'm sure you'll join me in congratulating Rep. Slaughter on her re-election. Unfortunately, while her victory assures us that Ms. Slaughter will not be a "lame duck" legislator, she's no spring chicken, either. At age 81, she won't be around Congress forever to help you reach your worthy goal of ending "secrecy, arrogance, and the abuse of power" on Capitol Hill.

Then again, in a few weeks' time, you'll have 60-plus new legislators coming in to help you make that goal a reality. Please, please put them to good use.

Yours Foolishly,
Rich Smith (TMFDitty)

Fool contributor Rich Smith does not own shares of any company named above. Check out his latest stock recommendations on Motley Fool CAPS. The Fool owns shares of Bank of America. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. Learn all about the Motley Fool's disclosure policy here. Trust us -- it really is better than the one they've got in Congress.

Read/Post Comments (9) | Recommend This Article (31)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 11, 2010, at 8:54 PM, ilovesumm wrote:

    Great article , these public officials shouldn't be able to trade on insider info.

  • Report this Comment On November 12, 2010, at 4:32 AM, bandybailey wrote:

    Why don't you send this to Fox so the American public would know how corrupt this congress is?

    This is totally outrageous! If you don't send it, you are aiding and abetting. How much did they make shorting Freddie and Fannie?

  • Report this Comment On November 12, 2010, at 8:02 AM, U2I2R wrote:

    The new speaker is either naive or thinks the American public is very naive. His ideas are contradictory. I agree that the investment in corporations should be stopped, but laws as intended do attempt to prevent investment by lawmakers in publicly traded items which they can control. All investments by lawmakers should be in blind trusts without input allowed from the lawmakers. This would prevent this abuse. If the new lawmakers are really sincere about helping the nation, they should work without pay until the budget is balanced!!! The budget should be balanced, not by cutting needed programs and not by raising taxes on the majority of American, but requiring all to pay their fair share. Cutting taxes on the upper level has never worked. They invest the tax savings overseas, not in America. We grew as a nation and economy more in the 50's when taxes were fair for everyone. My dad got taxed at 90% one year, and we survived and prospered.

  • Report this Comment On November 12, 2010, at 8:37 AM, TMFDitty wrote:

    @bandybailey: Just FYI, I know for a fact that Fox Business Network reads the Fool. So ... you can consider that message delivered.

    (Twice, actually. News Corp owns both Fox and the Wall Street Journal, and it is the Journal that's been doing the heavy lifting on this story, rifling through into the financial disclosure forms that Congressmen and high-paid staffers must file once a year. What WSJ knows, you can assume Fox knows as well.)


  • Report this Comment On November 12, 2010, at 9:09 AM, Morgana wrote:


  • Report this Comment On November 12, 2010, at 9:26 AM, mdtopper wrote:

    @U212r and others:

    I agree that something must be done. But if we want to attract talented, intelligent, moral people to serve in congress, we may have to increase the incentives (salarys are way lower than comparably placed private positions). In addition you suggest further hamstringing them by NOT ALLOWING THEM TO BUY STOCKS AT ALL?

    And work without pay? Remember - you get what you pay for!

  • Report this Comment On November 12, 2010, at 9:43 AM, Turfscape wrote:

    Rich, I applaud the article. I've been following this issue with great interest. From everything I have gathered, I'm very sorry to say that this bill...this issue in general...doesn't stand a chance.

    The current state of politics is monopolized by populist rhetoric. As such, the only issues you will see advanced in either the House or Senate over the next two years will be fully-divisive, sound-bite laden, cash-heavy proposals that are specifically designed to make the population feel as though they will be getting dollars put directly into their pockets: Repeal of healthcare legislation, tax cuts, end of entitlements for "them", introduction of entitlements for "you" know, the real "Hoo-Rah-Rah" stuff.

    Simply put, legislation that matters, that solves real problems, is boring. Financial education is boring...not to me, but to the overall population. It's something not well understood and, therefore, not something of great interest.

    For Christmas this year, I will be asking for only one thing: to be wrong on this matter.

  • Report this Comment On November 14, 2010, at 3:44 AM, yosemitebean wrote:

    @Rich - Don't forget about the teapartiers. These bills may pass much easier then people think. We have approximately 60 newbies, 50% of them will be swayed with important sounding titles, a better office, a fancy car, etc., leaving 30. Out of those 30 at least 50% of them will be snowed over with bs in a couple of short weeks leaving 15. Out of those 15 at least 10 of them will be able to be threatened or bought leaving just 5. Now this is where it gets interesting. Out of those 5 at least 2 or 3 of them will be totallky unshakable, unable to be bought, and unable to be silenced. All it takes is for 2 or 3 of them to stand strong, start uncovering ALL of the dead bodies that they find, and then start matching the pork up with the names of the deadbeats that are requesting them. This will be a sight to see. Change is definitely coming to Washington. .

  • Report this Comment On December 24, 2010, at 12:59 PM, KEBSolar wrote:

    The issue is not only stealing from constituents, it's actual manipulation of the stock itself. I worked for one of the companies in which members and staffers are investing and it was beyond me at the time how a company with such questionable technology and inept management could be a force in the industry. Now I know - a cozy relationship with legislators and the administration virtually assures that they benefit from stimulus dollars. Isn't this illegal already!!!!!

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