Senators, Act Senatorially -- and Pass the STOCK Act

Salary of members of the United States Congress: $174,000.

Average annual Civil Service Retirement System benefits for retired members as of 2007: $63,696.

But the profits they can make by trading on inside information? Priceless.

Are you fed up with Congress passing laws for the rest of us, while exempting itself from these same laws? Join the club -- and join the Foolish community today in commending the U.S. Senate for taking a step to level the playing field. Last week, they passed the STOCK Act... sort of.

Highway robbery on Capitol Hill
For more than a year now, I've been writing about the STOCK Act -- a new law that would forbid congressmen and their staffers from trading on inside information obtained through their work. Since 2004, when Georgia State economics professor Alan Ziobrowski published a report on the amazing profits congressmen have been earning on the stock market -- profits the professor attributes to the lawmakers "trading with an informational advantage" -- the Act has been introduced into the U.S. House of Representatives three times... and three times killed in committee.

Last month, that changed. 60 Minutes aired an expose describing how U.S. congressmen have used their jobs doing "the people's business" as a path to profit off trading shares of Visa (NYSE: V  ) , General Electric (NYSE: GE  ) , UnitedHealth Group (NYSE: UNH  ) , and others. Viewers were outraged. Support for the STOCK Act exploded.

Within days, a bill that had struggled for years to attract more than a handful of supporters in Congress had dozens of signatories. The number kept climbing, to the point where today the STOCK Act boasts an incredible 235 co-sponsors in the U.S. House of Representatives. Last week, for the first time ever, the STOCK Act received a favorable hearing before the House Financial Services Committee (before hitting a political speed bump).

What about the Senate?
Support in the Senate is also growing. Last week, Sen. Joe Lieberman's Homeland Security and Governmental Affairs Committee considered dueling versions of the STOCK Act, and merged the two into a single bill -- then in a 7-2 vote, approved the bill for consideration by the full Senate! Even better, the Senate version of the bill improves upon the House's version. It not only bans insider trading, period, but tightens up the deadline for Congressmen reporting legal stock trades to 30 days (from the once-annually requirement today).

That's the good news. Now here's the bad news: While Sen. Lieberman's committee has leapfrogged the House in moving its bill to the floor, the chances of STOCK Act approval in the Senate still look slim. In comparison to the House, where a clear majority of elected Representatives now favors passage of the Act, just 31 Senators have signed on to the Senate's versions. Here's how the bill's support looks today:

I don't know about you, but I've seen wedges of Swiss cheese with fewer holes. Over in the House, nearly every state in the Union has sent at least one Representative to Washington to support the STOCK Act. Nearly every investor in America has at least one state rep fighting to level the playing field between Congress and the people it supposedly represents. Not so in the Senate.

A picture is worth 1,000 votes
To look at the map above, you'd think it's hard getting a majority of New Yorkers to agree that insider trading in Congress is wrong. Senators from the Great State of Texas don't want to mess with business as usual, either. Indiana, Kentucky, West Virginia -- tic-tac-toe, three in a row, we're all in favor of the status quo.

Or... not. Judging from the nearly 4,000 signatures we've racked up on our Change.org petition in support of the STOCK Act, and the more than 500 Fool readers who've written us directly, expressing their support, I'd venture to say that banning insider trading in Congress enjoys a whole lot more support than the map above reflects. So what can you do to make the picture above better reflect reality?

That's easy. If you support the STOCK Act:

  • First, shoot us a blank email to imoscovitz@fool.com to let us know that trading on inside knowledge of upcoming laws in Congress is not OK with you. We'll keep you up to date on the STOCK Act's progress, and let you know what you can do to help get it passed.
  • And second, add your voice to the petition urging Congress to get off its keister and pass the STOCK Act now!

Fool contributor Rich Smith does not own (or short) shares of any company named above, but Motley Fool newsletter services have recommended buying shares of Visa. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.


Read/Post Comments (10) | Recommend This Article (34)

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 December 22, 2011, at 1:45 PM, QuaceraJohn wrote:

    For a good look at the crony capitalism being practiced by the friends (contributors) of the government go to www.recovery.gov

    For fun search "BNSF" and see the 91pages of grants, contracts & perks made to that company in thanks for its owners support of the current regime.

  • Report this Comment On December 23, 2011, at 6:50 AM, skypilot2005 wrote:

    Rich,

    Please direct me to The Fool’s SAVE THE WHALES petition drive.

    Is Moscovitz coordinating that one too? Every minute he spends on petition drives, he can’t spend analyzing stocks. Do you think that is smart? Do you think that is acting Foolishly? I don’t.

    This is just what we Fools need; another petition drive. You are really thinking "Outside of The Box". I suggest you create a new section titled “Petition Drive of The Week”. Did you guys come up with this unique concept at your last Frat House meeting?

    I suggest you could pull down the CAPS section and replace it with the Petition Section. Our score could be based on how many times we e-mail Moscovitz per month.

    There are only dozens of other political websites.

    I submit TMF needs to place some adults in charge and refocus your energies on enriching us as investors. That is your strength.

    To save time, please see my comments here:

    http://www.fool.com/investing/general/2011/12/15/take-action...

    Fellow Fools; Remember that each time you REC one of these type of articles you are just encouraging them to drive TMF image off the road and into the ditch.

    I am a Fool in order to Enrich myself. Period.

    Happy Holidays and…

    Fool On

    Sky Pilot

  • Report this Comment On December 23, 2011, at 5:55 PM, TMFGebinr wrote:

    Hi Sky Pilot,

    Thanks for sharing your comments. An entirely Foolish thing to do. However, I think you're laboring under a bit of a misunderstanding on why we're doing this.

    We at TMF believe that the investing playing field should be level for all players. That's why we supported (and testified before Congress on) the adoption of Reg FD over 10 years ago. This removed the advantage Wall Street insiders and analysts had over individual investors from obtaining material information from publicly traded companies before anyone else could obtain it.

    It is a similar situation here. Again, we're arguing in favor of leveling the playing field. This time, we're arguing that members of Congress should not be able to preferentially benefit themselves based on material inside knowledge they possess.

    You are free to join your voice to ours or not as you see fit. In the meantime, we'll continue both arguing for a level playing field for all investors -- which benefits everyone -- and continue analyzing companies and making investment recommendations in our various services.

    Cheers,

    Jim

  • Report this Comment On December 23, 2011, at 6:52 PM, dennyinusa wrote:

    Sky Pilot

    This is what all good investment organization should do, is educate people to things that put us at a disadvantage. Then together we can work to correct the problem. When congressmen, bankers, corporations, unions or Wall Street has inside information it destroys trust in institutions that we rely on throughout society. Once trust is lost the whole system starts to breakdown. I assumed insider trading was illegal for everybody; I thank TMF for this information and the work they are doing to level the playing field for everyone.

  • Report this Comment On December 23, 2011, at 8:13 PM, miltonf wrote:

    So why do we need a ne w law? Why can't we simply say they are subject to the same law as everyone else?

  • Report this Comment On December 23, 2011, at 11:13 PM, sumrall wrote:

    Dear fellow Fools: I believe insider trading is against the law for ALL of us. However, Senator

    Kerry of MA., where I live, thinks it's fine for him to make trades on soon to be enacted legislation because his wife (heiress to the Heinz catsup fortune) doesn't give him lunch money [and a kiss on the head] each morning.

    Why can't we all be put on the same medical plan as my Senator has? Roll the presses, After all, our money says it's good for all debts-public and

    private.

    It logically follows that there is no such thing as a national debt of $15 TRILLION. If you don't believe me, read a one dollar bill.

    Flame off.

  • Report this Comment On December 24, 2011, at 8:05 AM, skypilot2005 wrote:

    On December 23, 2011, at 5:55 PM, TMFGebinr wrote:

    "This time, we're arguing that members of Congress should not be able to preferentially benefit themselves based on material inside knowledge they possess.

    You are free to join your voice to ours or not as you see fit. In the meantime, we'll continue both arguing for a level playing field for all investors -- which benefits everyone -- and continue analyzing companies and making investment recommendations in our various services."

    I see your point.

    I'd be careful about the type of visibility you are creating by advocating the types of action you are encouraging Fools to take.

    I'd report it and move on. Advocating a petition and lettering writing campaign is all together something else.

    Perception is reality. Accurate or not.

    All the best.

    Merry Christmas,

    Sky Pilot

  • Report this Comment On January 03, 2012, at 2:56 AM, ujuj wrote:

    Tt's time to know what is the most valuable thing in your in life?

    http://youtu.be/zXKV78VERio

  • Report this Comment On January 04, 2012, at 8:56 AM, 3rdcitizen wrote:

    I would support banning congress from being permitted to trade in the stock market period. They were elected to represent the people of this country, not create loopholes for themselves. .

  • Report this Comment On January 10, 2012, at 4:26 AM, thidmark wrote:

    The last time I signed a MF petition, I was bombarded with other petitions from change.org. And I'd say 95 percent of them were tailored for the batsh-t crazy element of the left.

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