The salary of members of the United States Congress: $174,000.
Average annual benefits for retired members solely drawing from Civil Service Retirement System as of 2007: $63,696.
But the profits they can make by trading on inside information?
Here in the U.S., we're all quite familiar with the phenomenon of Congress taking our money and spending it on things we might prefer they not. It is, after all, Congress' job to raise revenues and spend them in the national interest. (It's right there in the Constitution -- Article I, Section 8, Clause 1.) What we're less familiar with is how Congress often appropriates investors' money through insider trading. That particular part of the job description isn't authorized anywhere in the Constitution. Problem is, it isn't forbidden there, either ...
For more than a year now, I've been doing my darnedest on Fool.com to raise public awareness of the problem of insider trading in Congress. As stock markets plunged and housing prices tumbled in 2008 and 2009, some of our elected representatives and their staffers went around shorting homebuilders and snapping up shares of short-the-Nasdaq ETFs.
And when Congress mobilized to shore up the economy with stimulus funds, some Congressional staffers were caught by the The Wall Street Journal trading shares of SunPower
I've also told you all about the strange fact that the same folks who set up a Securities and Exchange Commission to police malfeasance on Wall Street have established no similar rules to prevent their own trading on information gained in the process of passing laws that affect U.S. companies. And we've told you about the Stop Trading On Congressional Knowledge Act (that's right, the "STOCK" Act) that's supposed to fix this problem -- and how almost nobody in Congress seems interested in signing it. Why, I've even tried to kick start the process by embarrassing new Speaker of the House John Boehner into getting the bill through committee.
All to no avail.
Fourth time's the charm
I personally have penned three columns already on the subject, and while they've garnered a fair amount of praise, some Facebook success, and even an interview on Russian (!?) national television for me, they haven't yet done a lick of good toward getting the law passed. Well, here's hoping the fourth time's the charm. Because if you haven't heard, the STOCK Act is back under consideration before Congress this month.
Unfortunately, it's looking weaker than ever. To date, only six out of the 435 representatives sitting in the House today have cosponsored the bill that would prohibit Congressmen trading on inside information: Rep. Timothy Walz (MN) -- the bill's sponsor, along with Reps. Raul Grijalva (AZ), David Loebsack (IA), Louise Slaughter (NY), Niki Tsongas (MA), and Dennis Kucinich (OH).
Our job today is to give them a helping hand -- and make Congress hear that we're serious about this legislation. We know some of our elected representatives have their hands still stuck in the stock market cookie jar, we're mad as hell, and we're not going to take it anymore.
What you need to know
Congress is stuck in a time warp. For more than five years now, Rep. Slaughter (named above) has co-sponsored versions of this bill. And it couldn't come soon enough. A recent study by four university professors found that members of the House of Representatives beat the market by 6 percent from 1985 to 2001. An earlier study by the same group found that in the 1990s, U.S. senators outperformed the stock market by 12 percentage points per year. For context, that's twice as much outperformance as company insiders manage on average. Why, Warren Buffett and his Berkshire Hathaway
Pardon my bluntness, but if these numbers are accurate, then it appears to me that either:
- Congress is home to some of the savviest stock-picking geniuses in the history of Mankind, or ...
- it's full of crooks.
On her congressional website, Rep. Slaughter quotes law firm partner and former SEC enforcer Thomas Newkirk, who points out: "If a congressman learns that his committee is about to do something that would affect a company, he can go trade on that because he is not obligated to keep that information confidential." There's no law against it. There's no duty of confidentiality to any particular person that's being breached. And barring censure by the House itself for acting "unethically," there's currently nothing anybody can do about it. (And I'd add, in the Senate even the censure thing doesn't work, because the U.S. Senate has not adopted the Code of Ethics for Government Service.)
What you can do about it
It's time we put an end to this. As of this writing, the STOCK Act has been sidelined, shuffled off to die in committee before the House's Subcommittee on the Constitution. If you believe it should see the light of day, and that Congressmen should be forced to publicly vote for or against their "right" to trade on inside information, here's what you should do:
Done yet? That was almost too easy! So how about getting even more involved? If you've got a moment, phone Rep. Trent Franks (AZ), the subcommittee's Chairman, and Rep. Mike Pence (IN), the Vice-Chairman:
Rep. Pence: (202) 225-3021
Rep. Franks: (202) 225-4576
Let them know that you want the STOCK Act (H.R. 1148) approved out of subcommittee and committee and sent to the House floor for a vote.
While you're at it, and in the interests of being completely bipartisan, give Rep. John Conyers a jingle as well. His number is (202) 225-5126.
Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool owns shares of Berkshire Hathaway and Bank of America, and has also shorted shares of Bank of America in a separate account. Motley Fool newsletter services have recommended buying shares of Berkshire Hathaway. 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. The Motley Fool has a disclosure policy.