It's been a long and winding road, America. But on Feb. 9, 2012, you finally booked a win.
Last month, President Barack Obama threw down the gauntlet before Congress, declaring: "Send me a bill that bans insider trading by members of Congress, and I will sign it tomorrow." This morning, the House of Representatives responded by passing the Stop Trading on Congressional Knowledge Act. The bipartisan -- and darn near unanimous -- vote of 417-2, when combined with the 96-3 victory notched in the Senate last week, makes it likely the president will get his wish.
What now?
If you'd like to brush up on your knowledge of the legislative process, you can find the relevant Schoolhouse Rock video right here. But basically, now that both the Senate and House have signed onto the STOCK Act, the next step is to send it to a special "conference committee." There, members of the House and Senate will decide how best to integrate the competing versions of their respective bills into one single document that both bodies can live with.
Once that's decided upon, the bill can go to Obama for signing into law.
What's there to debate?
Three major issues are still on the table before that can happen. First up, the conference committee will need to decide whether to extend the restriction on insider trading, and the requirement to disclose trades, to the executive branch as well as the legislative. The House version does this; the Senate's does not (yet). Misery loves company, however, and if Congress is going to subject itself to the STOCK Act's strictures, I suspect they'll have no problem with extending its application to their colleagues in the executive branch.
More problematic is the House's decision to tack on a restriction against using government office to obtain preferential access to hot IPOs (such as the 2008 Visa IPO that Nancy Pelosi allegedly got in on only by virtue of her holding the office of Speaker of the House at the time). House Republicans did this eminently reasonable suggestion no favors when they tagged it the "Pelosi Provision," in a jab at the former speaker. Still, most of us investors who aren't highfalutin' Congress members hope that reason will prevail, and this provision, too, will make it into law.
The main event
Finally, the big debate: political intelligence firms. My fellow Fool Molly McCluskey told you about these folks in her column last month, but here's the issue in a nutshell: Knowledge is power -- but it's also money. Knowing that Congress is about to set a cap on the swipe fees a bank can charge for using a debit card, for example, can be pure gold for an investor who might be interested in short-selling some banks. PI firms rake in as much as $400 million a year through the business of picking lawmakers' brains for juicy tidbits on upcoming legislation like this, then selling this "political intelligence" to their hedge fund clients and other institutional investors.
But when considering the STOCK Act last week, the Senate seemed to be playing a game of "He loves me, he loves me not" with this provision -- first requiring PI firms to register like lobbyists, then removing this requirement and replacing it with a one-year "study" of the issue... then sticking it right back in and including it in their final version. The House, in contrast, went straight to "He loves me not" and opted for a study rather than an immediate restriction.
Given the money at stake, Rep. Louise Slaughter, one of the two original authors of the STOCK Act, warns that "political intelligence firms have all the potential for corruption that lobbying firms do, but none of the oversight." That's why she put a registration requirement in the STOCK Act in the first place. That's why she's not pleased that the bill that ultimately exited the House did so without the stricture.
The Foolish view
We like the fact that the Senate's version of the STOCK Act includes a registration requirement for PI firms, and we hope that the conference committee agrees. With all the momentum the STOCK Act has gained over the last couple of weeks, I think we can afford to push this one last requirement to make this law even better.
Then we can all cheer along: "He signed you, bill. Now you're a law -- yeah!"
