"I’m better than you." Apparently, that’s what our members of Congress think. Otherwise there wouldn’t be a law that allows them to get away with activities that are illegal for anyone who isn’t "serving" in Congress.
It’s still not illegal for Congress to trade on inside information. Virginia Representative Eric Cantor must have laid some bets based on his insider knowledge. How else can you explain his decision to delay the Stop Trading on Congressional Knowledge (STOCK) Act?
Congress’ approval rating is currently 11 percent. I say the over/under betting line for Congress’ approval rating by the end of the year is five percent. Cantor, trying to make some money on inside information, the way his colleagues in the House and Senate have, apparently bet the under.
Hands Off the Cookies
The STOCK Act was sponsored by Alabama Representative Spencer Bachus.
Yes, this is the same Spencer Bachus whose insider trades were featured in a scathing report on 60 Minutes. Bachus, with his hands caught in the cookie jar, is now publicly proclaiming that eating cookies before dinner is wrong.
Rather than letting Congress vote on a bill that would ban insider trading by members of congress – a vile act that’s as black-and-white as it gets – Cantor is asking to form a subcommittee to study guidelines on how to draft a provision that will create a task force on whether to further examine right from wrong. Or something like that.
You may recall, several weeks ago, 60 Minutes broke the story that various members of Congress, including Bachus, House leader John Boehner, former House leader Nancy Pelosi and others were trading stocks and options based on inside information. If a CEO or hedge fund manager made the same trade that Bachus made, they’d be paraded handcuffed in front of TV cameras. Those images would run on a continuous loop in the mainstream and financial media for days.
In fact, last Monday hedge fund manager Raj Rajaratnam, who founded the Galleon Group, reported to a federal prison in Massachusetts to begin serving his 11-year sentence. The former billionaire received and traded on inside information about corporate earnings, as well as mergers and acquisitions.
If he had committed the exact same acts from an office on Capitol Hill rather than one on Madison Avenue in New York, he’d be gearing up for his reelection campaign rather than trying to decide between a job in the prison library or kitchen.
The STOCK Act has 180 co-sponsors, is supported by the majority of the House, including 75 members of Cantor’s own party. Yet there’s considerable doubt that the bill will ever become law. According to Westfair Online, Iona College political science professor Jeanne Zaino said she has doubts the bill will pass. Many other political experts and consultants have said the same thing.
Eric Cantor’s momma didn’t raise no dummy, particularly when it comes to the securities business. Chances are he’s very familiar with issues important to the industry. After all, securities companies were the largest contributors to Cantor’s campaign in 2011, donating 64 percent more money than the second-largest backer.
And if he has any securities-related questions, he can probably run them by his wife, who used to work at Goldman Sachs (NYSE:GS), which incidentally was the second-largest single contributor to Cantor, behind The Travelers Companies (NYSE:TRV).
I first wrote about this subject in November when the story broke, and urged you to contact your Representatives and Senators and ask that they not only support the STOCK Act, but demand it. Clearly, some elected officials have received the message loud and clear. But others either think they know better than their constituents, or more likely, hope this issue just fades away in the distraction of everything else we're paying attention to.
Representatives and Senators make more than three times the median household income. Their health benefits are better than most Americans’. Despite their clamoring to end entitlements, they receive pensions for life. And although the vast majority of mutual fund managers - men and women who analyze the market every day - can’t outperform the S&P 500, members of Congress consistently beat the market. That’s not a coincidence...
All investors are looking for angles on how to make as much money in the markets as we can. As law abiding citizens and, more importantly, decent human beings, all we’re asking for is a level playing field. We’re investors who simply seek fairness. We should make a pact that we absolutely will not vote for any member of Congress who votes against the STOCK Act. And that we will spread the word about any Congressman or Congresswoman who apparently believes they’re entitled to special rights to help them line their pockets.
The only reason to vote against the STOCK Act is to keep the easy money coming. It’s time Congress represents us instead of their own self interests. You can find your Representatives’ and Senators’ contact information here. Let them know how you feel.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. Investment U expressly forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees and agents of Investment U (and affiliated companies) must wait 24 hours after an initial trade recommendation is published online - or 72 hours after a direct mail publication is sent - before acting on that recommendation.