The U.S. House voted to strengthen the ban on insider trading by members of Congress and other government officials amid a record-low public approval rating of the way lawmakers do their work.
The measure, approved 417-2 today in Washington, would bar members of Congress, their staffs and some executive branch workers from trading stocks, commodities or futures based on non-public information they learn on the job. The Senate passed a different version of the bill, S. 2038, on Feb. 2.
The House measure, offered by Majority Leader Eric Cantor, a Virginia (BEESVA) Republican, omits a Senate provision that would set a new disclosure requirement for companies that gather political information and sell it to investors.
“Can you believe what a few people in the House did to put this bill together behind closed doors?” Senator Charles Grassley, an Iowa Republican who sponsored the provision in his chamber, said today on Bloomberg Television.
Grassley said he will continue working to require the disclosure. “I’m not going to forget about this, and it’s not going to go away,” he said.
President Barack Obama has urged Congress to pass the insider-trading measure, which would require members of Congress, as well as some government officials and workers in independent federal agencies, to report any trades of $1,000 or more within 30 days. The rule wouldn’t apply to widely held investment funds.
Fannie, Freddie (FMCC)
Voting against the measure today were Republican Representatives John Campbell of California and Rob Woodall of Georgia. The bill also would block bonuses for executives of Fannie (FNMA) Mae and Freddie Mac while the mortgage-financing agencies remain in government conservatorship.
Though members of Congress aren’t exempt from existing federal insider-trading laws, the Constitution’s protection of their “speech or debate” may make it hard to investigate potential violations under current law.
A Gallup poll yesterday showed that a record-low 10 percent of Americans approve of the job Congress is doing, down from the previous low of 11 percent in December. The nationwide poll was conducted Feb. 2-5 among 1,029 adults.
CBS’s “60 Minutes” reported in November that some members of Congress, including House Speaker John Boehner of Ohio and Minority Leader Nancy Pelosi of California, bought stock in companies while legislation that might affect those businesses was being debated. Both said they did nothing wrong.
Pelosi, during floor debate today, called the House bill “much diminished” from the Senate version, though she urged lawmakers to vote for it so the matter can be sent to a conference committee to create “the strongest possible bill.”
Wall Street Lobbyists
White House press secretary Jay Carney yesterday criticized the changes being made in the House. He said the Senate legislation “is being weakened behind closed doors by House Republicans” under pressure from Wall Street lobbyists.
The House version deletes a requirement in the Senate bill that would extend some lobbyist disclosure rules to cover people involved in so-called political intelligence.
The House bill instead would order a study on political intelligence, defined as communication with members of Congress, congressional staff or executive branch employees to gain information that is sold to clients who intend “to use the information to inform investment decisions.”
The Senate disclosure provision “raises an awful lot of questions” about what it would cover, Cantor said today. “The thrust of this bill is about making sure that none of us in elected office or those in the executive branch are able to profit from nonpublic information.”
The Senate’s disclosure provision was the subject of a rare weekend call on Feb. 4 for members of the Securities Industry and Financial Markets Association, which represents companies including Goldman Sachs Group Inc. (GS) and JP Morgan Chase & Co., according to two people with direct knowledge of the call. An analysis for the group said the provision might require bank research analysts and others to register with Congress and disclose contacts with government officials.
Andrew DeSouza, a spokesman for the Securities Industry and Financial Markets Association, said the group wouldn’t comment on the proposed legislation.
Minnesota Democrat Tim Walz, who sponsored a similar provision in the House, said bank analysts weren’t the target of the political intelligence disclosure rule. Walz said he would support clarifying the language to exclude bank analysts if it would help reinstate other disclosure requirements that Republican leaders dropped.
The House measure includes a provision Republicans call a “Pelosi provision” to bar lawmakers from participating in initial public stock offerings that aren’t available to the general public.
Representative Louise Slaughter, a New York Democrat who was the initial sponsor of the legislation, told reporters she didn’t intend to micromanage the financial transactions of lawmakers.
Slaughter accused House Republican leaders of including the IPO provision “to cause grief” to Pelosi, whose husband’s purchase of stock in Visa Inc. (V) during a 2008 initial public offering was highlighted by “60 Minutes.”
The House bill also would extend to senior executive branch officials, federal judges and senior judicial employees an existing rule requiring disclosure when they are in negotiations about a possible new job.
Cantor’s version leaves out language by Senate Judiciary Committee Chairman Patrick Leahy, a Vermont Democrat, that would have tightened rules on public corruption while stiffening fines.
Dropping that language from the House bill is a missed opportunity “to enact serious anti-corruption legislation,” Leahy said in an e-mailed statement.
The House Judiciary Committee had adopted language similar to Leahy’s. It was designed to overturn a 2010 Supreme Court decision -- in the case of former Enron Corp (ENRNQ). executive Jeffrey Skilling -- that made it harder for the Justice Department to prosecute public officials for depriving citizens of their “honest services.”