It looks like the longest running insider trading scheme may be in jeopardy. Now that government agencies are major stakeholders in a variety of companies and the tidal wave of regulation is getting closer to the shore, the time has finally come to consider a prohibition on lawmakers using non-public information (learned on-the-job) for investment decisions. Accumulating an impressive portfolio of battered banks and auto makers has led at least some lawmakers to question the ability of politicians to avoid doing something unethical.
Congress and the federal government are now so enmeshed in the operations of our financial markets that the potential for abuse by members of Congress, congressional staff and federal employees is staggering," Rep. Louise Slaughter (D-N.Y.) said at a hearing of the oversight and investigations subcommittee of the House Committee on Financial Services.
No stranger to the appearance of impropriety themselves, SEC Inspector General David Kotz remarked
The SEC had essentially no compliance system in place to ensure that its own employees, with tremendous amounts of nonpublic information at their disposal, did not engage in insider trading themselves
A 2004 study revealed senators made approximately 25% more on investments than the average joe. Assuming the legislation passes and lawmakers have to take their trading ethics pledge, that number might get chopped down to 20%.
Congress Mulls Trading Curbs for Its Own [Washington Post]