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Posted at 04:38 PM ET, 03/20/2012

Senate to vote on STOCK Act


(Mario Tama - Getty Images)

The Senate will move ahead later this week with the House version of a congressional ethics package, including a formal ban against insider trading on Capitol Hill, but jettisoning tough provisions that had won bipartisan approval in the Senate.

Senate Majority Leader Harry M. Reid (D-Nev.), in a Tuesday afternoon floor speech, announced that he would not compel a conference committee to hash out the differences between the two chambers’ approaches to the STOCK Act, setting up likely final passage of the legislation by early next week.

Despite calls from some lawmakers and government watchdogs to push the Senate version, Reid announced that it would take up too much floor time to move to a conference committee and then vote on the final version later this spring or summer. Instead, the House draft – also approved on a wide bipartisan vote – will be voted on without any amendments allowed.

The legislation will clarify securities laws to ensure that members of Congress and their staffs are covered by laws banning them from making trades based on non-public information they gather from their jobs overseeing government and industry. It will also require more frequent disclosure of financial trades, along with a provision authored by Sen. John McCain (R-Ariz.) that forbids bonuses to executives at the mortgage giants Fannie Mae and Freddie Mac.

However, during the Senate’s debate in February, a pair of additional measures were included that transformed the bill into the most sweeping ethics legislation Congress had considered since 2007. Sen. Charles Grassley (Iowa), the top Republican on the Judiciary Committee, won inclusion of a requirement that the growing K Street sector of political intelligence analysts disclose their activities just as federal lobbyists do. These intelligence consultants do not advocate for specific outcomes, the way a lobbyist does, instead spending their time determining which direction legislation is going and advising hedge funds and other investment houses whether to buy or sell certain industry stocks.

In addition, Sens. Patrick Leahy (D-Vt.), the Judiciary chairman, and John Cornyn (R-Texas) won approval of an amendment that would give corruption investigators stronger tools to prosecute lawmakers following a Supreme Court ruling that watered down a key section of ethics law.

Rep. Louise Slaughter (D-N.Y.), who has labored for seven years promoting the legislation, calls the intelligence disclosure the “most important” provision; on Monday, she demanded an “open process” through a conference committee to advocate for it. Leahy and Grassley wrote to Reid on Monday pleading for either a conference committee or the chance to re-offer their amendments.

“Taking up the House-passed bill without the opportunity for the Senate to reassert its position with respect to these provisions would be wrong. These are two of the most important and substantive provisions in the bill. Without them the legislation would be significantly weakened,” the duo wrote.

The political intelligence disclosure provision, which passed with 60 votes, always faced an uphill battle at winning final passage. In addition to opposition from House Majority Leader Eric I. Cantor (R-Va.), who warned that it was too far reaching, Reid and Senate Minority Leader Mitch McConnell (R-Ky.) also voted against the Grassley amendment.

Instead, the final draft will order up a federal study of the burgeoning industry and request recommendations for any new disclosure laws needed to be considered next year.

In a statement Tuesday, Grassley said Reid’s plans amount to “a real blow for good government and transparency.  It’s a victory for Wall Street and a defeat for the American people.  It’s a victory for the hedge funds and big banks that like the secrecy of the status quo.”

This post has been updated since it was first published.

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