For six years, Rep. Louise M. Slaughter pressed her colleagues to co-sponsor legislation that would ban them from using information they gleaned on Capitol Hill to guide their trades in the stock market.
Most lawmakers bristled, offended by the mere suggestion that they would ever engage in such behavior. Others politely listened but walked away — some as recently as last month. Slaughter (D-N.Y.) never expected to hear from them again.
But now, as the Senate Homeland Security and Governmental Affairs Committee prepares to hold the first of two congressional hearings on the topic, Slaughter’s Stop Trading on Congressional Knowledge (STOCK) Act has become an overnight sensation.
Slaughter has 127 co-sponsors, up from the nine she had on Nov. 12, the day before “60 Minutes” aired a piece highlighting investments that congressional leaders made in companies while legislative efforts were underway that may have affected stock values. The piece was based on “Throw Them All Out,” a book released last month by Hoover Institution fellow Peter Schweizer.
“I’ve never seen such an explosion of interest,” said Slaughter, who has served in Congress since 1987. “The day after it ran, when I went through the airport, the TSA agents were asking me about the bill. Suddenly, everyone was interested.”
The piece also sparked interest for the first time in the Senate, where Sens. Scott Brown (R-Mass.) and Kirsten Gillibrand (D-N.Y.) soon introduced separate bills.
Classic insider trading usually involves senior company officials who use their inside knowledge about their firms to benefit themselves financially. It is prohibited by law. No law explicitly prevents members of Congress from profiting on information they pick up in briefings about companies, industries or the economy.
All three bills propose to ban lawmakers and their staffs from using non-public information in making trades on Wall Street. Lawmakers and their top staffers would also be required to report securities transactions in excess of $1,000 within 90 days. Currently, members of Congress report annually, and many do not disclose the dates of trades.
The potential conflicts posed by lawmakers’ investments have received growing media coverage in recent years, in articles in The Washington Post, the Wall Street Journal and the Atlantic magazine. Schweizer said he decided to focus on congressional stock trades after reading a Post article in December 2010 about how Armed Services Committee members are allowed to own stock in major defense companies, even though they require presidential appointees to divest in any company that does at least $25,000 in business with the Pentagon.
“That cast everything into relief,” Schweizer said. “They can own stock in companies that are major defense contractors, and this guy over here has to sell his Coca-Cola stock? That got me angry.”
Frank’s mea culpa
Of all the lawmakers who have joined with Slaughter in recent days, only Rep. Barney Frank (D-Mass.) has publicly acknowledged that he ignored her previous appeals and now regrets it. In a Nov. 16 letter to Rep. Spencer Bachus (R-Ala.), Frank requested a hearing on the issue before the House Financial Services Committee — now scheduled for Dec. 6 — saying he believed that he “neglected to act on a matter that I think is important in establishing confidence in our constituents that we are serving them faithfully.”
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