“Members of Congress are still loosey-goosey about what they require of themselves,” said Painter, who teaches securities law at the University of Minnesota. “I think it’s time for Congress to impose the same rules on themselves that they impose on others. The Stock Act doesn’t do that.”
A shift to Treasury securities
In late 2006, Congress started crafting legislation to overhaul Fannie Mae and Freddie Mac, a major effort to stem a rising tide of defaults on risky loans given to home buyers with poor credit.
As Congress worked to rein in the two government-sponsored lenders, Fannie and Freddie pushed back with aggressive lobbying campaigns, stalling the effort in early 2007.
Paulson started working the Hill, trying to break the deadlock and win support for the revisions. He called and met with a number of members of Congress, including Sen. Ben Nelson (D-Neb.), on this and other reform efforts.
Paulson and Nelson spoke on Jan. 10. The next day, between $250,000 and $500,000 in Lehman Brothers certificates of deposit that Nelson owned matured. (Congressional financial disclosure forms list only approximate ranges.) Nelson also purchased between $100,000 and $200,000 in Treasury notes, a safer investment.
On Feb. 12, Paulson met at 4 p.m. with Nelson in the lawmaker’s office in the Hart Senate Office Building. That day, Nelson bought $50,000 to $100,000 in Treasury bills.
That year, Nelson had only one other call with Paulson and no other meetings, records show. He made 103 other trades during the year, eight of which exceeded $100,000.
Nelson declined to be interviewed. A spokesman said that the senator discussed only policy matters related to disabled veterans during the call and meeting with the Treasury secretary and that the senator learned nothing that would have influenced his trades.
“Like everyone in Congress, Senator Nelson is bound by the laws, rules and guidelines established for members of Congress,” Nelson spokesman Jake Thompson said in a statement. “He carefully follows both the spirit and intent of them. He has not, and would not, have conversations with Executive Branch officials about matters affecting his personal finances.”
Under congressionally imposed ethics laws that cover Treasury secretaries, Paulson and Geithner would have been prohibited from making the same investments. Congress prohibits Treasury secretaries from investing in financial institutions or Treasury securities.