The House on Thursday overwhelmingly approved its scaled-back version of an ethics reform package that would prohibit insider trading on Capitol Hill and in the executive branch.
On a 417 to 2 vote, the legislation won approval despite complaints from senators and House Democrats that GOP leaders stripped the measure of several key reforms that the Senate had easily approved.
Despite those concerns, lawmakers agreed the best step was to approve this version and head to a House-Senate conference to hash out the differences between the two bills.
After the vote, House Speaker John A. Boehner (R-Ohio) hailed what he called the “strengthened” House bill and House Majority Leader Eric Cantor (R-Va.) said the sweeping vote should put pressure on the Senate - which passed its version 96 to 3 - to just approve the House version.
“We’ve got some work to do to restore the bond” of voters, Cantor said.
The legislation unveiled by formally bans lawmakers and staff members from making financial trades based on non-public information they receive in their positions.
Rather than holding an open, freewheeling debate, as the Senate did last week, House Republicans put the ethics legislation on a fast-track schedule that forbids amendments and requires a two-thirds majority for passage.
Despite those restrictions, Republican and Democratic leaders pledged their support for their version of the Stop Trading on Congressional Knowledge Act, or Stock Act.
Cantor nixed a provision that would have required a burgeoning K Street industry of consultants who glean inside information about legislative proposals, then alert their clients — hedge funds and other investment houses — about the likely outcome so they can buy or sell their stakes in advance. Unlike federally registered lobbyists, who disclose their actions and sources of income, the political intelligence industry has operated below the radar.
“It’s astonishing and extremely disappointing that the House would fulfill Wall Street’s wishes by killing this provision,” said Sen. Charles E. Grassley (R-Iowa), sponsor of the Senate-approved amendment. “The Senate clearly voted to try to shed light on an industry that’s behind the scenes.”
Instead, the House version would mandate a federal study of the industry — which has annual revenue of $100 million to $400 million — so recommendations can be made for legislative action next year.
Cantor dismissed questions about the dropping of the political intelligence disclosure provision as something “outside of what we do” and that it was not part of what the original legislation was intended to do.
He also raised the specter that the language Grassley used to draft the disclosure was so broad it might lead to constituent groups meeting with lawmakers having to file forms based on their questions related to pending legislation.
“What is the consequence of that provision,” Cantor said, suggesting his proposed study of the industry was preferable.
In addition, the Cantor draft dropped a bipartisan provision that the Senate approved on a unanimous voice vote that would have restored some elements of federal corruption law that the Supreme Court unanimously rejected last year. This “honest services” provision served as the basis for the prosecution of lawmakers, lobbyists and former congressional staffers in connection with the investigation of lobbyist Jack Abramoff, as well as the prison sentences issued to Enron executives, but it was declared overly broad by the court.
A bipartisan group from the House and Senate judiciary committees had crafted language restoring some “honest services” provisions.
“If we are serious about restoring faith in government and addressing the kinds of egregious misconduct that we have witnessed in recent years in high-profile public corruption cases, Congress must act now to enact serious anti-corruption legislation,” Sen. Patrick J. Leahy (D-Vt.) said.
House GOP leaders have also forbidden a vote on an amendment to permanently ban line-item spending measures, instead preferring the current earmark moratorium. Rep. Jeff Flake (R-Ariz.) cited The Washington Post’s series this week on earmarking as reason to push a permanent ban.
“If we’re going to remedy insider trading, we ought to remedy this,” he said Wednesday.
Cantor added one measure that was meant as a political poke at Democrats, what aides call the “Pelosi provision,” because it restricts lawmakers from receiving access to initial public offerings of stock. Businessman Paul Pelosi, husband of House Minority Leader Nancy Pelosi (D-Calif.), participated in Visa’s IPO, purchasing 5,000 shares in the fall of 2008. Pelosi’s aides said the transaction was made through his regular broker and have since noted that she was a proponent of legislation in 2009 that the credit card industry opposed.
Pelosi’s spokesman, Drew Hammill, said that the bill was not the bipartisan measure that 285 members had co-sponsored and that Cantor had “considerably weakened” it but that Pelosi supported moving forward on the measure.
“Leader Cantor has put roadblock after roadblock up to slow this bill down, and it is now clear that the only way to heed the president’s call is to pass Cantor’s bill so we can get a conference committee where Democrats will strengthen the final legislation,” Hammill said.
The main thrust of the legislation remains intact, formalizing that insider-trading laws enforced by the Securities and Exchange Commission and other federal entities apply to those working on Capitol Hill and senior advisers in the executive branch. No case of congressional insider trading has been prosecuted, although some legal experts suggest current law would allow for it.
Two other measures that were added to the Senate bill have also been included in the Cantor draft: a requirement that lawmakers and senior executive branch aides disclose details of the mortgage on their primary residences, and a ban on bonuses for top executives at Fannie Mae and Freddie Mac.