Correction: An earlier version of this article incorrectly said that Sen. Ben Nelson (D-Neb.) sold Lehman Brothers certificates of deposit on Jan. 11, 2007. That was the date the investment matured. This version has been corrected.

In January 2008, President George W. Bush was scrambling to bolster the American economy. The subprime mortgage industry was collapsing, and the Dow Jones industrial average had lost more than 2,000 points in less than three months.

House Minority Leader John A. Boehner became the Bush administration’s point person on Capitol Hill to negotiate a $150 billion stimulus package.

In the days that followed, Treasury Secretary Henry M. Paulson Jr. made frequent phone calls and visits to Boehner. Neither Paulson nor Boehner would publicly discuss the progress of their negotiations to shore up the nation’s financial portfolio.

On Jan. 23, Boehner (R-Ohio) met Paulson for breakfast. Boehner would later report the rearrangement of a portion of his own financial portfolio made on that same day. He sold between $50,000 and $100,000 from a more aggressive mutual fund and moved money into a safer investment.

The next day, the White House unveiled the stimulus package.

Boehner is one of 34 members of Congress who took steps to recast their financial portfolios during the financial crisis after phone calls or meetings with Paulson; his successor, Timothy F. Geithner; or Federal Reserve Chairman Ben S. Bernanke, according to a Washington Post examination of appointment calendars and congressional disclosure forms.

The lawmakers, many of whom held leadership positions and committee chairmanships in the House and Senate, changed portions of their portfolios a total of 166 times within two business days of speaking or meeting with the administration officials. The party affiliation of the lawmakers was about evenly divided between Democrats and Republicans, 19 to 15.

The period covered by The Post analysis was a grim one for the U.S. economy, and many people rushed to reconfigure their investment portfolios. The financial moves by the members of Congress are permitted under congressional ethics rules, but some ethics experts said they should refrain from taking actions in their financial portfolios when they might know more than the public.

“They shouldn’t be making these trades when they know what they are going to do,” said Richard W. Painter, who was chief ethics lawyer for President George W. Bush. “And what they are going to do is then going to influence the market. If this was going on in the private sector or it was going on in the executive branch, I think the SEC would be investigating.”

Boehner, now the speaker of the House, declined to discuss his transactions. His spokesman said they did not pose a conflict because a financial adviser executed them and they were made in diversified mutual funds. Other lawmakers also said their financial advisers handled their trades. They said that the timing of the trades and the conversations was “coincidental” and that they did not adjust their portfolios based on what they were told by the administration officials.

Questions about conflicts of interest and possible insider trading on Capitol Hill prompted Congress to pass the Stock Act this year. The act specifically bans lawmakers, their staffs and top executive branch officials from knowingly using confidential information gleaned from their legislative roles to benefit themselves, their family members or friends.

The act does not prohibit lawmakers from trading stocks in companies that appear before them or from reworking their portfolios after briefings with senior administration officials. Top executive branch officials are banned from investing in industries they oversee and can influence — for example, Fed chairmen are prohibited from investing in the financial sector.

The Post analysis did not turn up evidence of insider trading. Instead, the review shows that lawmakers routinely make trades that raise questions about whether members of Congress have an investing advantage over members of the public.

“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.

Nelson “has often sought and had one-on-one conversations with numerous cabinet secretaries under both President Bush and Obama on dozens of issues before Congress,” Thompson said in an e-mail. “That’s what good legislators do, they seek dialogue and understanding at the senior level about local, state and federal policy matters, as well as foreign policy issues.”

Paulson, through a spokeswoman, declined to discuss his conversations with members of Congress during the financial crisis.

Lowering risk

Toward the end of the summer of 2007, the foundation of the nation’s real estate market started to shake. On Aug. 6, the American Home Mortgage Investment Corp., the nation’s 10th-largest mortgage firm, filed for bankruptcy.

Three days later, Paulson was headed to work at the Treasury Department when he received word that the U.S. mortgage crisis and tightening credit markets were spreading to Europe, he would later write in his autobiography, “On the Brink: Inside the Race to Stop the Collapse of the Global Financial System.”

Paulson and Bernanke put their staffs on full alert. The Fed crafted a loan package for the nation’s banking industry. Treasury lawyers scrambled to figure out a way to stabilize the increasingly volatile markets, Paulson recalled.

On Aug. 9, the Dow fell nearly 400 points, its second-biggest one-day drop in five years. The next day, the Fed issued a statement pledging to “provide reserves as necessary . . . to promote trading in the federal funds market.”

At 4:30 p.m. on Aug. 13, 2007, as the markets closed, Paulson called Sen. Kent Conrad (D-N.D.), chairman of the Budget Committee, according to the Treasury secretary’s appointment calendar.

The next day, Conrad adjusted his family’s portfolio for the first time in four months. Conrad reported that a total of between $150,000 and $300,000 was shifted out of three mutual funds in his wife’s 401(k) retirement account. He moved $100,000 to $250,000 of that money into a lower-risk money-market fund within the retirement account.

That year, Conrad had two other calls and one meeting with Paulson. He reported 29 other transactions during the year, including three that exceeded $50,000.

Conrad said his conversation with Paulson had nothing to do with his trades the next day.

“There is absolutely no connection between the two,” Conrad said. “Our records show that Paulson called me about the debt limit extension and that had nothing to do with the reason for my making the trades.

“The decision that my wife and I made with our financial advisers to diversify into lower-risk investments had everything to do with what was happening that was on the front pages over every paper, including yours. His call to me had absolutely nothing to do with those issues.”

Trading amid stimulus plans

By the beginning of 2008, the Bush administration had decided to take a more aggressive approach to confront the growing economic crisis. On Jan. 2, the president told Paulson to consult with members of Congress, investors and the nation’s business leaders to come up with a strategy.

“This was a touchy point for Republicans, but the president was not an ideologue: He wanted to see quick results,” Paulson wrote in his autobiography

On Jan. 18, Bush announced a proposed $145 billion stimulus package designed to give the economy a “shot in the arm.” Paulson reached out to Republican and Democratic lawmakers in an attempt to strike a compromise. The House, not the Senate, would handle the negotiations with Paulson and the White House.

Boehner, the House minority leader at the time, would be the Republican point man on the Bush proposal; then-Speaker Nancy Pelosi (D-Calif.) would represent the Democrats.

In the days that followed, Paulson made frequent calls and visits to Capitol Hill, according to his appointment calendars. He called Boehner on Jan. 21 and again the following morning at 10:45, shortly after Paulson met with Bush to discuss the status of global financial markets. In public, Boehner and Pelosi disclosed little, telling reporters their negotiations were confidential.

On Jan. 23, Paulson had a breakfast meeting with Boehner and Pelosi. The two House leaders then held a brief news conference.

“A lot of plans were discussed,” Boehner said. “But nothing will be agreed to until everything is agreed to.”

Later that day, Boehner, Pelosi and Paulson got together again, this time for a two-hour, closed-door meeting. When they emerged, they told reporters that they couldn’t discuss the details of their discussions.

“We’re just not at that point,” Pelosi said.

“We’re hopeful,” Boehner said.

“I’m not going to comment,” Paulson said.

Boehner would later report that two adjustments were made to his financial portfolio on that day: between $50,000 and $100,000 was transferred out of the more aggressive mutual fund. He also reported purchases of between $50,000 and $100,000 in a less risky fund, spread over that day and four others throughout the year.

That year, Boehner had 46 other calls and one other meeting with Paulson. Boehner made 42 other transactions during the year, including one that exceeded $50,000.

Pelosi, who frequently buys and sells in the market, made no trades around the time she spoke with Paulson, according to her financial disclosure forms.

Boehner’s spokesman, Michael Steel, said the congressman’s trades are handled by an investment adviser. Steel declined to identify the adviser or disclose how often they discuss investment strategies. He said they did not discuss the mutual fund moves that were made on Jan. 23.

“The speaker has no say whatsoever on day-to-day investment decisions,” Steel said. He also noted that mutual funds have been exempted from stricter reporting requirements under the Stock Act because they are broadly diversified and have long been considered to be a “safe haven” for lawmakers.

“The issue, or perception, of insider trading is a moot point,” Steel said.

Making adjustments

On Jan. 24, 2008, the day after Boehner’s trades, the White House formally announced that it had reached a tentative agreement with the House on the stimulus package, which had risen to $150 billion. The proposal, approved by the House, called for giving tax breaks to businesses and rebates to taxpayers.

When the proposal went to the Senate, lawmakers began to make revisions and additions. Several Democrats wanted to attach spending provisions, including one that would extend unemployment benefits. Republicans warned that the passage of the plan was being placed in jeopardy.

Paulson worked the phones to salvage the deal. He called Senate Minority Leader Mitch McConnell (R-Ky.) three times on Jan. 28, and McConnell called Paulson once that day. On Jan. 29, Paulson called McConnell five more times.

The next day, Paulson again called McConnell five times, and McConnell called him three times. The bill had become bogged down in the Senate as lawmakers continued to spar over adding spending measures to the package.

The next day, Paulson called McConnell twice. Senate Democrats pledged to force votes the following week over whether to expand the package, setting the stage for what the White House, Paulson and McConnell had been hoping to avoid: a showdown that could scuttle the deal.

“The stimulus train is grinding to a halt here in the U.S. Senate,” McConnell told reporters on Jan. 31.

That day, McConnell would later report making four trades, each worth between $15,000 and $50,000 in his portfolio, rearranging four mutual funds. He reported selling shares in a one international fund, buying shares in another and reconfiguring his investments in two domestic funds. He hadn’t made a trade since Nov. 20, 2007, and he would not make another until April 14, 2008.

That year, McConnell had 44 other calls and three meetings with Paulson. McConnell made 11 other transactions during the year, including two that exceeded $15,000.

McConnell declined requests for an interview. His spokesman, Michael Brumas, said the senator does not own specific stocks, to avoid the appearance of a conflict, and he does not make his own trades to his funds, relying instead on the advice of an investment adviser.

The adviser, who works for Merrill Lynch in Louisville, Barry Barlow, said he conducts periodic readjustments of McConnell’s portfolio. The moves he made at the end of that January were suggested by Merrill Lynch, not the senator. Barlow said he couldn’t recall whether he spoke to McConnell before the readjustment, but he said the senator frequently tells him to stay away from purchasing individual stocks, to avoid the appearance of a conflict.

“He invests in broad-based mutual funds with hundreds of securities,” said Barlow, who was given permission to speak about the trades by McConnell.

McConnell’s attorney, Russell Coleman, said the trades were authorized by a staff member who worked for the senator. She relayed Barlow’s request to McConnell, who then gave Barlow permission to make the trades, Coleman said.

“They never spoke directly to the senator,” he said. “It’s an important distinction.”

Bailing on bonds

During the spring and summer of 2008, another sector of the economy began to wobble: the market for municipal bonds, which local and state governments sell to raise capital. Normally considered to be one of the safest investments on Wall Street, the muni market was falling victim to the economic crisis.

As chairman of the House Financial Services Committee, Rep. Barney Frank (D-Mass.) had the power to hold congressional hearings and introduce legislation aimed at calming and reforming the bond market. In March, he held a congressional hearing titled “Municipal Bond Turmoil: Impact on Cities, Towns and States.” In June, when the bond market was still in turmoil, Frank introduced two overhaul bills. Bond experts said the market was running scared.

“Investors were leaving en masse. Their fear was everything was coming apart at the seams, and this was next,” Marilyn Cohen, co-author of “Surviving the Bond Bear Market: Bondland’s Nuclear Winter,” told The Post.

Frank told The Post that problems with the bond market were twofold. Rating agencies were applying tougher standards to municipal bonds than private-sector investments, resulting in less favorable ratings. And bond insurers were taking on riskier investments, causing them to accumulate historically high debt. Investors feared the insurers would begin defaulting on bonds.

Despite Frank’s efforts, both bills stalled and fears about the bond market continued.

On Friday, Oct. 17, Paulson called Frank after the markets had closed. Frank said that the discussions probably centered on the $700 billion Troubled Asset Relief Program, known as TARP, and how banks would qualify for funds, the details of which Paulson revealed that following Monday, Oct. 20.

“We had one fight over TARP, and it was over the use of funds,” Frank said. “I wanted some of them to help with foreclosures.”

That day, Frank instructed his broker to raise cash for him, and the broker liquidated nearly $93,000 in Massachusetts municipal bonds in three separate transactions. The investments represented nearly 10 percent of his financial portfolio, according to his financial disclosure form. He said he moved the money into his campaign coffers because his support for TARP that year had placed him in a politically vulnerable position.

Under congressionally imposed rules, Treasury secretaries cannot make the moves that Frank did.

That year, Frank had seven other calls and three meetings with Paulson.

Frank said he worked in Congress to lower interest rates on municipal bonds, working against his own interests, and said his conversations with Paulson had nothing to do with his personal financial decisions.

“Were these things tied to the phone calls? No,” Frank said. “They didn’t tell you what was a good investment or a bad investment. They would tell you what was good or bad for the economy.”

Frank said he eventually was reimbursed by the campaign and reinvested in Massachusetts municipal bonds, because bonds are safe and provide good tax benefits. The bond market survived the crisis without defaults.

“To the extent that people said, ‘Oh, you were protecting your investment,’ I was protecting the financial well-being of Massachusetts,” Frank said. “What the hell else am I supposed to do?”

Deputy graphics director Karen Yourish
and researcher Bobbye Pratt contributed
to this report.