This has been said before, but it is worth saying again. The idea that Congress needs to pass a bill to keep members of Congress and their staffs from insider trading is the reason Americans have no confidence in the institution. It is tantamount to passing a bill that says members of Congress cannot sell illegal drugs on the floor of the House or Senate.
The new legislation, called the Stop Trading on Congressional Knowledge Act, was passed in the Senate by a margin of 96 to 3. It now goes to the House for what is an almost certain passage there. The president then gets to sign a bill that says that people should not do something they know not to do.
Insider trading is one of the most widely covered subjects about Wall St. That means that no one who follows the subject in the media could be in the dark. This has been particularly true since Galleon Group hedge fund founder Raj Rajaratnam went to jail and former Goldman Sachs director and past head of McKinsey & Co. Rajat K. Gupta was charged due to evidence each used information he should not have used to try to make money in the stock market.
Some experts argue that insider trading laws are open to wide interpretations. The head of one of the largest hedge funds, Steven A. Cohen of SAC Capital Advisors, recently said that insider trading has to be examined on a case-by-case basis. He knows it if he sees it, but has no objective means of measurement. That argument is spurious. Cohen has been around Wall St. long enough to know when he is even close to the white line.
Congress members and their staffs know better, too. They receive mounds of information about decisions and data that could affect the values of public companies. The rule, even if it is not put down in law for them to follow, is that if you can make money that people without the information cannot, it is illegal and unethical. And it is also one of the roots of the national confidence in the federal legislative institutions.
All of that is worth saying, again.
Douglas A. McIntyre