Last November, CBS’s 60 Minutes aired a report — based on Peter Schweizer’s book Throw Them All Out — accusing several members of Congress of profiting from stock trades made after receiving private briefings. In that report, the news program said that in 2008, one day after receiving a private briefing from the nation’s chief economic officials on the extent of the financial crisis, Bachus bet that the stock market would tank:
While Congressman Bachus was publicly trying to keep the economy from cratering, he was privately betting that it would, buying option funds that would go up in value if the market went down. He would make a variety of trades and profited at a time when most Americans were losing their shirts.
Bachus, now chairman of the powerful House Financial Services committee that oversees Wall Street, apparently made a $30,000 profit. But, as the report noted, members of Congress have long been considered exempt from anti-insider trading laws. Despite the exemption, the OCE opened an investigation into whether the Bachus trades violated any rule.
While the investigation was in progress, Congress passed the Stop Trading on Congressional Knowledge (STOCK) Act. The bill tightened some of the rules, but thanks to significant Wall Street lobbying, House Republicans successfully watered down the stronger Senate version. The final product left significant loopholes. Members of Congress can still own stocks in the industries they regulate and can still sell secret “political intelligence” to investors.
Friday, the OCE ended the inquiry. In a press release Bachus celebratedthe end of what he called a “destructive and disruptive, media generated assault,” saying:
It has been a long, painful, and frustrating experience to have a reputation built over many years sullied by untrue accusations. I also appreciate former SEC Chairmen Harvey Pitt and Roderick Hills and Federal Judge Stanley Sporkin for reviewing the allegations, determining they were false and meritless, and publicly coming to my defense. Perhaps the most gratifying aspect is that my constituents who know me best recently reaffirmed their faith in my character and my ability to serve their interests, and my personal commitment to them is to continue to serve with the highest level of effectiveness and accountability. Finally, I want to thank the OCE staff for their professionalism and the OCE Board for unanimously coming to the right conclusion. While their review and report should never have been necessary, I am pleased that they have helped clear my name.
Given that the rules in 2008 were not even the slightly tougher STOCK Act provisions, it is little surprise that the OCE found there was “not substantial reason to believe that a violation of House Rules and Standards of Conduct occurred.” Even if it did not violate the House’s permissive rules — and even if, as he claims, his behavior was not technically insider trading — the OCE’s action hardly has cleared his name. Significant questions remain about whether his dealings were ethical.
This ruling serves as a reminder of the gaping holes in Congressional ethics rules. And with unseemly — but unpunished — trading practices all too common, it is little wonder that Congress currently sports an approval rating in the low teens.