The vast swath of people who work in Congress are also exempt from insider trading laws that pertain to ‘we the people’ – normal Americans, Charles Ortel, investor and author, tells RT.
Insider trading is a deep-seated problem on Capitol Hill, where easy profits are made by members of both the Republican and Democratic parties.
The issue has once again grabbed the limelight after Diane Dewhirst, Nancy Pelosi’s deputy chief of staff, was exposed over her husband’s purchase of stock in pharmaceutical companies, AstraZeneca and GlaxoSmithKline; and David Hoppe, former chief of staff for Speaker Paul Ryan, was accused of buying and selling a number of stocks.
RT: What public reaction do you expect to such revelations?
Charles Ortel: Most Americans are not aware of the fact that, as in the case of the health care bill, Obamacare, Congress exempted itself from the provisions of that law. The vast swath of people who work in Congress are also exempt from insider trading laws that pertain to ‘we the people’ – normal Americans. The theory behind that is those staffers, and the Congress people are so intimately involved working all the time for the benefit of this wider economy – there is no possible way to allow them to do that and to trade, so we ought to exempt them from this idea of ‘you’re prohibited from trading insider information.’
That is a muddy reading, a muddy conclusion. I think the people in Congress should know better than ordinary Americans. It is a privilege to invest in the stock market. If they want to have an investment in our American stock market – they don’t have to pick individual companies, they can buy indices. It is a gross miscarriage of justice.
RT: Do you think the legislation controlling this should and can be changed?
CO: It certainly seems as if our swamp that has been festering down Washington DC. It is interesting, you may not know that Washington DC was actually physically built upon an actual swamp. That swamp is so powerful and involves people across the political spectrum and both political parties, independence, etc. that seems to be that – absent revolution in the streets – it seems to be very difficult to affect the kind of change the American people rightfully demand.
RT: How alarming is that congressional staff members can be active traders? How fair is this system?
CO: It is really horrible. The real story is that these staffs engage in projects – and many of them, and I’d like to think an overwhelming majority of them – are honest people. But they have enormous power. They engage in projects over the course of many months and years; they have friends that network around Washington DC and around the world; they have the ability to traffic in insider information. There is no real governance. These staffers are not required to submit some kind of detailed paperwork that would allow anyone – regulators, investigators, journalists – to check the true nature and extent of this. As I say, they can get this confidential information, make a decision to leave, and then no one is going to be able to figure out what they are actually doing. It is reprehensible.
Taking advantage of privilege
Michael Hudson, economist, professor of economics, University of Missouri
RT: What can you tell us about insider trading in general?
Michael Hudson: Insider trading is when somebody works in a privileged position, such as a brokerage house, and you have information that something is going to happen that the public doesn’t have. But you have it and you know it is going to affect the price of the stock and you trade on that inside information. For instance, if you’re an underwriter of stocks and you know what the stock is going to be priced at, or you know something insider about the firm, you are not allowed to trade on that. If you’re an officer of a company, like Equifax. And you know that all of the sudden you’re going to have to tell people that you made the ‘biggest mistake’ in years that cost billions of dollars to people, and you sell the stock knowing this when the rest of the public doesn’t know it – that is insider trading.
Insider trading is not what happened to Martha Stewart. She wasn’t in a privileged position, she wasn’t a broker, she wasn’t an officer – she overheard something over dinner and traded with it. Even that is considered enough insider trading to throw her to jail so that the government could say: “We threw somebody in jail, and they wanted to to all of their campaign contributors.” But Martha Stewart’s real crime was not contributing to a political campaign and having anyone protect her. So she was a sacrificial lamb to protect all of the real insiders – the corporate officers and the stockbrokers who trade on inside information.
RT: We’ve done research into several cases of congressional aides, and it appears that they’ve managed to gain significant profit from their inside knowledge. Is there anything wrong in it or it’s just normal?
MH: Of course. A congressional aide’s job is to help prepare legislation. So if he is asked by his Representative or Senator to help to draw up a law that is going to affect some industry and companies in that industry, and he knows that it is going to be proposed on the congressional floor, and he can either buy the stock in advance, or he can sell it short – then of course that is insider information.