The STOCK Act would do little to address the problem of insider trading on Capitol Hill, says Hoover Institute fellow Peter Schweizer.
“My biggest concern is enforcement,” Schweizer told The Daily Caller.
He cited the example of former Louisiana Democratic Rep. William Jefferson, who famously stored $90,000 in cash bribes in his freezer.
“He had been taking bribes,” Schweizer explained. “The FBI heard about this, so they did everything they were supposed to do. They got a search warrant from a federal judge and they went in and searched his congressional office. … Congress went absolutely ballistic and said this was an infringement of constitutional rights and authority and there were actually threats to cut the FBI budget as a result of doing this.”
“I just don’t see the SEC wanting to have a fight like that,” said Schweizer. ”And that is why I think law is only as good as it’s likely or willing to be enforced.”
Schweizer says the STOCK Act might do some good, but he prefers a bill called the RESTRICT Act, sponsored by Wisconsin Republican Rep. Sean Duffy.
“The RESTRICT Act basically says to members of Congress, number one, you need to put all of you assets into blind trust,” Schweizer explained. ”You know blind trusts aren’t perfect, but I think they are a help. And if you don’t want to do that then you have to disclose, I think on your website within three business days any financial transactions that you engage in.”
Schweizer says that transparency, above all else, is of paramount importance in wringing out lawmakers’ bad habits.
During congressional hearings on the STOCK Act, Schweizer noted, the Securities and Exchange Commission said that it has never charged a member of Congress with insider trading.
“If there was a health care bill going through Congress and people found out in real time that their congressman was trading stocks in the health care sector, I think they would be outraged and vote them out of office or take some sort of recourse,” he said. “The biggest issue is empowering individual voters in terms of disclosure, so I think the STOCK Act is important to pass because it makes clear that the same rules apply to members of Congress.”
The STOCK Act is insufficient because it doesn’t cover investments made in private companies, something he says that has been a problem in the past.
In his book ”Throw Them All Out,” Schweizer discusses Colorado Democratic Rep. Jared Polis, who during the health care debate of 2009 bought millions of dollars’ worth of equity in BridgeHealth International, a private medical tourism company. Polis suspected, as did many, that health care reform would cause medical expenses to increase and that more people would seek medical procedures outside of the United States.
BridgeHealth is a private company, and therefore would not fall under the jurisdiction of the STOCK Act.
“He could go ahead and make that kind of trade and potentially use inside information, and he would not be prevented from doing that based on the way that this law currently exists,” Schweizer explained.
The STOCK Act also makes no attempt at guarding against conflict of interest in earmarks proposed by members.
“The bar is so low that basically so long as they can demonstrate at least one other person will benefit from the earmark, it is OK for them or their family members or whoever to profit from the use of taxpayer monies in this way,” Schweizer said. “That is an abysmally low standard.”
Several leaders in Congress have repeatedly sought earmarks that benefit their personal investments.
Nancy Pelosi pushed for a $20 million earmark in 2005 “for waterfront redevelopment only two blocks away from the Belden Street property [she and her husband own in San Francisco]. The earmark was killed in July of that year. The Pelosis increased their financial stake in the property, and the next year Pelosi asked for the earmark again and this time she succeeded,” Schweizer noted in his book.
Earmarks like the Pelosi redevelopment example would not be considered an abuse of insider information under the STOCK Act.
Alexa Fee is an intern at The Daily Caller