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Congress just made a law it never liked very difficult to enforce.
One of the few good acts of the 112th Congress was applying the law against insider trading to Congress itself and mandating an online disclosure system of congressional stock trades so that compliance to the law could be monitored. Just one year later, Congress slashed critical provisions from the Stop Trading on Congressional Knowledge Act with a dull axe, leaving enforcement of the law seriously in question.
After years of denying that congressional insider trading is a problem — even after research showed that Congress enjoyed an exceptionally high rate of return on the stock market, suggesting that members are either geniuses in the market or they know something we don’t — Congress was compelled to adopt the STOCK Act in 2012 after a “60 Minutes” exposé.
At the same time, Congress was miffed by President Barack Obama’s calls for passage of the STOCK Act, so it added a provision requiring online disclosure of stock trades and personal finances by most of the executive branch, some 28,000 employees. What’s good for the goose is good for the gander, reasoned Sen. Richard C. Shelby, R-Ala.
Problem is, those 28,000 employees capture some security officials and ambassadors in foreign lands, raising the specter of safety concerns.
A reasonable solution would have been to rein in the scope of online disclosures for executive branch personnel, mandating transparency for most senior staff outside security services. Instead, Congress overreacted, approving legislation in less than two days with no reading of the bill and no debate. Even though it was approved unanimously, most members did not even know they voted for the bill — let alone what’s in it.
The measure scaled back online disclosures for the executive branch from 28,000 employees to 67. Ironically, because of the conflict-of-interest rules applicable to senior executive branch officials, these 67 officials cannot even trade stocks in their field. Executive officials who could pose a problem of insider trading, such as deputy directors and other senior management, are now exempt from online disclosure.
Also exempted from online disclosure are all congressional staffers. This is particularly troublesome because there is no comparable conflict-of-interest rule to prevent congressional staff from playing in the stock market. Granted, staffers still must disclose stock trades on paper filings with congressional offices, but these are available only to those who can make the trip to Capitol Hill, and only in PDF format, requiring a researcher to peruse through each of the thousands of filings individually. There is no ability to search for stock trades reported in the past 30 days, or to identify just staffers that engage in stock trading.
So now only members of Congress, congressional candidates and 67 executive branch officials need disclose their personal finances online. But even these records have been made difficult to review.
At Congress’ request, the National Academy of Public Administration reviewed the online disclosure of the STOCK Act. The study, which largely excluded the views of transparency groups, offered conflicting recommendations ranging from delaying implementation of the online disclosure provision to questioning the value of searchable, sortable and downloadable transparency databases altogether.
NAPA also raised the possibility that disclosure of personal financial records could endanger intelligence service employees, but then recognized that such transparency is already in place in paper format and concluded that it “was unable to find any evidence” of such risk. Instead of proposing a narrow remedy to exempt intelligence service employees, NAPA recommended, and Congress obliged, deleting huge swaths of government officials from online disclosure and crippling the utility of the online database by making it just a bunch of PDF snapshots of the filings — a transparency system antiquated by design.
Make no mistake: The STOCK Act is still in effect and congressional insider trading still is banned. But it has now become extraordinarily difficult to ensure compliance with the law.
There is another chance to put teeth back into the law: mandate disclosure of the political intelligence industry. Some 2,000 lobbyists and Wall Street operatives roam the halls of Congress for stock trading information valued at more than $100 million annually. Congressional staffers are a primary source of information for these political-intel consultants.
If stock trading of congressional and executive branch staff remains largely below the public’s radar, at least we can mandate such transparency for the cottage industry that taps into government-insider information. In the wake of Congress’ repeal of the disclosure enforcement mechanism of the STOCK Act, it is more important than ever to open the books on the political intelligence industry and disclose online their sources of information, activities and clients in a searchable, sortable and downloadable database.
Craig Holman is a government affairs lobbyist for Public Citizen’s Congress Watch.