When laws are put into effect it seems to be a consensus that the laws created are to be followed by all U.S. Citizens, without regard to race, creed, religion, social class, economic or political status. Since 1787 Article I of the US Constitution established the Congress of the United States of America as the Legislative branch of government. Congress consists of the House of Representatives and the Senate; together they are the US Congress. A recently aired 60 Minutes report revealed a loophole that allows members of Congress to legally trade stocks based on information that is not available to the public. I was able to do a little digging and the U.S. Constitution, through the Commerce Clause gives Congress exclusive power over trade activities between the states and with foreign countries. The same Congress who condemns the use of “non-public” information for trading is guilty of the same thing. However, the caveat here is when a member of Congress uses the same kind of “non-public” information to make decisions concerning stock trading it is not illegal. Puzzled yet? Insiders are defined by federal law as being company officers, directors and individuals who control at least ten percent of a company’s equity securities. Members of congress are responsible for:
- Passing bills; making laws
- Deciding how money is spent
- Shaping foreign policy
With House and Senate member salaries ranging from $168,000 to $215,700 per year plus benefits such as retirement and pensions, these figures place members of Congress snugly in to the top ten percent of earners in the US. Members of Congress collectively earn more than 90% of the entire US population. Senator Dick Durbin (D-IL) held a hearing in May of 2011 to focus on market oversight and gas prices. Oversight of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission were all addressed.
“With our markets on the rebound, record high gas prices and vast new responsibilities after last year’s Wall Street reform bill, SEC and CFTC’s roles in protecting consumers and investors have never been more important,” Durbin said. “In order to protect our recovery, SEC and CFTC need to remain robust, responsive regulators, even as we face concerns over deficits and spending cuts.” Dick Durbin (D-IL)
With a loop hole that allows members of Congress to use “non-public” information for trading purposes, members of Congress are open to making even more money through stocks. There are inevitably no public records disclosing how much money members of congress have made yearly from insider trading, in addition to their six-figure salaries. With this being said, an additional income of just $132,300 to $180,000 more per year members of congress can easily be placed in the top 1% earning more than 99% of the population yearly. With access to sensitive information that can forecast a company’s stock growth or decline, the yearly earning potential can easily exceed $180,000.
From an economic public policy perspective, scholars consider insider trading socially undesirable because it increases the cost of capital for securities traders and therefore depresses economic growth.
In an nation that is facing a growing deficit and high unemployment rates with public servants like teachers who are underpaid, a breath taking reality is surfacing about the underlying causes of the financial issues the US is facing. The nation’s citizens are growing impatient, occupying major cities round the country searching for answers to problems such as these. Widening income gaps and loopholes that allow the nation’s leaders to do as they please are worsening the economic durability of the United States of America. With an epidemic of greed circulating many levels of government the future of the nation is getting bleak. The light that has been shed on congresses financial interests concerning what bills are passed into law raises the question of why the Democratic Party opposed President Obamas proposed tax-cut deal and Republicans supported it when it was presented in late 2010. Democrats believed that the tax deal showed too much favor to the wealthy. Even with former President Bill Clinton’s endorsement, Democrats fought tooth and nail against the plan. While Republicans and Democrats in the House and Senate continue to play Good cop Bad cop concerning policies that will help Americans, the world is watching. With consistent disagreement on both sides of the House concerning major reform bills, congress is comfortably and quietly controlling the economic infrastructure of the US.
“Our financial system operated with large gaps in meaningful oversight, and without sufficient constraints to limit risk. Even institutions that were overseen by our complicated, overlapping system of multiple regulators put themselves in a position of extreme vulnerability. These failures helped lay the foundation for the worst economic crisis in generations.” — Treasury Secretary Timothy Geithner (on the recession).
Allowing practices that are unethical to continue just because they are not written into the context of the law is a moral failure of epic proportions. Not only does it show the lack of concern for the state of the country it shows a greater need for oversight for all bodies of Government. Damagingly enough, Congress falls under a category of unregulated markets and institutions. If congress would go back to creating Federal laws for, “the public interest and the protection of investors,” the process of restoring the faith of the American people may begin this lifetime.