Wednesday, April 04, 2012

Kudos to Peter Schweizer

Last November, Hoover Institution research fellow and author Peter Schweizer released his latest book "Throw Them All Out," documenting how members of Congress and their friends "get rich off insider stock tips, land deals, and cronyism that would send the rest of us to prison."  The book inspired a CBS News "60 Minutes" segment highlighting congressional insider trading.

Today, largely because of that expose'.....

WASHINGTON, April 4 (UPI) - "U.S. lawmakers must obey insider-trading laws like everyone else, the White House said, as President Barack Obama prepared to sign a law curbing such trading. Obama is scheduled to sign the Stop Trading on Congressional Knowledge Act, or STOCK Act, at 11:55 a.m. today.

The legislation, which the House and Senate passed on bipartisan votes, prohibits congressional employees and their families -- along with the president, vice president, thousands of executive branch workers and the judiciary -- from buying and selling securities based on their possession of non-public information they gained through their jobs."

MP: That sure didn't take long.  From the book's release in mid-November, to the STOCK Act passing in the House in early February by a vote of 417-2, to passing the Senate 96-3 on March 22, to being signed by the President in early April. 

And it's a real testament to the efforts of Peter Schweizer, who has demonstrated the power of a single individual to sometimes bring about major changes that will have long-lasting effects and change history. 

36 Comments:

At 4/04/2012 7:48 AM, Blogger The Grouch said...

This is start, but their are many other ways our Congresspeople enrich themselves at the public trough and through privileged information.

 
At 4/04/2012 7:52 AM, Blogger PFCT said...

Mark

I thought you believed the U.S. insider trading rules were dumb? I recall previous posts citing Milton Friedman's views of this topic.

Have you changed your view?

 
At 4/04/2012 8:08 AM, Blogger Jon Murphy said...

I thought you believed the U.S. insider trading rules were dumb? I recall previous posts citing Milton Friedman's views of this topic.

It's not about the validity of the rules. It's about Congress being allowed to do things that would land one of us in jail.

 
At 4/04/2012 8:54 AM, Blogger Cabodog said...

Kroft's questioning of Pelosi during her press briefing was absolutely priceless.

My only concern about the STOCK act is what will Congress do now to pad their pockets?

 
At 4/04/2012 8:55 AM, Blogger Jon Murphy said...

But Public Citizen didn't get the word out, did they?

Credit goes to those who achieve the ends, not those who first reported it.

 
At 4/04/2012 8:55 AM, Blogger PeakTrader said...

Insider trading benefits insiders, unless outsiders have the same access as insiders.

 
At 4/04/2012 9:23 AM, Blogger Paul said...

Marmico,


"Maybe when you achieve a grad degree with a few Pell grants thrown in, you might afford to get married and understand congress."

That is one complicated insult...

 
At 4/04/2012 9:47 AM, Blogger Jon Murphy said...

Bah,

He knows I'm right so it's reduced to ad hominum attacks.

Think about it. When we give credit, it's always to the one who finishes the job, never he who starts it. MLK gets credit for the Civil Rights Movement, doesn't matter it had been going on well before he was born. George Bush gets credit for the recession, doesn't matter its seeds were sown back in 1992. New York Giants are the world champions of football, doesn't matter the Green Bay Packers had a better season. Whether it's good or bad is irrelevant. What matters is who brought the issue to light. While Public Citizen did blog on the issue, it didn't go past that. Peter Schweizer wrote books, had public apperiances, and really publicized the issue. He should get kudos for it

 
At 4/04/2012 10:00 AM, Blogger PeakTrader said...

Jon Murphy says: "It's not about the validity of the rules. It's about Congress being allowed to do things that would land one of us in jail."

So, it's not about insiders stealing from outsiders, it's about the unfairness of which insiders go to jail.

 
At 4/04/2012 10:08 AM, Blogger juandos said...

"That is one complicated insult"...

And about as dumb as putting tap shoes on a boar hog...

paul you might find this Glenn Beck chat with Peter Schweizer (about 10 minutes long on December 6, 2011) about what certain Senators and Representatives (of both parties) did after getting some 'non-public' information from Paulson and Bernanke...

 
At 4/04/2012 10:11 AM, Blogger Jon Murphy said...

So, it's not about insiders stealing from outsiders, it's about the unfairness of which insiders go to jail.

I suppose that is another more cynical way of saying it, yes.

 
At 4/04/2012 10:12 AM, Blogger Jon Murphy said...

paul you might find this Glenn Beck chat with Peter Schweizer (about 10 minutes long on December 6, 2011) about what certain Senators and Representatives (of both parties) did after getting some 'non-public' information from Paulson and Bernanke...

As someone (maybe someone here) once said: about 1% of private sector households are millionaires but 50% of Congress is. We're protesting the wrong crooks.

 
At 4/04/2012 10:19 AM, Blogger Jon Murphy said...

You must forgive me, Marmico. I've not used Latin since I left the monastery so my spelling is a little rusty.

 
At 4/04/2012 10:28 AM, Blogger PeakTrader said...

Jon Murphy says: "I suppose that is another more cynical way of saying it, yes."

The "validity of the rules" not being important is "cynical?"

 
At 4/04/2012 10:33 AM, Blogger Jon Murphy said...

I was just referring to PFCT's comments.

There is something to be said for allowing insider trading.

I was not trying to pass judgement on the issue, so I was saying your comment was more cynical because of the tone to it condemning insider trading. That's all. I'm not saying it's right or wrong. Just cynical.

 
At 4/04/2012 10:43 AM, Blogger PeakTrader said...

Jon Murphy says "There is something to be said for allowing insider trading."

Yes, you said it, which was:

"It's not about the validity of the rules. It's about Congress being allowed to do things that would land one of us in jail."

And when I said the validity of the rules are important, you said that's a "more cynical" view.

 
At 4/04/2012 10:47 AM, Blogger Jon Murphy said...

Ah, forgive me, Peak, as I had misunderstood your original comment.

 
At 4/04/2012 10:47 AM, Blogger Jon Murphy said...

In that case, I retract my "cynical" comment.

 
At 4/04/2012 10:54 AM, Blogger Benjamin said...

Yes, but...

If Congressional denizens can consistently outperform the market....should not their trades merely be publicized, not outlawed?

 
At 4/04/2012 10:59 AM, Blogger PeakTrader said...

Jon Murphy, ok, there should be rules to stop insiders stealing from outsiders.

 
At 4/04/2012 11:06 AM, Blogger Jon Murphy said...

Jon Murphy, ok, there should be rules to stop insiders stealing from outsiders

I agree with you. There are others who say insider trading is good, and they have legitimate points, but I must say this is one area I do not mind some government regulations.

 
At 4/04/2012 1:27 PM, Blogger VangelV said...

Insider trading benefits insiders, unless outsiders have the same access as insiders.

You are missing the point. If the insiders at Enron were allowed to trade on their information the stock would never have run as high as it did and would not have caused so many to people to lose everything. Why is trading on bad information somehow a virtue?

 
At 4/04/2012 1:46 PM, Blogger PeakTrader said...

VangelV, there are winners and losers in a zero sum game (if the market rises 10% and insiders make 100%, then outsiders make less than 10%).

How can an insider lose when he knows the outcome of the game?

And the insider can win without any research or risk.

Perfect information is not "bad information."

 
At 4/04/2012 6:37 PM, Blogger Craig Howard said...

This entire discussion is beyond the point. The legislation is toothless. Nothing has changed.

Congress is putting restrictions on itself. Do you need someone to tell you how that works?

 
At 4/04/2012 9:47 PM, Blogger bob wright said...

Somebody owes Martha Stewart a huge apology.

Where does she go to get her life back?

 
At 4/05/2012 3:35 AM, Blogger Ron H. said...

Jon M.

"You must forgive me, Marmico. I've not used Latin since I left the monastery so my spelling is a little rusty."

Ut totus vox , vos es venia.

:)

 
At 4/05/2012 3:51 AM, Blogger Ron H. said...

Peak,

"Perfect information is not "bad information."

I think Vang is referring to the fact that outsiders don't have the newest and best information available to insiders, as insiders can't signal that information by trading on it.

 
At 4/05/2012 7:13 AM, Blogger VangelV said...

VangelV, there are winners and losers in a zero sum game (if the market rises 10% and insiders make 100%, then outsiders make less than 10%).

My argument still stands. If insiders know that the shares are overvalued their sales will prevent an explosive move to the upside that winds up ruining many speculators who 'believed' the nonsense being spread by analysts and insiders.

How can an insider lose when he knows the outcome of the game?

Ask Aubrey McClendon. He wound up losing $2 billion because he bought into the hype that he was selling to ignorant speculators.

And the insider can win without any research or risk.

But that is the point. The insiders do far more research than those outside of the company. They know it best and are the best judges of value. If they do their job right they help the stock market act as a weighing machine and move it far from the casino that it currently seems to be.

Perfect information is not "bad information."

You are confused. First of all, nobody has perfect information. Second, my argument is that better information reduces volatility and helps to reward prudent investors.

 
At 4/05/2012 7:14 AM, Blogger VangelV said...


I think Vang is referring to the fact that outsiders don't have the newest and best information available to insiders, as insiders can't signal that information by trading on it.


Correct. I thought that the point was obvious to anyone who debates the insider trading issue.

 
At 4/05/2012 8:13 AM, Blogger PeakTrader said...

Ron H. says: "I think Vang is referring to the fact that outsiders don't have the newest and best information available to insiders, as insiders can't signal that information by trading on it."

That's why insiders can win and outsiders can lose.

 
At 4/05/2012 12:18 PM, Blogger Ron H. said...

Peak,

"That's why insiders can win and outsiders can lose."

But outsiders can win by avoiding a stock that insiders are dumping, or win by buying, based only on the signal that insiders are loading up.

As there is no perfect information, good information is preferable to no information, or bad information, no?

 
At 4/05/2012 2:09 PM, Blogger Paul said...

SO what happens if a Congressman violates this new law? Another investigation that yields barely a slap on the wrist a la Charlie Rangel?

The Senate is required by law to submit a budget every yr. We're now into year 3 without one from Harry Reid. Whence come the marshals to escort him out of his office and into his new jail cell?

 
At 4/05/2012 2:18 PM, Blogger Ron H. said...

"SO what happens if a Congressman violates this new law?"

Nothing.

 
At 4/05/2012 3:32 PM, Blogger PeakTrader said...

Ron, everyone, i.e. the market, should have access to perfect information.

Are you saying when insiders make big gains, outsiders can make big gains too. So, everyone can win?

 
At 4/05/2012 8:25 PM, Blogger Ron H. said...

This comment has been removed by the author.

 
At 4/05/2012 8:51 PM, Blogger Ron H. said...

"Ron, everyone, i.e. the market, should have access to perfect information.Are you saying when insiders make big gains, outsiders can make big gains too. So, everyone can win?

Of course not. Insiders who make major company decisions have the best information, and if they can act on that information, the rest of us would have that good information also.

Unless insiders can somehow offer large numbers of shares without anyone noticing, they might not make the big killings you imagine. Keep in mind, someone must buy all those shares for there to be big gains. Although outsiders may not be able to share in the gains, they could avoid the larger losses they might suffer without good information.

Would you rather suspect a company is in trouble a little ahead of time, or find out on the morning the SEC locks the doors and suspends trading?

If a CEO dumps all his shares as soon as he sees the regulators in the lobby, you might reconsider clicking "buy" on that 10k share order you had just decided on.

 

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