The Washington Post has a new series on the financial shenanigans on Capitol Hill, which takes up where Reagan biographer Peter Schweizer left off in his groundbreaking book, Throw Them All Out. Both detail how congressional insiders have made themselves rich through insider tips, land deals and cronyism and how they are largely immune to the insider trading laws and rules that would send the rest of us to jail if we were to follow their lead.
Throw Them All Out and The Post’s series “Capitol Assets” are must-reads for anyone who wants to understand just how self-serving Washington’s insiders are, and why the populist Tea Party’s critique of Capitol Hill’s insider culture resonates with so many voters in outside-the-Beltway America.
According to a Washington Post examination of appointment calendars and congressional disclosure forms summarized in “Capitol Assets,” Speaker of the House John Boehner is just one of 34 members of Congress who took steps to recast their financial portfolios during the financial crisis after phone calls or meetings with Treasury Secretary Henry Paulson; his successor, Timothy F. Geithner; or Federal Reserve Chairman Ben S. Bernanke.
As Richard W. Painter, who was chief ethics lawyer for President George W. Bush observed to The Washington Post, “Members of Congress are still loosey-goosey about what they require of themselves… I think it’s time for Congress to impose the same rules on themselves that they impose on others.”
Painter went on to note that the recently passed “Stock Act,” which was intended to tighten-up congressional trading rules, doesn’t really do that.
As The Post noted in “Capitol Assets,” “The act does not prohibit lawmakers from trading stocks in companies that appear before them or from reworking their portfolios after briefings with senior administration officials. Top executive branch officials are banned from investing in industries they oversee and can influence — for example, Fed chairmen are prohibited from investing in the financial sector.”
If these criticisms were coming only from The Washington Post -- and if they were aimed only at the GOP -- Capitol Hill insiders might be able to dismiss them as typical Post hit pieces on Republicans. But they aren’t.
As Peter Schweizer details in Throw Them All Out, former Speaker of the House and current Democratic Leader Nancy Pelosi and her husband have a long history of benefiting from special access to IPOs in a way that would be “difficult, if not close to impossible, for ordinary Americans to join.”
Schweizer documents a truly mind numbing number of sweetheart IPO deals the Pelosis were in on: “Often the Pelosis received stock in an IPO and then sold it days later for a huge profit. In 1993, they bought IPO shares in Gupta, a high-tech company. After the price soared 88%, they sold it the next day. They did the same when they participated in IPOs involving Netscape and UUnet, both of which doubled in value the same day. They also gained access to other oversubscribed IPOs, including those of Remedy Corporation, Opal, Legato Systems, and Act Networks. They sold all of them within a month or two for hefty profits.”
Henry Manne said “the federal government is the largest producer of information capable of having a substantial effect on stock-market prices.” And Congress has done nothing to prohibit itself from benefiting from its unrivaled access to that information.
From rules allowing sweetheart IPO deals, to allowing members of Congress to vote on or even earmark projects that benefit the value of land they own, to manipulating the very rules regarding so-called “blind trusts,” that are supposed to insulate Members from conflicts of interest, Congress has given itself a pass on the basic rules of conflict of interest and fiduciary conduct that govern the rest of us.
The avarice of Capitol Hill insiders is not a partisan issue. Conflict of interest rules, Supreme Court Justice Antonin Scalia wrote recently, “have been commonplace for 200 years.” It is long past time for Congress to apply what is commonplace in boardrooms, cities and towns across America to itself.