The ethics measure, authored by U.S. Rep. Tim Walz, must now be reconciled with a Senate version.
WASHINGTON - Rep. Tim Walz, D-Minn., won a victory on Thursday, when the House passed a version of his bill designed to combat insider trading in Congress.
After five years of languishing in limbo, Walz's ethics reform legislation, dubbed the STOCK Act, passed with overwhelming bipartisan support, launching the former Mankato high school social studies teacher into the national spotlight.
The Stop Trading on Congressional Knowledge Act would bar members of Congress, their staff and senior executive branch advisers from applying insider information gleaned on the job when they trade stock and securities.
"This has always been about making sure public officials play by the same rules as everyone else," Walz said on Thursday. "At a time when Americans are understandably frustrated, this legislation is long overdue."
The bill gained traction after a CBS News story on "60 Minutes" shed light on members of Congress who made large profits on the stock market, possibly from information gathered in the course of their jobs.
After that report, news of Walz's proposal spread and his colleagues in the House and Senate grew eager to sign up or sponsor similar legislation. Support for the STOCK Act ballooned from fewer than a dozen co-sponsors last fall to close to 300 within a few months.
Amid poor public approval ratings for Congress, an ethics bill proved an opportunity for members eager to distance themselves from the mere suggestion of corruption or unseemly profits. A slightly different version was adopted by the Senate last week. The two bills will be reconciled before a single version heads to President Obama for his signature.
The House bill is not without its critics. Though he voted for it -- along with every other member of Minnesota's delegation -- Rep John Kline called it redundant.
"While it is already illegal for Americans -- including members of Congress -- to participate in insider trading, I continue to advocate for increased oversight," Kline said.
The bill passed 417 to 2, despite complaints from senators and House Democrats that Republican leaders weakened the bill by stripping out several reforms the Senate had approved. One element eliminated by House Majority Leader Eric Cantor was a requirement that firms specializing in "political intelligence" for Wall Street firms register in the way lobbyists do.
House Republicans avoided open debate on the ethics bill by placing it on a schedule for fast-track passage that bans amendments and requires two-thirds' support to pass, a move common with legislation that has widespread support.
Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington (CREW), a Washington, D.C.-based watchdog group, said the bill approved Thursday is a shell of what it could have been. "Everybody gets to say, 'I voted [for ethics reform].' Nobody can be blamed," Sloan said. But "at least public awareness has been raised," she said.
To date, no one in Congress has been prosecuted for insider trading. The STOCK Act may not change that because it would not do enough to stop confidential leaks, said Richard Painter, a University of Minnesota law professor who served as chief White House ethics lawyer under former President George W. Bush.
Walz: It's a first step
Painter often guarded against consultants seeking to collect information from White House staff about legislative proposals for their clients. Their goal: Gather inside information that would help their clients -- typically hedge funds or Wall Street traders -- make shrewd moves before final decisions on votes that could influence markets.
Unlike formal lobbying, the growing "political intelligence" industry has remained unregulated. Forcing people to register before they gather information about the government could tread on civil liberties, Painter said.
The House version under Cantor calls for a federal study of the industry that could pave the way for legislative action, possibly in 2013. The House Republicans also removed a Senate bill provision that would have banned federal earmarks, but added one that would restrict congressional members from acquiring initial public offerings of stock.
Leaders in the House and Senate agreed on two measures: Lawmakers and senior executive branch aides would have to provide details on the mortgage of their primary residences and bonuses would be banned for top executives at government-sponsored mortgage companies Fannie Mae and Freddie Mac.
Walz said he considers this merely a first step toward making government more accountable.
"We shouldn't be patting ourselves on the back for doing what's right," he said.
Corey Mitchell is a correspondent in the Star Tribune Washington Bureau. Twitter: @StribMitchell