TV story spurs interest in bill to ban insider trading by Congress.
WASHINGTON - Hardly anyone noticed in March when U.S. Rep. Tim Walz, a three-term Democrat from Minnesota, reintroduced a long-dormant bill to combat insider trading in Congress.
As recently as a month ago, Walz had fewer than a dozen co-sponsors. There had been no hearings, and hardly anyone outside a small cadre of Hill staffers even knew the legislation existed.
On Tuesday, the former Mankato social studies teacher was the star witnesses in a packed hearing on his own bill, dubbed the STOCK Act (Stop Trading on Congressional Knowledge). For the past three weeks, Walz's colleagues have been rushing to sign on. He is now up to 170 co-sponsors. House GOP leaders have introduced their own version of the bill, and several versions have been hatched recently in the Senate, including one by Amy Klobuchar, D-Minn.
"I'm glad to hear my colleagues now have all these wonderful ideas," Walz said in a hallway between meetings. "We couldn't get an idea out of anybody before."
What changed was an unflattering CBS News story on "60 Minutes" last month that questioned the trading practices of several top congressional leaders, including House Speaker John Boehner, R-Ohio; House Minority Leader Nancy Pelosi, D-Calif., and House Financial Services Committee Chairman Spencer Bachus, R-Alabama.
It was Bachus who called Tuesday's hearing, the second in Congress in as many weeks. Like Boehner and Pelosi, Bachus has denied impropriety. Now he's offered his own bill and promised to move along Walz's bill, too.
"It's absolutely essential we restore the public's trust," Bachus said. "There have been some serious allegations. I'm personally aware of it."
Walz, little-known outside his southern Minnesota district, has seen his political stock rise in a town eager to distance itself from a whiff of impropriety, self-dealing or corruption, especially at a time of Wall Street scandals and low public regard for Congress.
"No member of Congress wants to be seen as weak on ethics," said Meredith McGehee, policy director for the nonpartisan Campaign Legal Center.
Walz, who has been working on the legislation since his freshman year in Congress, puts on no airs about his powers of persuasion: "This is happening because of the '60 Minutes' story, which is unfortunate, because it could have been done five years ago."
Still, not everybody thinks the "60 Minutes" story on Nov. 13 was exactly on the mark. The report strongly suggested congressional insider trading is both legal and practiced with impunity. Many legal scholars strongly dispute that view.
"There is no reason why trading by members of Congress or their staff members would be considered 'exempt' from federal securities laws," said Robert Khuzami, testifying for the U.S. Securities and Exchange Commission. He added, however, that nobody in Congress has ever been prosecuted for insider trading, a fact that critics find suspicious -- given the temptation.
Another legal scholar, Indiana University law professor Donna Nagy, testified that it's almost an "urban myth" that Congress somehow exempted itself from federal statutes against insider trading. But she acknowledges "shades of gray" in their application to members of Congress.
Some experts note that although high-level policy discussions can move markets, much of what happens in Congress is open, though often shrouded in arcane procedures and hidden from easy public view. House ethics rules already prohibit use of confidential information obtained "in the performance of government duties as a means of making private profit."
Among those rallying to Walz's cause is veteran U.S. Rep. Barney Frank of Massachusetts. "Redundancy is preferable to ambiguity," said Frank, ranking Democrat on the Financial Services panel.
The STOCK Act would explicitly bar members of Congress and their staffs from trading in securities based on "nonpublic information" and increase reporting requirements on all financial transactions over $1,000. It also would require firms that specialize in "political intelligence" for Wall Street firms to register much like lobbyists.
While support for the act is building, even some reformers sympathetic to Walz have raised questions about certain provisions, suggesting they could inhibit members of Congress from talking publicly about pending or prospective legislation.
Others argue the legislation is duplicative and unnecessary. Texas Republican Francisco Canseco, a member of the House Financial Services Committee, called it "completely unworkable" and suggested "it could lead to witch hunts."
Canseco and other Republicans have come out, instead, for a resolution increasing disclosure requirements or requiring members of Congress to put their investments in blind trusts.
Walz says he is open to different ideas and has received support from Democrats as well as Republicans. So far, no Minnesota Republicans in Congress have signed on.
Among those backing Walz now are some who say the problem just wasn't on their radar before. "I have a 401(k), but I don't trade on stocks, so it's not something I think about every day," Klobuchar said.
Then came the "60 Minutes" report spotlighting trades by Boehner, Pelosi and Bachus that could be interpreted as bets on pending legislation.
While dismissing the premise of the CBS report, Pelosi and Boehner expressed varying degrees of support for reform legislation, though it remains unclear whether Boehner will bring Walz's bill to the House floor.
Walz, who took over the STOCK Act crusade from retired Washington U.S. Rep. Brian Baird, worries that the mounting support he has received in recent weeks will ring hollow without a final vote.
"With the public there's cynicism," Walz said. "If I were them, I would be absolutely convinced that this is for show at this point in time. The only way to get over that is to pass something meaningful."
Kevin Diaz is a correspondent in the Star Tribune Washington Bureau.