U.S. Rep. Tim Walz
Finish the job
“The STOCK Act passed last Congress is important. … But the job isn’t completed until Congress takes on the insider trading industry that uses cozy relationships with congressional staffers and dangles future job prospects in front of them as a means of making big bucks on Wall Street trading.”
-MEREDITH MCGEHEE, policy director, Campaign Legal Center
Wall Street-Washington links must be disclosed
- Article by: Editorial Board
- Star Tribune
- June 15, 2013 - 5:46 PM
It’s common knowledge that the well-heeled lobbying industry in Washington, D.C., daily deploys an army of power-suited staffers to seek out sympathetic lawmakers and shape public policy to clients’ liking.
Less well-known is the so-called “political intelligence” industry also working congressional corridors for the benefit of influential clients — in this case, usually wealthy Wall Street firms. A better moniker would be the “investment intelligence” industry, because its aim is gleaning advance information about key industries and regulatory changes that could give clients a lucrative leg up over ordinary investors.
Lobbyists have long had to publicly disclose information about their activities and relationships. But similar requirements don’t exist for those working for political intelligence firms. That oversight that makes it difficult to police potential insider trading and, more important, creates the impression that “a fortunate few are making money from special access to insiders,’’ according to Iowa Republican Sen. Chuck Grassley, a longtime advocate for government transparency.
In an era with public approval ratings of Congress perilously close to single digits, politicians should be doing everything they can to erase this shameful public trust deficit.
Bolstering disclosure requirements for an industry widely acknowledged to be operating in the shadows — even a recent Government Accountability Office (GAO) report had difficulty quantifying the political intelligence industry’s size and influence — is a common-sense step to enhance accountability for big government and big business.
“Anything we can do to assure people that their elected officials and the markets are playing by the rules is a positive step. Not addressing this right now leaves a big hole,’’ said Minnesota Democratic Rep. Tim Walz, who championed a landmark 2012 ethics reform known as the STOCK Act that specifically banned insider trading by members of Congress. Controversy has long swirled over politicians’ abnormally high returns on the stock market.
Walz is working with Grassley and Rep. Louise Slaughter, D-N.Y., to introduce legislation that it is expected to require political intelligence industry representatives to provide the same type of information as lobbyists do. (The news media, another gatherer of political intelligence, would be exempted from disclosure because it provides a public service.)
The bipartisan legislation, expected to be rolled out soon, will not ban the political intelligence industry. Instead, it will provide a modest amount of information that would shed much-needed light on the industry’s scope and who is benefiting from its work. It should also make it easier to identify relationships or events that led to suspicious trades. Estimates of the industry’s annual revenue range from $100 million to $400 million, said Craig Holman of Public Citizen, an advocacy organization.
The legislation likely will have difficulty getting through Congress. Both Wall Street and politicians like the advantages of operating out of the public eye. But recent events have helped make the case for reform, which is why Walz and his congressional allies need to move quickly.
Public ire is still smoldering after Congress employed a cowardly procedural sleight of hand to weaken some STOCK Act financial disclosure requirements this spring. The continuing controversy is a reminder that the political intelligence disclosure requirements were once a part of the legislation but were stripped by lawmakers who said the issue needed more study. That study, the GAO report, is now complete and has concluded that very little is known about the industry.
Controversial trading spikes in health care stocks before key government decisions affecting the industry became public have also put a spotlight on the political intelligence industry and have raised troubling questions about insider trading.
There should be little doubt at this point about how valuable this information is and why there’s a need to better understand its flow between Washington and Wall Street. Congress made a mistake in weakening the STOCK Act. Failing to act on the modest but necessary political intelligence reforms would send another troubling message that top officials shouldn’t be bothered by pesky questions about how they may have profited from their privileged perches.
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