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Congressman Tim Walz was on his way to teach a class at Byron High School on Friday morning, fresh off what appeared to be a huge legislative victory. On Thursday, the House of Representatives overwhelmingly passed a bill co-authored by the First District Democrat that aims to clarify that members of Congress are not allowed to use nonpublic information gained on the job to enrich themselves in the stock market.
You might think Walz went into class with his chest puffed up, eager to tell students how his legislation was an example of how smoothly government can work to make itself more transparent.
Instead, during a phone interview on his way to the school west of Rochester, Walz quoted the message from an old "West Wing" episode: "No victory balloons."
"I'm a realist," said Walz. "I don't necessarily believe it would change anyone's behavior."
The Stop Trading on Congressional Knowledge, or STOCK Act, would bar members of Congress, their staff and executive branch advisers from using insider information learned on the job when they trade stocks and securities.
It seems like a no-brainer. The notion that members of Congress can get away with behavior that would put the rest of us in jail is ridiculous. Yet, Walz's bill was ignored like a street-corner beggar for five years -- until a big "60 Minutes" story highlighted members of Congress making financial gains that seemed especially astute, as well as linked to decisions made by Congress. Those suspiciously keen deals included ones made by top officers John Boehner and Nancy Pelosi.
'60 Minutes' turned the tide
Polls show that Congress is less popular than Paris Hilton. Heck, even socialism ranked higher. So when the story aired, elected officials who previously gave Walz wide berth were suddenly giddy about his transparency efforts.
In passing the bill, however, they inevitably gutted some significant pieces from it, including closer controls on the so-called "political intelligence" industry, which scours Washington for closely held intel on legislation and sells it to hedge funds for a profit.
The Hoover Institution, which contributed heavily to the "60 Minutes" report, is not convinced that the Walz bill will rectify the problem. One institution member, Jonathan Macey, wrote of the bill as it read in December:
"On closer examination, it appears that what Congress really wants is to keep making the big bucks that come from trading on inside information but to trick those outside of the Beltway into believing they are doing something about this corruption."
Walz, who said he has no personal information that his colleagues cheat the market, acknowledges that he has a long way to go to curb their potential to do so.
"If I had my way, it would have been my bill, but that's not the way democracy works," he said. "There was criticism that my bill wasn't strong enough to begin with. Of course it wasn't. There's far more we could have done; the issue is [to have] something we could get passed.
"I thought this bill could also kind of model good behavior," said Walz. "The real thrust I was after was to make that clear delineation on public information."
One line in one bill can make a congressman wealthy, which may explain how so many of them become millionaires while earning under $200,000.
"This whole idea that Congress outperforms the stock market, and there's never been a conviction -- something's wrong there," said Walz. "That is statistically impossible."
According to the Hoover Institution, Democrats' stock outperforms the market by 9 percent, and members of the Senate outperform it "by an astonishing 12 percent."
Some, including Rep. John Kline, R-Minn., believe members of Congress already are beholden to insider trading laws.
Walz says that's because Kline "is as honest as the day is long. A guy like John, he doesn't need to be told this is wrong."
"But I sat down with the SEC and legal scholars," said Walz. "The issue at hand is deciding fiduciary responsibility. The courts and legal precedence has ruled that members of Congress do not have a fiducial responsibility to their constituents, which I think is insane. I believe any [information] I gained in Congress, not working at Mankato West High, is non-public, privileged information."
"The SEC director sat in my office and said this [bill] will probably make it easier to make the case" against an insider trade, said Walz. "That's all I cared about."
Walz said he tries to teach a high school class in his district once a month. After five years as a congressman, and after experiencing the realities of getting something like this bill done, he's a lot better and more realistic at teaching U.S. government than before.
"I used to teach this, but now I feel like I should go back and give them a refund, because I had no idea what I was talking about."
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