Insider Trading in Congress?

[Mass]

http://www.thedailybeast.com/cheats/2011/11/14/insider-trading-in-congress.html

Did Nancy Pelosi, John Boehner, John Kerry, and several other lawmakers benefit from something similar to insider trading during the financial crisis?

I saw the reporting on 60 minutes today, which does not name Kerry and, with the exception of Pelosi, focuses on Republicans. It also does not say that Schweitzer was an adviser to Sara Palin. All things which would have given the audience some clues about his goals.

The reporting left me wary because obviously, insider trading should be forbidden to congresspeople. The Baer bill should have passed a long time ago. However, at the same time, Schweitzer(who happens to belong to the Hoover Institute), seemed to be cherrypicking sales and buys out of several years of trading in order to make his point. Often, there seemed to be only a thread between insider trading (I call my broker and tell him to sell or buy because I have info) and what would be a trader knowing the topic better and betting on what seems logical (based on information otherwise obtained).

What bothers me in this article is that, while I am sure some people trade on insider information and it is even possible that it is Kerry;s case, the main goal seems to be about creating less trust in government.

http://www.thedailybeast.com/newsweek/2011/11/13/peter-schweizer-s-new-book-blasts-congressional-corruption.html

While examining trades made around the time of the 2003 Medicare overhaul, Schweizer experienced what he calls his “Holy crap!” moment. The legislation, which created a new prescription-drug entitlement, promised to be a huge boon to the pharmaceutical industry—and to savvy investors in the Capitol. Among those with special insight on the issue was Massachusetts Sen. John Kerry, chairman of the health subcommittee of the Senate’s powerful Finance Committee. Kerry is one of the wealthiest members of the Senate and heavily invested in the stock market. As the final version of the drug program neared approval—one that didn’t include limits on the price of drugs—brokers for Kerry and his wife were busy trading in Big Pharma. Schweizer found that they completed 111 stock transactions of pharmaceutical companies in 2003, 103 of which were buys.

“They were all great picks,” Schweizer notes. The Kerrys’ capital gains on the transactions were at least $500,000, and as high as $2 million (such information is necessarily imprecise, as the disclosure rules allow members to report their gains in wide ranges). It was instructive to Schweizer that Kerry didn’t try to shape legislation to benefit his portfolio; the apparent key to success was the shaping of trades that anticipated the effect of government policy.

It also shows how little you get protected from these accusation if you have by using independent trustees

Senator Kerry does not buy, sell, or trade stocks,” says Jodi Seth, Kerry’s spokeswoman. She notes that Kerry’s holdings are in family trusts and managed by independent trustees with whom he does not communicate. Further, Seth says, Kerry is not a beneficiary of Teresa Heinz Kerry’s trusts, which were established before they were married. In any case, Seth adds, Kerry was running for president when the Medicare bill was passed, and he missed much of the debate.

“It’s not that I think John Kerry is calling up his broker, on health care, and saying, ‘Buy this company, sell that company,’?” Schweizer says. “The issue is one of a double standard.” He notes that if the executive of a health-care company were in discussions with the White House over pending legislation that would affect his industry, and then made a series of unusual stock transactions related to the industry, the SEC might well open an insider-trading investigation. “The only group in America that we exempt is politicians, who are probably the last people about whom we should be saying, ‘Oh, we’ll take their word for it,’?” he says. “That’s what’s so amazing to me.”

[karynnj]

1. I saw that and responded in a few places

This is just awful (and sloppy) analysis on Sweitzer's part. That last paragraph that you quoted is beyond bizarre. "It's not that I think JK is calling up his broker, on health care, and saying, "Buy this company, sell that company". However that is IMPLICITLY what he accuses Kerry of doing - with absolutely no basis.

The fact is that Bush had a drug benefit in his 2003 agenda and there were close votes in both the House and Senate. Kerry and the Democrats fought it because it was a huge give away to the drug companies and it was unpaid for. Sweitzer simply aggregates all the transactions made in drug companies by the Kerrys in 2003 - and notes that between them they made a lot of money. (Gee - and I bet they LOST a lot of money in 2008! This is a function of the amount of money invested.)

I responded:

Peter Sweitzer's comments on John Kerry show rather poor research on his part. In 2003, when the Republicans were pushing the drug proposal, the Republicans were in control of the Senate, therefore Senator Kerry was NOT the chair of the committee. In addition, he opposed the plan as a giveaway to big pharma, both in his Senate speeches and votes and in the speeches made as part of his Presidential run.

Sweitzer does not explicitly contest Kerry's spokesman's explanation that he is not involved in managing the family trusts, which he should have done if he wanted to make the implicit accusation of "insider trading". The fact is that it was common knowledge that the Bush administration was going to pass a bill that gave Medicare recipients a drug benefit. Anyone watching the OPEN hearings in the Senate knew that. This was NOT insider information. It is entirely likely that any brokers controlling either John Kerry's or Teresa Kerry's assets had no more information than was in the NYT or the Wall Street Journal - or Newsweek.

It would seem that examples where a Senator or Congressmen could benefit from insider information is when they know an earmark will benefit a specific company and that ear mark is not yet public or where they legislate to improve the prospects of the assets they hold.. Neither was not the case here.

I think it is pretty poor when he ignores that they DO have independent managers managing their assets because that really is the solution to avoiding the insider trading that troubles him. It may be that there is a need to add the provision (if it is not already there) that the legislator will not provide ANY guidance on how the assets are invested.

It would also be nice if they treated Teresa's assets consistently. In 2004, the media and other Democrats built a wall between his and her money - and argued she could give him no more than the $2000 or so that anyone could donate. Here and in every "richest Senators" articles, the money is combined. There has NEVER been anything to suggest that Kerry has ever had any input to the people running the Heinz funds.

On the health care bill, it passed in June 2003, Kerry was among those fighting it - and it only passed the House by one vote - something Kerry would have had no more insight on that anyone in DC.

I did NOT know he was an adviser to Palin - that explains why Kerry was targeted, even though the example is not insider trading and was on a bill that he publicly was against.

[Mass]

2. It gets better by the minute

http://www.msnbc.msn.com/id/45287592/ns/politics-more_politics/#.TsFaVfQUqso

Schweizer is a research fellow at the Hoover Institution at Stanford University and is the editor of Bigpeace.com, a website focused on national security founded by conservative activist Andrew Breitbart.

[karynnj]

3. Wow - talk about Orwellian names!

Bigpeace !!!

In a way, if you know who people are by knowing who their enemies are, Senator Kerry is in great shape. If this very foggy, shaky accusation is the best he can find to call John Kerry corrupt, Kerry is as clean as they come. It also shows they do consider him important enough to lie about.

Not to mention, I doubt Kerry had much - if anything to do - with shaping a piece of legislation that he was a strong voice against.

I noticed in some comments they were again pushing the myth that Palin fought corruption. If Kerry was out to make money from his Senate career, he would have done so in the years where he faced financial difficulty.

[YvonneCa]

4. Wonderful comment. I agree...

...completely. :hi: