Uncle Sam's Inside Info and Wall Street's Insider Trading: Excuse Me While I Vomit

You may not be aware whether you own stock in the managed health care company Humana via a mutual fund or not. I would imagine if you own Humana as an individual holding, you would be keenly aware that this company saw close to a 20% increase in its stock price back on April 2nd.

Did you participate in that spike or did you have a sell order in place at a certain level and get taken out well below the upward move?If you knew what some in Washington knew and shared with ‘their friends' on Wall Street prior to that move higher, you likely would have held your stock and, who knows, might have been inclined to purchase more. In doing so, though, you would have likely been engaging in insider trading.

In what is becoming a regular occurrence, I spit up my coffee once again this morning in reading that such highly sensitive and market moving information as that which caused Humana's stock to spike so sharply was actually shared with hundreds of federal employees.

Think that some of them might have had a little bit of appreciation as to how sensitive and valuable that information was and what it might be worth to traders and others who would be willing to act on it? You think?

The Washington Post provided not surprising but embarrassing color to this situation in writing, Hundreds In Government Had Advance Word of Medicare Action at Heart of Trading-Spike Probe:

Sen. Charles E. Grassley (R-Iowa) told The Washington Post late last week that his office reviewed the e-mail records of employees at the Department of Health and Human Services and found that 436 of them had early access to the Medicare decision as much as two weeks before it was made public.

The number of federal employees with advance knowledge is surely higher; the figures Grassley's staff compiled did not include people at the White House's Office of Management and Budget who also saw the information.

The discovery that sensitive information was so widely disseminated could complicate the forensic task for investigators trying to determine who may have leaked confidential information, and it brings further attention to the government's handling of policy details valued by Wall Street traders.

“This should sound an alarm,” Grassley said. “It should result in better controls to avoid unfair access to information that the average investor could never tap.”

A former director of the Medicare program, Thomas Scully, said he was not surprised that hundreds of people had access to the decision, given the complexity of the matter. He favors more communication between the agency and Wall Street, but he said that more care needs to be taken about what is discussed.

More care? Better controls? Or is this merely another example of the “rent seeking” economy and markets I highlighted last week in which the privileged benefit from their sway with Uncle Sam and friends at the expense of the rank and file? No doubt. As further evidence that those in Washington just “don't get it,” choke on this:

“There are plenty of people at CMS (The Centers for Medicare and Medicaid Services) who, wanting to be cooperative and friendly, may have given out information without realizing it could benefit one investor versus another,” Scully said.

Wanting to be cooperative and friendly? Really? Excuse me while I vomit.

We are supposed to believe that bull$*&t? Do we need even more info that our government fails to perform and protect investors, consumers, and taxpayers?

How about there are plenty of people who are willing to provide sensitive information as a means of greasing the wheels of the revolving door in the hope of cashing in and trading up professionally?

The crony, corruptible, incestuous behaviors go on and America suffers.

Navigate accordingly.

Larry Doyle

Isn't  it time or overtime to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.