Congress Bet Against Economy as it Cratered
It's a shame that dueling is illegal, because after watching this report on '60 Minutes', I would love to be able to go 12 paces with scumbag Alabama Representative Spencer Bachus.
Bachus, at the time the ranking member of the House Financial Services Committee (and now its Chairman), played an interesting role in the 2008 banking and economic meltdown. As the economy was collapsing, Bachus was placing stock bets where he would personally benefit financially if the economy collapsed. Bachus placed those bets with insider information, unavailable to the general public, that he got as a member of Congess.
In other words, he's Raj Rajaratnam with a terrible accent... except for one detail: Everything Bachus did is completely legal.
That's right. Bachus was able to sit in on high-level government meetings with the Treasury Secretary (at that time, Hank Paulson) and Fed Chair Ben Bernanke during the day, and by night, use the high level information gained from those meetings to buy options, betting against the economy. He literally abused his office to profit from the pain that Americans suffered at the hands of the collapse.
Peter Schweizer, the former Palin speechwriter who investigated these insider trades by Congress, published the facts in a book, "Throw Them All Out." He details the Bachus case as a particularly grotesque abuse of power and position.
"These meetings were so sensitive-- that they would actually confiscate cell phones and Blackberries going into those meetings. What we know is that those meetings were held one day and literally the next day Congressman Bachus would engage in buying stock options based on apocalyptic briefings he had the day before from the Fed chairman and treasury secretary. I mean, talk about a stock tip," Schweizer said.
Schweizer found FORTY options trades that Bachus made after receiving secret information from his position as a congressman. In one particularly grotesque incident, Bachus sat in on a meeting with Bernanke where the incoming decline of the stock market was discussed, including such horrors as twenty percent drops in the Dow, General Motors going bankrupt, and other such events. The next day, Bachus bought options on the inverse market ETF Proshares Ultra-Short QQQ (NYSE: QID). He doubled his money. Later, after learning that GE had trouble selling bonds, Bachus shorted GE options four times, making another pile of free cash.
It is as close to treason as any member of Congress has come since the Civil War.
If Congress had any sort of moral leadership whatsoever, Bachus would be expelled from office by his peers. Then again, Bachus isn't the only one making stock trades off insider information gleaned from secret Congressional information.
House Speaker John Boehner, also a Republican, is said to have benefited from investments. So too is his predecessor, Democratic leader Nancy Pelosi. Pelosi and her husband invested in many IPOs, allegedly using insider knowledge of which laws would pass or fail to determine which IPO companies would succeed and which would flop.
For example, Pelosi invested in Visa (NYSE: V) when it went public — right at the same time as Pelosi's Congress was debating regulating credit card companies. She had to know, as Speaker, what would pass and what would not, making her the ultimate insider as far as Visa stock would be concerned.
None of the congressmen involved are willing to speak on the matter, at least not in terms of directly answering WHY they feel it's OK for sitting members of Congress to engage in insider trading. They are more than willing to make ad hominem attacks and try to change the subject. Here is Pelosi's lame attempt at explaining away her profiting off her public job.
"Congress has never done more for consumers nor has the Congress passed more critical reforms of the credit card industry than under the Speakership of Nancy Pelosi," Pelosi spokesman, Drew Hammill, said in a statement soon after the report aired Sunday night.
What the hell does that have to do with whether or not Pelosi privately benefited from her office? One could actually construe it as a public admission of guilt. After all, if credit card reform was good for consumers, it would make credit cards more usable for consumers. This would increase the value of credit card companies, making her investment choice in Visa a no-brainer.
Congress should pass a law — immediately — making it illegal for Congressmen and their families to trade on information they gain as a result of their connections in office. If they do make such trades, they should be prosecuted as harshly as executives who commit similar crimes.
Or, at the very least, they should be tarred and feathered, and then spanked on national television. Yes, spanked. Pants down, bent over Obama's knee, getting the beating of a lifetime.
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