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.”