While the middle class is facing a tax hike because of yet another congressional stalemate, Wall Street hedge funds and their investors are increasing their worth by employing a strategy of secret meetings with Capitol Hill lawmakers to glean insider information that impacts stock prices and guides investment strategy.
As I noted here,the legal yet secretive political intelligence industry uses connections to lawmakers to find out whether stocks are likely to rise or fall in the face of upcoming congressional action. Yesterday, the Wall Street Journal reported on the practice, documenting dozens of meetings between political intelligence firms and Members of Congress that helped hedge funds make investment decisions yielding hefty profits.
It is outrageous that political intelligence firms acquire market-moving information before anyone else, and can do so without any transparency. Unlike lobbyists, who at least have to disclose who their clients are and what issues they are working on, political intelligence operatives are subject to no disclosure mandates.
The Stop Trading on Congressional Knowledge Act (STOCK Act) would require anyone collecting information for the purpose of investment decisions to register and report their activities. The bill would also explicitly ban insider trading by Members of Congress and their staff.
Unfortunately, despite 241 cosponsors in the House and companion legislation in the Senate, some in Congress are attempting to derail the bill, or at the very least weaken its provisions. According to the Journal story, Sen. Joe Lieberman is pushing to require a government study of the issue, rather than immediately impose disclosure requirements.
In response, Rep. Slaughter, a lead sponsor of the bill said in a press release, “Let me tell you, we don’t need a study to understand this industry; we need transparency and regulation so that the public, Members, staff, and regulators know who is speaking to Congress to gain an advantage on the financial markets.”
We couldn’t have said it better ourselves.