Politico reported today that the Senate is considering voting on the House version of the STOCK Act rather than convening a conference committee where differences between the House bill and the much stronger Senate-passed bill would be hashed out. The move, still under consideration, would be designed to avoid a filibuster attempt and would give cover to Members of Congress, allowing them to head into the election season claiming to be reformers.

But, by even considering voting on the "STOCK Act Lite" instead of going to conference, Senate leaders are engaging in the kind of political gamesmanship that has resulted in the public’s low opinion of Congress in the first place. Rather than stand on principle and take a bill that Senators supported by an overwhelming vote of 96 to 3 to conference, Senators would be taking the expedient route, kowtowing to the mere threat of a filibuster by Senator Tom Coburn. Do Senators Reid and McConnell need to be reminded that a bill that passed with 96 yea votes probably has the 60 votes needed to overcome a filibuster?

More importantly, the Senate-passed version of the STOCK Act is a much better bill. Like the House version, it ensures that insider-trading laws apply to Congress and improves transparency of legal trades. In addition, it addresses the entirely secretive practice that allows political intelligence firms to gather congressional information and use that information to enrich investors and manipulate markets. It does so not by banning the practice, but by applying disclosure laws to those who roam the halls of congress in search of information that could impact stock trades or other investments. The disclosure help to ensure enforcement of insider-trading laws.

The original House version of the STOCK Act, which included political intelligence disclosure provisions, had 286 co-sponsors, more than enough to pass. But bowing to pressures from Wall Street, Eric Cantor gutted the bill, stripping the political intelligence disclosure language from it before he would allow it to come to a vote.

The watered down bill passed the House and should proceed, along with the Senate bill, to conference where differences between the two versions would be hashed out. With the strong support the political intelligence disclosure language has in both Houses, it is possible that a bill would emerge from conference with that language reinstated. Simply put, a strong reform bill could become law. Really. In this Congress. In this political climate. Real reform. But, for that to happen, there has to be a conference.

Which takes us back to where we started. Senate leaders should reject the idea of bypassing a conference for the sake of expediency. They should not allow a filibuster threat by a single senator to derail a popular and important piece of legislation. They should stand strong, stand up to threats, and stand for real reform.

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.

On the intersection of K Street and Wall Street lies the burgeoning “political intelligence” industry, where lobbyists, advisors and other DC insiders use their campaign contributions, connections and clout not to shape legislation, but to make investment decisions. The Stop Trading on Congressional Knowledge (STOCK) Act, H.R. 1148, introduced by Representatives Walz and Slaughter would shed some light on political intelligence activities by requiring firms that specialize in gathering nonpublic information from Hill sources to register with the House and Senate, as lobbying firms are required to do. The bill also creates rules to tamp down the occurrence of insider trading by members of Congress.

It’s no wonder that savvy investors at hedge funds look to Washington insiders to help them decide to buy or sell stocks. Will a bankruptcy bill help or hurt credit card companies? Will offshore oil drilling be allowed? Will legislation to address antitrust claims be introduced? Is the pharmaceutical industry going to face new regulations? What Congress does matters very much to the business world, and early, nonpublic information about the way Congress will impact any business or industry can lead to huge profits for investors.

The political intelligence industry relies on remaining in the shadows. The website for one firm that specializes in political intelligence notes,

Our political intelligence operation differs from standard 'lobbying' in that the OSINT Group is not looking to influence legislation on behalf of clients, but rather provide unique 'monitoring' of information through our personal relationships between lawmakers, staffers, and lobbyists working the K Street - Pennsylvania Avenue corridor. Providing this service for clients who do not want their interest in an issue publicly known is an activity that does not need to be reported under the Lobbying Disclosure Act (LDA), thus providing an additional layer of confidentiality for our clients.

If the STOCK Act passes, the “additional layer of confidentiality” will disappear, helping to ensure that insider information is not driving investment decisions for a few, leaving the rest of us in the dark.

Rep. Brian Baird and Rules Chair Louise Slaughter reintroduced an important transparency bill that would ban lawmakers, executive branch officials, congressional staffers, and others from trading stocks, bonds, and commodities by using nonpublic information obtained in their official capacity. The legislation - Stop Trading on Congressional Knowledge Act (H.R. 682) - also carries important transparency elements including requiring lawmakers to disclose stock transactions of $1,000 or more within 90 days and requiring "political intelligence" firms to register with the government just like lobbying firms.

With the amount of influence the legislature and the executive are currently exerting within the financial sphere it is paramount that they are not using information gleaned from closed-door meetings or information peddlers to play the market. Currently, disclosure provisions only require lawmakers and others to disclose stock, bond, and commodity trading once a year, and the system is spotty. The only way to ensure that elected and appointed officials are not using their positions to grow their wealth is to mandate regular disclosures as exist in the Baird-Slaughter bill.

For more information about "political intelligence" firms and trading on Capitol Hill see below (from the Baird press release):

Currently Members of Congress and their staff do not owe a duty of confidentiality to Congress, and therefore are not liable for insider trading.  Because of this, the temptation exists for Members and government employees to use government information only they have access to when making investment decisions.  A 2004 report from Georgia State University showed that United States Senators received investment returns that were approximately 25% higher than what typical Americans were able to achieve. Similarly, there is currently nothing to stop Congressional staffers and executive branch employees from sharing inside information with their friends.  Armed with information not available to the general public, these people are able to make potentially lucrative investment decision that can either make them a windfall profit, or save them from a devastating loss. Political intelligence firms have created a multi-million dollar industry to traffic this information.  Since they first showed up in the 1970s, these firms have operated in secret, and largely without government controls.  They provide investors with inside information about impending legislative action that can be used to inform investment decisions. One recent questionable example of these firms’ influence appeared in late 2005: On November 15, 2005, the stock of a building materials company in Chicago (USG Corp) suddenly doubled, despite the fact that there was no publicly available news about the company, or industry, which explained the increase in volume. What the public didn’t know yet, but what some investors discovered through back channels and political intelligence companies, was that then-Senate Majority Leader Bill Frist had quietly decided to move forward with legislation to relieve companies, such as USG Corp, of their liabilities in asbestos related lawsuits.

Just like on Elm Street, Freddie killed bills in Congress. The Ted Stevens trial is set to wrap up today amidst cross examination of the Alaska senator. Lawmakers pressure AIG to stop lobbying. A look inside lawmaker insider trading. All of that in today's news:

In 2005, when Republicans still ruled Washington, Freddie Mac deployed a stealth lobbying effort targeting 17 Republican senators in an effort to beat back a reform effort pushed by Sen. Chuck Hagel. The lobbying firm employed, DCI, never filed a lobbying disclosure form as they avoided direct contacts with lawmakers and staff. Instead, the firm, whose lobbying effort Freddie Mac chief Hollis McLoughlin wanted to stay on the down-low, deployed high-profile constituents - businessmen, trade associations, etc... - to push back against the regulation effort to their senators. Freddie Mac was very happy with DCI's efforts as they kept 9 of the 17 targeted senators from signing a letter to then-Majority Leader Bill Frist asking that the bill be brought to the floor for a vote.

Sens. Dianne Feinstein and Mel Martinez responded to the appalling revelation that AIG is using taxpayer money to lobby against already enacted regulations by calling for the partially privatized insurer to stop its lobbying activities. AIG exists solely because of a $120 billion loan from the federal government, making the United States taxpayer the majority shareholder of the insurance giant.

Final fireworks are expected to fly as the fast moving ethics trial of Sen. Ted Stevens comes to a close today. Stevens is expected to face further cross examination today. The cross has already brought out the Incredible Hulk in Sen. Stevens as he showed his temper in court the other day. The defense attorneys are likely hoping that Stevens can better control himself. They don't want to see him when he's mad.

Open Secrets points to ProCon.org and their look into the issue of insider stock trading in Congress. Earlier this year, Rep. Brian Baird proposed the STOCK Act, which would make it illegal for lawmakers, staff, and executive branch officials to trade stocks with the benefit of nonpublic information obtained through the status of their official position. Another bill proposed by Rep. Baird would require "political intelligence" firms to publicly disclose their activities in the same way lobbyists do. In case you were wondering whether there is an actual insider trading positive effect on Congress' stock sheets, check out this graph: