The STOCK Act: An Interesting Side-Note
As you probably know by now, Congressional members can trade on insider information and even give the information away without any legal repercurssions. This trading is done by both sides of the politcal spectrum, from Nancy Pelosi and her holdings in Visa (V) to Eric Cantor and his trading of such stocks as Altria (MO). These actions have led to understandable outrage and the STOCK (Stop Trading On Congressional Knowledge) Act, a bill (or actually a series of bills with subtle variations) that is long overdue and revolves around the idea that "No Member of Congress and no employee of Congress shall use any nonpublic information derived from the individual's position as a Member of Congress or employee of Congress, or gained from performance of the individual's duties, for personal benefit."
Thanks to awareness raised by 60 Minutes and our own Motley Fool as well as various news outlets, public and Congressional support for the bill has skyrocketed, with more than 32 senators and 242 members of the House of Representatives supporting the bill.
Yet, apparently Congress doesn't even understand how to benefit from insider trading! According to a recent Wall Street Journal article citing a joint study by MIT and the London School of Economics, the average Congressional investor lagged the general public in market returns by 2 to 3% between 2004 and 2008. It also found that, although more than 50 Congressional members actively traded/reported large transactions in 2010, few appeared to make much money and many actually suffered losses. In fact, many lawmakers would have been better off if they hadn't actively bought and sold stocks.
Now, this by no means should de-emphasize the importance of the STOCK Act or take away from the reasons the bill should pass, but it is a very interesting side-note that serves to put things into perspective. As Business Insider appropriately notes, you can now consider Congress to be both "unethical and inept."