Congress should enact ban on insider trading by members

The book, by Peter Schweizer, caused an uproar by listing questionable deals by senior members of both parties in which they appeared to trade on information that wasn’t available to the average investor. The most serious allegations concerned Spencer Bachus, the chairman of the House Financial Services Committee. As the committee’s ranking member in 2008, the Republican from Alabama received updates from financial regulators on the crumbling state of the economy - and made nearly $30,000 betting that markets would fall, according to the Wall Street Journal.

The accusations of insider trading leveled against Senator John F. Kerry, however, seem far less compelling. According to Schweizer, a trust belonging to Kerry’s wife, Teresa Heinz Kerry, traded medical company stocks affected by legislation that the senator was working on. In 2007, for instance, Teresa Heinz Kerry’s trusts sold between $500,000 and $1 million worth of Amgen stock a week before the government publicly announced it would limit the amount Medicare reimbursed patients for taking a drug made by the company. But those trades were arranged by independent trustees, not Kerry.

Still, Schweizer’s allegations added up to a clear indictment of the status quo. Earlier this month, in response to the furor, a Senate committee approved a bipartisan bill based on proposals by Brown and Kirsten Gillibrand of New York that would explicitly bar members of Congress or their staff from using secrets obtained as a result of their service for personal financial gain, and would require members of Congress and congressional employees to report all stock, bond, and commodity futures transactions above $1,000 within 90 days.

In the House, New York congresswoman Louise Slaughter has fruitlessly pushed similar legislation for years. Representative Barney Frank said recently that he was mistaken in not bringing the proposal to a vote when the Democrats were in charge of the House and he chaired the Financial Services Committee; Frank has now signed on as a co-sponsor of Slaughter’s plan, along with most of the rest of the Massachusetts delegation. House Majority Leader Eric Cantor, after blocking the bill from consideration earlier this month, now says he is willing to move the bill forward in 2012.

The proposal ought to be a no-brainer. To restore public trust, it’s important that Congress swiftly tighten the rules to ensure that lawmakers are serving the public interest - not their own.