New Report Finally Exposes Congress’ Secret Weapon for Insider Trading

It’s rare that we get a glimpse into how the machine actually operates, but POLITICO just gave us one. The findings of an investigation by the news agency, published Monday, reveal that congressional staffers may play a far larger role in greasing the engine of American government than one might assume. From the article by Maggie Severns:

“A POLITICO review of federal disclosures for 2015 and 2016 found that some senior aides regularly buy and sell individual stocks that present potential conflicts of interest with their work. A smaller number of staffers trade in companies that lobby Congress and the committees that employ them. In all, approximately 450 aides have bought or sold a stock of more than $1,001 in value since May 2015.

“That’s likely just the tip of the iceberg, since most congressional aides aren’t required to report their trades. Only those in positions earning more than $124,406 per year must reveal their investments. Of the 12,500 staffers working for lawmakers, committees and leadership offices, only about 1,700 make that much, according to data compiled by Legistorm and the Brookings Institution.”

Continuing, Severns writes that government watchdog groups take serious issue with this because congressional staffers “often have more of a hands-on role than the members [of Congress] themselves in crafting details of legislation that could have enormous consequences for individual companies.” Further, because “aides are rarely in the spotlight,” there’s “more potential for ethical lapses to go unnoticed.”

Members of the House and Senate, like administration officials in the executive branch, POLITICO points out, are held to far higher standards and scrutiny when it comes to stock market trading.

Essentially, while members of Congress are forbidden from trading in companies that present conflicts of interest with their roles as legislators — and most ignore the stock market altogether to avoid any whiff of scandal — aides are left largely to their own ethical compasses when it comes to buying and selling stocks.

Toss this in with the fact that, as Severns notes, staffers are “the real experts on the intricacies of policies” and do most of the work on bills that will affect these companies directly, and it isn’t difficult to see how one could be tempted.

Ethics are one thing, Indiana University law professor Donna Nagy told POLITICO, but what about when those choices begin affecting how the country operates?

“It causes the public to question whether personal stock holdings are influencing legislative activity,” she said. “That doesn’t necessarily mean a ‘yes’ or ‘no’ vote, as it would a senator or member of Congress. Did personal stock holdings influence the speed or slowness with which a report is written? That’s something that would be in staffers’ control.”

Meredith McGehee, chief of policy at money and politics watchdog group Issue One, pointed out to POLITICO that aides are in no way answerable to the public, unlike senators and representatives who must be elected:

“The staff level is actually more dangerous, because they don’t get scrutiny and they’re not accountable. If a member does it, he can get defeated. A staff person can wield enormous amounts of power that isn’t seen, and there’s really no way to hold that staff accountable.”

Craig Holman, a lobbyist for the watchdog group Public Citizen, says aides are on par with members in terms of legislative influence, adding that it’s the staff — the ones being tempted to buy and sell stock on insider tips — that the dealmakers want to see:

“The very senior staffers ought to be considered very much the same as members. These are policy-making individuals. They’re the people lobbyists want to meet with and influence. It’s their ability to affect public policy that matters, whether or not they receive votes or subject themselves to elections.”

If that sounds like a loophole or a flaw in the system, it’s one Congress is going out of its way to hide from the public. In the exhaustive review, which highlights cases of potential insider trading by staffers on both sides of the aisle, POLITICO noticed that even recent changes to rules have favored aides Again, from Severn’s article:

“In 2012, when Congress passed the Stock Act, leaders crowed that information about the investments of both lawmakers and senior staff would be available online in an easily searchable format. But a year later, Congress silently passed revisions to the bill that wiped out many of those data requirements.

“Information on lawmakers is still available online, but it cannot easily be searched or sorted by date or company traded. The requirement that aides’ disclosures be posted online was scrapped from the law, and today such information is available only in person at computer kiosks maintained by the House and Senate.

“Individuals seeking the information must log in using their name and other personal details. The documents they seek cannot be downloaded or otherwise taken out of the office in a digital format. They can be printed for 10 cents to 20 cents a page.”

Larry Noble, senior director of the Campaign Legal Center, told POLITICO there’s “little excuse for these barriers, especially in the digital age.” He also said the only logical conclusion is that Congress’ shielding of its staffers’ financial portfolios must be intentional:

“When you have to go to an agency or to Congress to have a document printed out, and you put your name down — all that is to deter people from doing it.”

As POLITICO details, the Security and Exchanges Commission seems content to look the other way, and the members themselves — the elected officials who employ these aides — have thus far failed to raise concern over the issue. Could all that be because everyone on Capitol Hill secretly understands that it’s really the staffers, as behind-the-scenes players, that get things done in Congress?

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