According to the Wall Street Journal, 72 aides traded in companies overseen by their bosses. These trades were unethical but legal. Though this seems like groundbreaking news, it’s really just business as usual. The 72 aides barely scratch the surface of insider trading in Washington. This cohort comprises only the dumbest and most blatant of the bunch. Although congressional aides must file their trades, friends and family members are still below the radar. One can only imagine the many uncles, cousins, and college roommates that have been enriched by congressional inside information.
A Politico article points out that the aides didn’t make a killing – only a few thousand dollars in some cases. But once again, this is just the visible money. Suppose a friend in the hedge fund industry got the tip as well. Now we’re talking profit in the millions. But surely congressional aides don’t know anyone in the financial industry, right? Regarding the money earned from insider trading, this report only reveals the tip of the iceberg.
Furthermore, the investigation only considers a direct link between their boss’s legislation and a traded company. But there’s more insider trading below the surface here too. D.C. is practically an ocean of freely floating insider information. When I worked in the District, I, too, heard tidbits of tradable information. I didn’t even seek the information or ask. People would outright reveal classified information in casual conversations about work.
You see… D.C. has a general problem with keeping its lips sealed. That’s one reason that you always hear about “leaks from the White House.” The whole city is a giant gossip mill. Here’s my explanation why. Washington D.C. primarily draws egotistical characters. In no other city can someone feel so important –especially so early in their career. The private sector offers few opportunities to work on world-changing events and to stroll the halls of power. These divas can’t handle the cubicles and the “unimportance” of regular work. Hence, they come to D.C. to bath in the limelight.
So, what do egotistical individuals love to do? Talk about themselves, of course. And they love to reveal all the privileged information that they know and you don’t. It gives them a feeling of self-importance and superiority. In fact, you literally can’t help but hear insider information in D.C. Go for some drinks with your friends on Capitol Hill, and you’ll hear something or another not in the mainstream press… yet. One could likely make a good living simply by buying drinks for congressional staffers and listening.
And this takes us back to those 72 aides. They are just the most obvious culprits. There are innumerable trades where one hill staffer hears something from another hill staffer and then trades on that information. The vast majority of trades will come from this pool, and they won’t be picked up as a conflict of interest.
So, what should be done about this? I say keep it legal but make the information more public. Yes, these congressional bums will enrich themselves through questionable means, but that will happen regardless of insider trading laws. If it’s not insider trading, it will be soul-selling on K-Street.
Instead of filing trades once a year, aides should be required to post them almost immediately. This would give the rest of the market additional information about the inner workings of Congress. Observing congressional trades would provide an early warning sign much like trades of top executives in the private sector.
However, I doubt this law would ever pass. After all, the benefit of the law would come from admitted insider trading by congressional aides. Politicians never want to reveal the whole charade and would never allow such a law to pass. The theft must always be hidden and indirect. Think of the propaganda that public-sector unions always push. Or aides themselves who complain about low pay though they are guaranteed high-paid K-Street jobs after their tenures on the Hill. “Get rich, but don’t make it obvious” has always been the motto for government workers. Hence, Congress will likely pass an insider trading laws instead of just increasing transparency.
