Why Don't Congressmen Have Better Financial Oversight?


My new column is out on Congressional insider trading.  Periodically, a study comes out on the subject, and a few libertarians get enraged, and then we all go back to sleep.  But it really matters, and not because congressmen are necessarily raking in millions with secret knowledge.  As you'll see if you read the piece, the evidence is actually more complicated than that.

No, it matters because we have no real way of knowing the extent to which this is happening.  The oversight is laughable--it took the better part of a decade to notice that Charles Rangel had failed to disclose about half a million dollars worth of assets on his financial disclosure forms, and the omissions were uncovered only in the wake of scandal over his tax evasion and acceptance of multiple rent-controlled apartments from a developer.

Yet attempts at reform have gone nowhere--even Representative Slaughter's STOCK Act, which would very modestly increase the amount of reporting that congressmen do, has gone absolutely nowhere.  And why should it?  We're not demanding better oversight.  When the cat's away, the mice are not going to vote themselves stricter playtime regulations.

But we should be demanding more transparency.  In my opinion, in fact, we should be demanding that they put any significant assets in a blind trust, with exceptions carved out for family businesses and some real estate.  Those assets that they don't give up should come with a strict requirement that they recuse themselves from voting on any laws that might affect their financial prospects one way or another.  Ditto, spousal jobs.

I'm sure that the overwhelming majority of congressmen wouldn't dream of voting to illegally enrich themselves, or acting on their knowledge as congressmen.  But a few is too many--and we all know how having a strong interest in something can tempt us to skew our assessment of the "right" answer, even unconsciously. And, of course, for the few bad apples, this opens up the possibility of super-cheap legalized bribery--just give your friendly congressman an insider tip on your company, and allow him to profit in return for favors. 

That's why we don't rely on the sterling integrity of private actors.  We rely on transparency and sanctions for those we catch. Why should our legislators be above the law?  

I have yet to hear an even vaguely plausible reason that our legislators shouldn't be watched at least as closely as we watch CEOs.  In fact, I've yet to hear any reason.  No one in government wanted to talk about it.  The best I can infer is that well, it's a pain in the ass, and they don't wanna.

That's absurd.  What's even more absurd, however, is that we permit it.
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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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