The Hustle to Defuse 60 Minutes' Congressional Insider Trading Story
The legislators knew it was coming and they came out guns blazing.
The legislators knew it was coming and they came out guns blazing. Last night, 60 Minutes aired a hard-hitting piece on the investment practices of members of Congress. The Steve Kroft exposé showed that everyone from House Minority Leader Nancy Pelosi to current House Speaker John Boehner to Congressman Spencer Bachus made investments that stood to benefit by legislation being considered at the time the investments were made. The bulk of the reporting stems from a new book Throw Them All Out by Peter Schweizer, a fellow at the conservative Hoover Institution. Each member of Congress, and their press staff, knew the piece was coming, as Kroft has been showing up at pressers and raising questions for weeks. Here's how they're trying to put out the fire.
John Boehner In the piece, the House speaker is singled out for buying health-care stocks in 2009, days before the so-called "public option" was killed—a measure Boehner strongly-opposed.
Today, an advocate for Boehner, one would assume a member of his press team, is pushing back hard but refusing to go on record. Both Politico and the Huffington Post got the same quote attributed to a "GOP aide":
"The idea that the Republican leader in the House opposed the ‘public option’ -- policy favored by the left of the left -- for personal profit is, frankly, stupid,” said the aide.
The Huffington Post's Ryan Grim adds the detail that the source "didn't want to be quoted criticizing CBS"—a nice testament to the Tiffany Network's street cred.
Either way, the gist of the Boehner defense is that his broker surmised and executed the trade without his input and the fact that he made several other investments around the same time that had nothing to do with the health care law's fate.
Others in the media have come to Boehner's defense, such as Grim, saying that even if the speaker was involved in the trades, he didn't have privileged information. "There's no reason to think that Boehner had any better insight into what was happening within the House Democratic caucus than anybody else reading news reports at the time," writes Grim.
Still, legislating is Boehner's job we're talking about. To suggest that a laymen reading The Washington Post is just as attuned with the movements of Congress as Boehner is somewhat of a stretch.
Nancy Pelosi Less afraid to criticize CBS on the record apparently, Pelosi's spokeswoman Drew Hammill had a statement with her name on it ready to go on Sunday night. The dirt on Pelosi is that she and her husband purchased 5,000 shares in Visa in 2008 while the House was contemplating financial reform legislation that would have hurt the bottom lines of credit card companies. As 60 Minutes pointed out, "The credit card legislation never made it to the floor of the House" after the investment was made. In response to the report, Hammill delivered this statement.
Tonight’s report. failed to note that the legislation in question in this story was reported out of the Judiciary Committee on October 3, 2008 – the day the House was consumed in passing TARP and also the last day the House was in session before the November election. It failed to note than in September 2008, the House passed the Credit Cardholders’ Bill of Rights. In the next Congress, the House and Senate passed and President Obama signed the Credit Cardholders’ Bill of Rights and the Dodd-Frank legislation, which included a stronger, more direct approach to addressing swipe fees.
It's a plausible defense but it basically amounts to: We were very busy the day the legislation was stalled and, by the way, I've been a strong advocate for consumers against credit card companies.
Spencer Bachus Interestingly, the lesser-known Republican Congressman and ranking member of the House Financial Services Committee has been getting attacked the most since the report came out last night. He stands accused of benefiting from the global market meltdown in 2008, or as Schweizer says, making at least 40 option trades "between July 2008 and November 2008 — a period when markets were at their most volatile — netting as much as $50,000 by betting that the market would go up or down at crucial points in the crisis."
Alex Tabarrok at Marginal Revolution called the report "hugely damning. Business Insider wrote "Forget Pelosi, Here’s The Most Stunning Detail From The Congressional Insider Trading Report,” which goes onto explain the Bachus accusations. Conservative publisher Andrew Breitbart is now calling for him to step down.
Interestingly, the Bachus camp doesn't seem to be too quick to the draw here. In the 60 Minutes report, Bachus declined to speak with the Kroft so they showed up outside his office:
So we went to his office and ran into his Press Secretary Tim Johnson.
Kroft: Look we're not alleging that Congressman Bachus has violated any laws. All...the only thing we're interested in talking to him is about his trades.
Tim Johnson: Ok...Ok that's a fair enough request.
What we got was a statement from Congressman Bachus' office that he never trades on non-public information, or financial services stock.
Though they denied the allegations of misconduct, they don't appear to be elaborating today. A Business Insider report from 30-minutes ago notes that "Neither the House Financial Services Committee nor Bachus's office has responded to our calls for comment." Presumably, a fuller statement will be on the way.
So where does that leave us?
In the end, it's not difficult for each politician to give a plausible explanation for what they were doing making investments while major legislation was in the works, as Megan McArdle at The Atlantic explains:
Each of these trades does have an innocent explanation. In late September 2008, it was getting fairly obvious that there was big trouble afoot in the markets. Similarly, it was clear that the public option was dead long before its obituary ran. And Nancy Pelosi is a very wealthy lady; those types of accounts do get preferential access to IPOs.
However, the fact that we just have to take their word on this is troubling—a point McArdle makes well. "The problem is, they also have a non-innocent explanation," she writes. "And there's the rub: we don't know. We ought to be able to trust our congressmen. But when they won't take even small steps to improve their transparency ... then the mistrust gets even worse."
See the entire segment here: