I assure you it was just a coincidence. I had no insider tips or other advance knowledge of what was about to happen. Last Wednesday morning I posted a few remarks about “Senators as Stock Pickers” solely because I found the idea that Senators were able to outperform the market as amusing. I had no non-public information about forthcoming Congressional action. It was purely a coincidence that later that day Representatives Brian Baird and Louise Slaughter introduced the Stop Trading on Congressional Knowledge Act (STOCK Act) in Congress.
Daniel Gross, writing at Slate, doesn’t think the STOCK Act is necessary, and in fact has elements that are harmful. I agree.
Not only would the act bar members of Congress, their employees, and executive branch employees from trading based upon non-public information obtained as a result of their positions, the act wants to bar “those outside Congress from buying or selling stocks, bonds, or commodities futures based on nonpublic information obtained from within Congress or the Executive Branch.”
The STOCK Act also takes a curious swipe at the First Amendment with its attempt to regulate so-called political intelligence firms, which, Baird and Slaughter say, “provide investors with inside information about impending legislative action that can be used to inform investment decisions.” They want to require firms in this industry “to register with the House and Senate, much like lobbying firms are now required to do.”
Again, a probably harmless idea. But who, precisely, is in the “political intelligence” industry? Think about all the professionals who make their living peddling information about what goes on in Washington… The “political intelligence” shops aren’t doing anything much different than, say, the Washington Post, National Journal, or the Wall Street Journal. After all, these companies employ Washington-based operatives who spend their days working government contacts to unearth information that isn’t available to the public. The companies then sell that information exclusively to people who feel that knowledge of such information is important to their businesses.
Both the Congressional press release and the Slate article mention the 2004 academic journal article that I cited in my post. (Another coincidence, really.) The article used data from the mid-1990s, but more current data is available. Given this regulatory impulse out of Congress, I think the conclusion of my earlier post is even more important: “It would be interesting to see whether or not Senators have returned to abnormal returns.”