It’s Time for Their ‘Luck’ to End : Congressional members’ purchases of new stock offerings should be banned
Apologists for the practice keep reciting, like a mantra, that there’s nothing in the law or in the rules of the House or Senate to prevent a member of Congress from accepting first crack at buying usually lucrative new stock offerings. True, though this is really a shamelessly pathetic defense for something that is so transparently corrupting.
A senator or representative who is invited to profit through the purchase of a hot new initial public stock offering (IPO) incurs an obligation to whoever arranged the deal: You did me a favor, now I owe you one. Even someone with the most rudimentary sense of what constitutes ethical behavior, say a child of 4, can figure that out. It’s insulting to argue that just because there’s no specific ban in law, or in the ethical standards Congress writes for itself, such flagrant influence-buying therefore deserves to be seen as right or permissible. All that the absence of a ban shows is that the law and the standards both need toughening.
Sen. Alfonse M. D’Amato (R-N.Y.) made a quick $37,000 profit buying and selling the initial public offering in a small California computer company. Was he just lucky? He was lucky indeed to be the ranking Republican on the Banking Committee, which among other things oversees the Securities and Exchange Commission. At the time that D’Amato scored so big his stockbroker happened to be under investigation by the SEC for fraudulent sales practices and stock manipulation. Quelle surprise! , as Miss Piggy would say.
D’Amato has plenty of company in the shady glades of congressional ethics. In the last two years Sens. Howard M. Metzenbaum (D-Ohio), Barbara Boxer (D-Calif.) and Dale Bumpers (D-Ark.) have reported profiting from IPOs. So, among others, have Reps. Robert G. Torricelli (D-N.J.), Gary L. Ackerman (D-N.Y.) and Nancy Pelosi (D-San Francisco). House Speaker Thomas S. Foley (D-Wash.) made 42 trades in IPOs in less than four years, earning more than $100,000.
Some of the people named above would argue that as major investors they would be cut in on IPO deals even if they weren’t in Congress. Such offers are regularly made by brokers to favored customers, to the annoyance of small investors. But that argument ignores the self-evident fact that as soon as they took their oaths of office their private financial affairs became subject to a degree of public scrutiny, the object of which was to detect any potential interest conflicts. Whenever anyone in government participates in a lucrative IPO deal such a conflict occurs.
That’s the problem. The remedy is apparent: A flat ban on IPO trades for anyone in government who remotely could be influenced by such acts of favoritism.
