The Senate and House have rushed to pass a bill explicitly prohibiting lawmakers and their staffs from making stock trades based on the company secrets they're told. The two chambers split, however, over what to do about a new breed of Wall Street professionals who buzz around Capitol Hill, searching for tips that could affect stocks. The work of these "political intelligence" consultants may not merit the same degree of regulation as lobbyists, who actively try to influence legislation. Yet that doesn't mean they should be left to work secretly and unaccountably.
Although trading on inside information is already a crime, the law applies only to those who are duty-bound to keep the information confidential. The Senate version of the Stop Trading on Congressional Knowledge Act would make it clear that members of Congress and their employees have such a duty. It also would require lawmakers, key aides and top executive branch officials to disclose more promptly the securities trades they make.
Reformers have been trying to enact such requirements since the mid-2000s, but they attracted little support before "60 Minutes" shined a spotlight on some key lawmakers' uncanny success on Wall Street. Now the STOCK Act seems unstoppable. The only real sticking point seems to be a Senate amendment by Sen. Charles Grassley (R-Iowa) to regulate political intelligence workers the same way as lobbyists are, requiring them to register and to file regular reports identifying their clients and the issues they gathered information on. House Majority Leader Eric Cantor (R-Va.) stripped it from the version he brought to the House floor, saying he was concerned about unintended consequences for ordinary constituents and businesses.
Grassley's amendment is indeed written too broadly, applying to far more exchanges of information than the sort done for hedge funds and stock traders. But the pursuit of political intelligence is a potentially corrupting force, given the value that stock traders may place on insights from inside Congress or the administration. For example, being the first to know about a new tax break that's been slipped into a bill could enable a trader to profit when the rest of the market finds out and reacts. Doing so might involve a consultant posing as a concerned constituent, or buying enough goodwill to obtain the kind of access to lawmakers, aides and documents that the general public doesn't get.
That's why these workers should be required not just to identify themselves when dealing with lawmakers and administration officials, but also to disclose publicly how much they contribute to the campaigns of those they contact. Congress should include such a mandate in the STOCK Act, but apply it more precisely to Grassley's intended targets.