A 60 Minutes report on Sunday examined the ways that members of Congress trade on inside, privileged information to make themselves rich — without breaking any laws. Even though many positions in the federal government are bound by conflict of interest laws, Congresspeople are exempt from insider trading rules and are perfectly free to make business deals based on information they learn through their jobs.
The story is based on the work of Peter Schweizer, a researcher at the Hoover Institution. (Others have been studying the issue. As Bloomberg's Lizzie O'Leary and others have pointed out, The Wall Street Journal has reported on this issue quite recently and Megan McArdle dedicated her column in The Atlantic's November issue to the phenomenon of "congressional insider trading.") Schweizer and his team have looked at financial transactions made by Representatives and Senators and found that many, including the past three House Speakers, have made deals that appear to be based on non-public information that they had access to thanks to their position in Washington. Schweizer calls it "honest graft," since many people would consider it unethical, even though it's not illegal.
Some times it's stock trades (John Boehner reportedly invested in several health care stocks shortly before killing the public option in last year's legislation) and other times it's simply making a well-timed business deal. (Like when former Speaker Dennis Hastert secured an earmark for a federal highway project that just happened to pass by some land he already owned. He later sold the land for $2 million dollars.) Nancy Pelosi has participated in eight IPOs, including some involving companies that had business before her House. Schweizer says that giving a Senator or Congressperson pre-IPO shares in a company is allowed under current rules, even though giving them an equal amount in cash would be considered a illegal bribe.
A Pelosi spokesperson criticized the 60 Mintues report, though he did not actually deny the facts that were presented.
The problem, of course, is that not only are these transactions perfectly legal under existing law, the people who benefit the most are the ones who write the laws. Naturally, most members of Congress don't seem eager to take away these special benefits that can turn humble public servants in the multi-millionaires.
Meanwhile, when Wall Street insiders make similar moves, they end up in jail. You can watch the entire 60 Minutes report below: