Yesterday the Washington Post reported that House Financial Services Chairman Spencer Bachus (Ala.) is under investigation for possible insider-trading violations.
The Office of Congressional Ethics is investigating the chairman of the House Financial Services Committee over possible violations of insider-trading laws, according to individuals familiar with the case.
Rep. Spencer Bachus (R-Ala.), who holds one of the most influential positions in the House, has been a frequent trader on Capitol Hill, buying stock options while overseeing the nation’s banking and financial services industries.
There can be no doubt that part of the impetus for this investigation was the 60 minutes investigation into Congressional insider trading and the book on soft corruption "Throw Them All Out" by Peter Schweizer.
One can’t help but wonder how Nancy Pelosi escaped a similar ethics investigation?
Three years ago, then-House Speaker Nancy Pelosi and her husband, Paul, made Hillary Rodham Clinton’s success with cattle futures look like a child’s lemonade stand. The credit card giant Visa was holding an initial public offering, among the most lucrative ever seen. The Pelosis were granted early access to the IPO as “special customers” who received their shares at the opening price, $44. The lucky investors turned in a 50 percent profit in just two days.
Starting on March 18, the speaker and her husband made the first of three Visa stock buys, totaling between $1 million and $5 million. “Mere mortals would have to wait until March 19, when the stock would be publicly traded, to get their shares,” writes Peter Schweizer of the Hoover Institution in his new book. On the surface, it appeared to be quite a gamble. Mr. Schweizer reports that the investment represented at least 10 percent of the Pelosis’ stock portfolio and perhaps as much as half of their equity holdings.
But maybe there was more to it than meets the eye. The Pelosis got their IPO stocks just two weeks after legislation was introduced in the House that would have allowed merchants to negotiate lower interchange fees with credit card companies. Visa’s general counsel described it as a “bad bill.” The speaker squelched it and kept further action on interchange fees bottled up for more than two years. During that time period, the value of her Visa stock jumped more than 200 percent while the stock market as a whole dropped 15 percent.
In a Zerohdge piece from June 2011, Mrs. Pelosi disclosed that she had been privy to material non public information about US sovereign credit review conducted by Moody’s Investor Service:
House Minority leader Nancy Pelosi that it likely wouldn't downgrade the US debt as long as several weeks ago. Per Dow Jones: "Moody's earlier Thursday took the unusual step of warning that it might place the U.S. government's debt rating under review for a possible downgrade. The agency said the review would come if Congress doesn't make progress on raising the country's debt ceiling. Pelosi said she was alerted to the Moody's report just after House Democrats met with President Barack Obama at the White House. She said a few weeks ago she was in New York and the head of Moody's told her that it "would probably not downgrade, so this is interesting news today," she said. "But the fact is we cannot default" on the debt."
At the time Zerohedge wondered if perhaps during some pillow talk with her husband Nancy had let this material non public information slip. One can’t help but wonder over the last 25 years how many times Nancy slipped material non public information to Paul. For those who are unaware Paul Pelosi owns and operates Financial Leasing Services, Inc., a San Francisco, California-based real estate and venture capital investment and consulting firm. The bulk of the Pelosi wealth has come from Pauls investing acumen.
It became so obvious that there was money and lots of it to be made from “insider access and tips” based on the actions that were occurring in Washington, that Hedge Funds wanted in on this “information”.
When Senate Democrats finally brokered a compromise over the proposed health-care law, a group of hedge funds were let in on the deal, learning details hours before a public announcement on Dec. 8, 2009.
The news was potentially worth millions of dollars to the investors, though none would publicly divulge how they used the information. They belong to a select group who pay for early, firsthand reports on Capitol Hill.
Seeking advance word of government decisions is part of a growing, lucrative—and legal— practice in Washington that employs a network of brokers, lobbyists and political insiders who arrange private meetings between hedge funds and officials, including lawmakers and their aides.
With markets moving sharply on actions in Washington, hedge funds and other big Wall Street players are willing to pay for access. News tips, combined with data and analysis, help steer firms to profitable investment decisions.
At this point one can’t help but wonder if Senator Bachus is a mere sacrificial lamb.That Bachus plus the Stock Act (which oddly does not address option trading - which is what Bachus did, or congressional spouses being on preferred IPO lists - Pelosi) is meant to demonstrate how “accountable” Washington is becoming. After all, in Washington the appearance of justice being done is often more important than actual justice being done.
Finally, there is nothing in the Stock Act which prevents Wall Street insiders and Hedge Funds from paying for access to information. In the House version they even scrapped the language that would require political intelligence consultants to register as lobbyists. Perhaps those paying for access would be wise to follow the much cheaper, Paul Pelosi route, and put a ring on it.
One ends where they started.....What about NANCY?
Sources:
http://www.washingtonpost.com/politics/2012/02/09/gIQA21Ui2Q_story.html?hpid=z1 [13]
http://www.washingtontimes.com/news/2011/nov/22/legislators-and-honest-graft/ [14]
http://www.upi.com/Top_News/US/2012/02/09/House-passes-its-version-of-STOCK-Act/UPI-69781328807781/ [15]
http://www.cbsnews.com/8301-250_162-57324034/pelosi-defends-record-after-60-minutes-report/ [17]
http://online.wsj.com/article/SB10001424052970204844504577100260349084878.html [18]
