Politicos have been abuzz about insider trading this week, after a "60 Minutes" piece released Sunday detailed questionable stock-trading rules that do not prohibit members of Congress from trading on information they hear during the course of their lawmaking.
But the issue should hardly be news to Californians. Similar controversies arose twice during last year’s statewide elections – and the difference between those cases in many ways illustrates the disparity between rules governing private executives and public servants.
The issue first surfaced early last year, when Republican gubernatorial candidate Meg Whitman faced criticism for her so-called “spinning” of initial public offerings – or IPOs – during her time as a board member at Goldman Sachs.
Spinning involves acquiring shares in a company before they are publicly available and then selling them at a profit after they are made available to investors. Such offerings often are structured to rise in value once the public offering is made, virtually guaranteeing the early stockholder a profit.
Whitman left Goldman Sachs after Congress began to investigate spinning among corporate executives, and the practice eventually was banned as part of a settlement.
Several months after the Whitman story broke, Democratic U.S. Sen. Barbara Boxer was accused by her Republican opponent of engaging in a similar practice earlier in her Senate career.
In both 1994 and 2000, Boxer benefited from early access to IPOs in much the same way that Whitman did – acquiring them before they went public and then selling them at a profit after the offering.
Boxer has consistently denied that she received access to the offerings because of her position as a longtime U.S. senator, and she has long kept her assets in a blind trust, ensuring she has no control over investment decisions.
Still, though the practice of spinning has been banned among corporate executives, no such prohibition exists for members of Congress, though arguments have been made to the contrary.
In light of the "60 Minutes" investigation, Massachusetts Sen. Scott Brown, a Republican, filed a bill this week that would bar lawmakers from trading on inside information. The bill mirrors another piece of legislation introduced earlier this year by two Democratic representatives, and looked to be stalled until the story was released.
The House version of the bill picked up 19 of its 27 co-sponsors since the story ran Sunday, according to Business Insider.
Similar legislation has been introduced before but failed to gain traction. Evidence of potential insider trading in Congress has been public since at least 2004, when several professors studied the performance of U.S. senators’ stock portfolios and determined they consistently outperformed the market.