Senators said at a hearing Thursday that Congress should quickly pass a bill that clearly prohibits its members and their staffs from trading stock based on nonpublic information they gather on Capitol Hill.
In a two-hour hearing before the Homeland Security and Governmental Affairs Committee, members and witnesses said swift action was necessary because the public’s faith in Congress is at “an all-time low.”
“When the faith ebbs, as it now has to historic lows, we must increase our efforts to ensure that people who did us the honor of sending us to Washington can be confident that our only business is their business,” committee Chairman Joseph I. Lieberman (I-Conn.) said in his opening statement.
“The fact is, America doesn’t trust you,” Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington, told the Senate panel.
Two Senate bills and a House bill — known as the Stop Trading on Congressional Knowledge Act — would prohibit trades based on information that could come from private meetings, briefings and phone calls on the Hill. The bills also would dramatically change the financial disclosure process.
The proposed legislation calls for members to report their trades within 90 days. Several senators pressed for the information to be disclosed in a searchable, online database — something government watchdogs have unsuccessfully sought for nearly a decade.
Sloan and several panel members pushed for amendments to the bill that would require disclosure far more frequently — perhaps as often as every 10 days.
Lieberman called on Sens. Scott Brown (R-Mass.) and Kirsten Gillibrand (D-N.Y.), the authors of the two Senate bills, to work together to merge the bills by mid-December.
“If someone wants to cheat, they will find a way,” said Sen. Mark Begich (D-Alaska). “The thing is disclosure, disclosure, disclosure. . . . It should all be available anytime online and in a searchable database.”
The bill would also create a Capitol registry for lobbyists who work the Hill to gather political intelligence that is passed on to clients who use it to guide their investments.
A panel of legal experts told the senators that existing anti-fraud laws could be used to prosecute members and their staff for the use of nonpublic information on Wall Street but that building a successful case would be difficult.
“I think there is enough ambiguity in this field that you need action,” said John C. Coffee Jr., a Columbia University law professor.
The two Senate versions of the STOCK Act were introduced in response to a Nov. 13 piece on “60 Minutes” highlighting investments that congressional leaders made in companies while legislative efforts were underway that may have affected stock values. The piece was based on “Throw Them All Out,” a book released last month by Hoover Institution fellow Peter Schweizer
On the House side, Rep. Louise M. Slaughter (D-N.Y.) has attempted to pass the measure since 2006 but received little support before the “60 Minutes” segment. The House Financial Services Committee will hold its own hearing on the issue Tuesday.