So flagrant has insider dealing in stocks become among legislators in the USA that it threatens to expose the deep-seated corruption at the beating heart of America’s much-vaunted ‘democracy’. But feeble legislative efforts to clean up the tarnished image of Congress can neither staunch the flow of corruption nor screen the ugly face of capitalist greed from public view.
Up until 2012, members of the US Congress could freely use their privileged status and access to knowledge to indulge in insider dealing on Wall Street, taking full advantage of their behind-the-scenes connections, ‘miraculously’ buying or selling stocks at just the right time to make a killing.
But the 2008 crash drew unwelcome attention to the antisocial activities of speculators, necessitating the passage of a law in 2012, the so-called Stock act (Stop Trading on Congressional Knowledge), in theory banning insider trading by members of Congress. In practice, however, insider-dealing up on the Hill carries on regardless, and no member of Congress has ever been prosecuted under Stock.
Toothless regulation an ‘honour system’
Members drag their feet over declaring their stock exchange dealings; research by Business Insider recorded 54 deadline breaches in 2020 and 2021. The Economist notes: “Violations are not publicly reported, and neither are payments of the initial fine of a paltry $200. At times, members are not even notified of their having an outstanding fine to pay – meaning adherence to the Stock Act is in effect an honour system.” (Allegations of insider trading in Washington spur new efforts to stop it, The Economist, 25 January 2022)
As a measure of the honour amongst the thieves up on Capitol Hill, consider the case of Senator Richard Burr. In February 2020, this gentleman was briefed on the likely true scale of the impending pandemic. Without missing a beat, Burr demonstrated his deep concern for the toll of human misery by telling his broker to beat the rush and sell off stocks worth up to $1.7m.
In 2020, we also saw the next lurch into world economic crisis, leading to another bout of going through the motions and pretending to hold the dodgy dealers to account. Sure enough, up popped two senators in January this year, one Democrat and one Republican, each in a hurry to claim the moral high ground by introducing virtually identical bills purporting to curb insider trading.
If either gets to be law, there is no reason to suppose that it will prove any less toothless than Stock. And in any case, limiting the scope of regulation to individual trades misses out on the bigger picture.
The Economist quotes a law professor from Indiana University, Donna Nagy, who points out that insider trading is already illegal, adding: “What is not illegal is owning stocks that are directly and substantially affected by policy the Congress member shapes. At least 15 lawmakers on the House and Senate armed services committees, for instance, hold stock in defence contractors.
“John Hickenlooper, who serves on the Senate commerce committee’s subcommittee for communications, media and broadband, holds between $250,000 and $500,000 each in Alphabet, Amazon and Facebook stock. The attention on trading obscures the fact that ownership itself can create conflicts of interest.”
Corruption is not a regrettable blemish on the face of capitalism but its very life blood, connecting the military-industrial complex, the corporate giants and the fools on the Hill in one single parasitic monopoly capitalist state.
It cannot be sanitised and must be overthrown.