Martha Stewart's Mistake? She Wasn't on The Hill

You'll remember that Martha Stewart went to prison in 2004 for perjury and investment fraud. She had acted on insider information that her shares of ImClone Systems would drop, and she lied under oath about it. For her cronyism she spent 5 months in prison, 2 years under supervised release, and she paid heavy fines.

This probably won't surprise you, but legislators do the same thing. (And by "the same thing" I don't mean "go to prison.") Here's how it works:
Legislators sit in committee meetings and learn information that will affect the price of stocks they own. They then trade these stocks based on that information—before the information is made public. I don't know enough about the stock market to say that trading on insider information is in itself particularly heinous, but I know enough about justice to assert that what is illegal for citizens should be illegal for legislators (who—hot flub!—are also citizens).

In his book Throw Them All Out Peter Schweizer dishes the details:

• John Boehner and John Kerry bought shares in pharmaceutical companies before passing legislation that would drive these stocks up. 
• Rahm Emanuel, who was involved with the workings of Fannie Mae, sold his stock in the public/private company a few weeks before the stock dropped. 
• Nancy Pelosi got in on an initial public offering with Visa, and then she kept certain bills at bay that would hamper the stock's value.

The list goes on. That's just a clip of the book's first two chapters. In addition to treating themselves as citizens, Congress could enforce rules for investing only through blind trusts. Or they could (is this too harsh?) make it illegal for lawmakers to invest in stocks. That's not too harsh, is it? To ask Congress to get by on just $174,000 per year?

This problem with insider trading speaks to bigger problems. It speaks to what I view as the single biggest issue in contemporary politics: The union of big business and big government.

As I wrote my ideas for this week, it all quickly became too large for a single post, so on Thursday I'll present the second part about how libertarianism and communal government can serve as a solution to the rampant crony capitalism.

Further reading:

An article about how a bill to ban insider trading is catching people's attention (spread it, support it)

Throw Them All Out (With a caveat: While the book skewers both parties, it focuses more on Democrats. I wish it had been even-handed.)

Buddy Roemer