The Senate voted today to ban insider trading by members of Congress, their staffs and some federal workers. The bill, which already cleared the House, will now go to President Barack Obama, who probably will sign it.
There are at least two questions about the bill. The first is whether it's even necessary. The second is whether it goes far enough.
Last year, Securities and Exchange Enforcement Director Robert Khuzami testified that Congress and government employees already are subject to insider trading laws. But the bill's backers argued that existing law might not apply to certain activities of members of Congress. Last November "60 Minutes" based a long report on a book, "Throw Them All Out," which claimed to document possible insider trading in Congress. Many of the examples it cited might not have violated current insider trading laws, and certainly they would have been difficult cases to prosecute.
So much for the notion that the law is unnecessary; as we've argued, it is. In fact it could have been stronger.
The version of the bill that passed the Senate is missing a couple of provisions that would have given it a bit more heft. The most important would require more disclosure by so-called political intelligence consultants, hired guns who dig for closely held information to be used to trade stocks. Many work for hedge funds and securities firms, who just happen to be some of the biggest congressional campaign contributors.
Another provision would have given investigators new tools and greater scope to go after embezzlement of public funds, bribery and other types of corruption.
The vote on the Stop Trading on Congressional Knowledge (STOCK) Act, by the way, wasn't even close: 96-3. What's surprising is that three members voted against it. Clear evidence of insider trading by members of Congress is sketchy at best. What's the harm in voting for a law that's unlikely to affect your fellow senators while at the same time shows voters you oppose corruption in Washington?
(James Greiff is a member of Bloomberg View's editorial board.)
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