Financial Reform For Thee But Not For Congress

It was bad enough that the recent "financial reform" package passed by Congressional Democrats (with the aid of a three RINOs in the Senate) was written by the two men most responsible for banking and investment crash. While, Bahney Fwank and Christopher Dodd (who both should be bunking with Bernie Madoff), thumped their chests about the good and virtuous federal government having its boot on the throat of the financial industry it turns out one group is still unregulated. Go ahead, give it a guess. Robin Hanson's post at Overcomingbias.com provides the answer: It's Congress!

While the US Congress has found time to “reform” finance by preventing movie futures, they have not found time to regulate insider trading by Congress.

Ordinary folks are banned from “insider trading.” For example, someone who noticed a factory fire via an airplane window was convicted of insider trading for trading on this info before it was publicly announced. But Garrett Jones tells me that US Congressional representatives, and all their staffers, have long been explicitly exempt from these rules – the SEC is not authorized to regulate Congress, and Congress has not chosen to regulate itself. So Congress-folk regularly profit by trading on inside info they gain from interactions with industry representatives. So much so that their average return on investment (ROI) is far larger than the public’s.

So, while innocent conversations or helpful information that is incidentally discovered can land a person in prison, the gang of reprobates in the Kremlin on the Potomac can craft legislation to build their personal portfolios and cannot be investigated much less punished. Congress can do much more to impact market forces through their abusive legislative hammer than any financial manager can do. The difference is a rogue investment banker or portfolio manager can pay a severe price for their evil doings. Barney Frank and Chris Dodd can crash the housing market and demand more power over the banking industry.

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