Spencer Bachus, House Financial Services Chair, Bet Against Market After Meeting With Bernanke
WASHINGTON -- Hours after leaving a closed-door meeting with top government officials about the impending financial collapse in September 2008, Rep. Spencer Bachus (R-Ala.), then the ranking member of the House Committee on Financial Services, placed a bet against the nation's financial markets.
On the evening of Sept. 18, 2008, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson met privately with congressional leaders from both parties, including Bachus. At the gathering, held in the office of then-Speaker Nancy Pelosi (D-Calif.), Bernanke and Paulson warned that a meltdown of the global financial system could be just days away and that immediate action was necessary.
The next day, Bachus purchased contract options on an index that multiplies investments when the Nasdaq goes down. Bachus sold the options four days later, after markets had taken a turn for the worse. According to financial disclosure forms for 2008, he made about $7,800 off the sale, nearly doubling his money.
The congressman had been betting against the market throughout the year. In 2008 alone, he made dozens of trades on similar indexes.
As "60 Minutes" reported Sunday, a new book by the Hoover Institute's Peter Schweizer alleges that Bachus is one of several members of Congress who directly benefited from nonpublic information. "While Congressman Bachus was publicly trying to keep the economy from cratering, he was privately betting that it would, buying option funds that would go up in value if the market went down," said Schweizer on the CBS News program. "He would make a variety of trades and profited at a time when most Americans were losing their shirts." Schweizer's book, Throw Them All Out, will be released Tuesday.
Bachus, now chairman of the House Financial Services Committee -- which, of course, has jurisdiction over issues relating to securities, exchanges and monetary policy -- made a total of 24 transactions on Sept. 19, 2008, including selling off investments in General Electric, Kansas City Southern and mutual fund Consulting Group Capital Markets Funds.
This is not the first time Bachus' investments have stirred up questions. In 2008, right around the time he bet on Nasdaq collapsing, Bachus raised eyebrowswhen it was revealed he had made a tidy profit on an unusually quick investment turnaround. He bought shares in a Chinese advertising company, betting that company's stock value would increase. He sold two weeks later, on the same day that a news release stated the company, Focus Media Holding, would acquire a competitor. He made $15,000 off the transaction.
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First Posted: 11/14/11 01:23 PM ET Updated: 11/14/11 06:04 PM ET