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Will Main Street or Wall Street Get Dealt the Upper Hand on STOCK Act?

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In the weeks following an explosive 60 Minutes exposé on congressional insider trading, both chambers of Congress nearly unanimously passed the "Stop Trading on Congressional Knowledge" (STOCK) Act. But there is still no law. What's the holdup?

The ball is in Senate Majority Leader Harry Reid's (D-Nev.) court. And everyone is waiting for him to decide how to proceed.

It's not like the problem hasn't been well-documented. In congressional hearings, Robert Khuzami, director of enforcement for the Securities and Exchange Commission, acknowledged that the laws against insider trading have not been applied to Congress. "There does not appear to be any case law that addresses the duty of a member [of Congress] with respect to trading on the basis of information the member learns in an official capacity," Khuzami conceded. The same is true for congressional staff.

In addition, academic research showing that congressional lawmakers enjoy an extraordinarily high rate of return in the stock market has been well-publicized. That's why Congress fell over itself to pass a STOCK Act that would apply insider trading laws to itself. The problem is that the Senate and the House passed two different versions, leaving President Barack Obama's promise to sign the STOCK Act into law as soon as it reaches his desk unfulfilled.

The Senate approved a sweeping measure by a 96-3 vote that would specify that insider trading is illegal for Congress, that the cottage industry of lobbyists and Wall Street operatives who prowl the halls of Congress for insider information affecting the stock market fully disclose their clients and activities (known as the "political intelligence" provision), and that anti-corruption enforcement laws be repaired so that prosecutors can enforce these laws in the courts. The House of Representatives was ready to approve the same strong legislation - until House Majority Leader Eric Cantor (R-Va.) intervened, stripped the political intelligence and anti-corruption enforcement provisions from the bill and imposed a procedural rule under which the House could adopt only Cantor's weak substitute measure or none at all. The House reluctantly took the Cantor deal by a 417-2 vote. Now the differences must be worked out.

Now that the House has sent the stripped-down measure back to the Senate, Reid essentially has three choices: (1) adopt Cantor's weak version; (2) reinstate the political intelligence and enforcement provisions in some modified form and ping-pong the bill back to the House; or (3) send the bill to conference committee to work out the differences. (Reid could let the bill perish, but this is not a realistic option, given the public uproar over the issue.) Nothing has happened yet.

The first option is easiest but, like Cantor, Reid would appear to be caving in to Wall Street, which launched a massive lobbying campaign against the political intelligence provision. Also, Reid would then lose out on the very popular anti-corruption enforcement provision, which passed the Senate by voice vote. So this is unlikely. The second option would be fastest but the third option could work if Reid makes sure the end result is fair.

The ball in the Senate's court, and it is time once again for the Senate to insist on strong reform legislation - a STOCK Act that mandates Wall Street transparency and provides a viable means to enforce the law - and re-appeal to the large majority of House members to override Cantor. Proponents of the political-intel provision have already indicated the language can be narrowed somewhat while still preserving the intent. The anti-corruption enforcement provision is simply an imperative. If you agree, speak up now.

The clock is ticking. C'mon Senate, play smart ball. The president is expecting a strong STOCK Act on his desk, and the American public expects no less.