When former New Hampshire senator Judd Gregg was being considered for Commerce secretary in early 2009, his investments came under scrutiny. Among other things, Gregg had earmarked $66 million in federal funds to transform a decommissioned Air Force base in his home state into a business park.
The project was being spearheaded by Gregg’s brother Cyrus, and the senator had invested $450,000 to $1 million of his own money. Since the taxpayer-financed redevelopment, Judd Gregg has earned somewhere between $240,000 and $650,000. Yet when asked about his earmarks, Gregg replied, “I am absolutely sure that in every way I’ve complied with the ethics rules of the Senate both literally and in their spirit relative to any investment I’ve made anywhere.”
Gregg’s statement is true—and that’s a problem. In terms of earmark abuse, Senator Gregg was far from the worst member of Congress. But Senate ethics rules are toothless and easily skirted. George Washington Plunkitt of Tammany Hall once put it this way: “There is so much honest graft in this big town that they would be fools to go in for dishonest graft.” (As the Charlie Rangel and Maxine Waters ethics investigations indicate, we still elect our share of fools.)
The anecdote about Gregg and the Plunkitt quote above are both included in Peter Schweizer’s Throw Them All Out. The book has received a massive publicity push—including a much-discussed 60 Minutes segment—and for good reason. Though many people may think it’s impossible to be any more cynical about Washington, D.C., -Schweizer’s well-documented litany of political corruption is likely to discover wells of indignation heretofore untapped.
Aside from its land deals and earmarks, Schweizer notes that Congress has exempted itself from insider trading laws. At a time when Americans hate Wall Street with the fire of a thousand suns, behavior that would get a bank executive a perp walk and a jail sentence is business as usual in the nation’s capital.
Schweizer provides exhaustive detail on members of Congress actively and profitably trading health care stocks during the debate over Obamacare, given their advance knowledge of which companies the legislation would turn into winners and losers. It also appears that a number of congressmen dumped or traded stock in the wake of confidential briefings by Federal Reserve chairman Ben Bernanke and then-Treasury Secretary Henry Paulson in the fall of 2008, as the country headed for bank collapses and a market meltdown.
House Financial Services Committee chairman Spencer Bachus, who has regular access to privileged financial information, has been brazen. Bachus has quite successfully engaged in risky short-term options trading—he made $50,000 in capital gains between July and November of 2008, when just about every American was watching his 401(k) fall off a cliff.
Now some of Schweizer’s targets are pushing back. Nancy Pelosi and her defenders say the fact that the former speaker of the House was let in on a lucrative Visa IPO as Congress was considering major credit card legislation is less sinister than Schweizer makes it appear.
Note that Pelosi’s office is not rebutting Schweizer’s convincing documentation of how her earmarks and other legislative activity have significantly increased the value of her real estate holdings. Note too that telling sitting congressmen to avoid trading or purchasing stock they are in a position to affect the price of is hardly a radical suggestion.
Outrage over Schweizer’s revelations has revived the Stop Trading On Congressional Knowledge (STOCK) Act, which would finally make congressional insider trading illegal. First introduced in 2006 by Democratic representatives Louise Slaughter and Tim Walz, the legislation initially went nowhere. It’s now being reintroduced by a bipartisan group of senators, including GOP rising stars Scott Brown and Marco Rubio. Both parties should come together and pass something like the STOCK Act quickly.
But they shouldn’t end there. The GOP should take active steps to deal with corruption in its own ranks and look for additional, sensible legislation to champion.
It’s not just clean politics. It’s good politics. Americans understandably loathe the political class, and the growing hype over Schweizer’s book suggests corruption is politically potent. After all, Republican’s long-term goal of re-limiting government is compatible with a short-term agenda of curbing the corruptions of big government.