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With Obama Endorsement, Insider Trading Ban for Congress Likely

One part of the State of the Union I forgot to mention is that the President formally backed legislation that wold ban insider trading among members of Congress. If the Administration has been serious about anything related to financial fraud, it has been insider trading, where they have engaged in multiple criminal prosecutions. And the 60 Minutes piece on insider trading, while a bit flawed, did raise attention to the fact that it’s almost perfectly legal for members of Congress to trade on the secret information they get from being on Capitol Hill. Suddenly everyone wanted to pass the STOCK Act, legislation that would ban insider trading in Congress, which languished with just a handful of co-sponsors for months. And now, the President formally endorsed it.

Harry Reid has it on his agenda as well, which means it’s likely to come up for a vote soon.

Senate Majority Leader Harry Reid (D-Nev.) said Tuesday night he would support legislation to end insider trading among members of Congress and saw no reason why the bill couldn’t become law this year.

President Barack Obama called on Congress during his State of the Union address to swiftly pass legislation barring legislators from investing in companies whose business is affected by matters before the two chambers.

“Well, I think people should have enough sense not to do it without legislation, but I will support legislation,” Reid told a handful of reporters after the speech.

Could the bill become law this year? “I don’t see why it shouldn’t,” Reid said.

Senate Republicans were glad to hear of Reid’s willingness to back the bill — or at least his inability to see how its demise might come about.

“Oh good! I hope he schedules it for floor action,” Sen. Susan Collins (R-Maine) said when told about Reid’s backing.

Everyone wants to get on the right side of this, so it looks like it will pass. But the trouble could come in the House. Spencer Bachus, very implicated in the 60 Minutes story, tried to pass his own version of the legislation through committee recently, but Eric Cantor blocked him because he never cleared it with the leadership. So that needs to be untangled. It’s a very delicate position for the House leadership to be in, however, blocking legislation that simply says that members of Congress cannot trade stocks in businesses over whom they have oversight and lawmaking responsibility. That’s not going to work if the President and the Democrats in the Senate make any kind of push.

The fact that you need legislation on this right now is pretty shocking, but I would be surprised if it didn’t pass at some point this year.

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David Dayen

David Dayen