NPR: Congress Quietly 'Overhauls' Law Against Congressional Insider Trading

"Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance; without them it cannot live."

Franklin D. Roosevelt, First Inaugural Address, March 4, 1933

Who says that the Congress cannot act quickly and in a bipartisan manner in order to pass laws.

As I recall the original reform was called the STOCK (Stop Trading on Congressional Knowledge Act) Act. It was in response to the public outrage over a news story that exposed the insider trading business in Congress.

At the time the MF Global story was also breaking and there was concern that the people might lose confidence in the financial markets.

Well, the elections are over, and the law was about to take effect, so...

NPR
How Congress Quietly Overhauled Its Insider-Trading Law
by Tamara Keith
April 16, 2013


The legislative process on Capitol Hill is often slow and grinding. There are committee hearings, filibuster threats and hours of floor debate. But sometimes, when Congress really wants to get something done, it can move blindingly fast.

That's what happened when Congress moved to undo large parts of a popular law known as the STOCK Act last week.

A year ago, President Obama signed the Stop Trading on Congressional Knowledge Act into law at a celebratory ceremony attended by a bipartisan cast of lawmakers.

"I want to thank all the members of Congress who came together and worked to get this done," he said.

The law wouldn't just outlaw trading on nonpublic information by members of Congress, the executive branch and their staffs. It would greatly expand financial disclosures and make all of the data searchable so insider trading and conflicts of interest would be easier to detect.

But on Monday, when the president signed a bill reversing big pieces of the law, the emailed announcement was one sentence long. There was no fanfare last week either, when the Senate and then the House passed the bill in largely empty chambers using a fast-track procedure known as unanimous consent.

In the House, Majority Leader Eric Cantor, R-Va., shepherded the bill through. It was Friday afternoon at 12:52. Many members had already left for the weekend or were on their way out. The whole process took only 30 seconds. There was no debate...

Read the entire story and listen to the audio portion here.

Here is what DemocracyNow had to say:

Obama Signs Bill Gutting Transparency Provisions in Insider Trading Law

President Obama has signed into law a measure critics say guts key transparency provisions from a law designed to combat insider trading by members of Congress. The new bill repeals a requirement in the Stop Trading on Congressional Knowledge Act that high-level federal officials disclose financial information online.

But, according to the Center for Responsive Politics, it also removes requirements for the searchable and electronic filing of information related to potential conflicts of interest by the president, vice president, Congress and other officials.

On its website OpenSecrets.org, the Center wrote: "Without the provisions, the STOCK act is made toothless. Insider trading by members of Congress and federal employees is still prohibited, but the ability of watchdog groups to verify that Congress is following its own rules is severely limited because these records could still be filed on paper — an unacceptably outdated practice that limits the public’s access."

Here is a story on the same overhaul from The Hill.

Jonathan Weil also wrote a story on Bloomberg saying that all this concern over insider trading was overdone and that Chuck Grassley does not understand what he is talking about. I found it to be interesting. 

I think this story may be relevant. Stock Surge Linked to Lobbyist

Washington is corrupt, and Obama is no reformer.

Gold Daily and Silver Weekly Charts - Change Is Coming

“First you destroy those who create value. Then you destroy those who know what values are, and who also know that those who have already been destroyed were in fact the creators of value.

But real barbarism begins when no one can judge or know that what they are doing is barbaric."

Ryszard Kapuściński

Intraday commentary about gold here, What Does the Recent Decline in Gold's Price 'Prove?'

Well I think we can stipulate that if you give the Banks enough money and regulatory leeway, they will be able to have a good time with almost any market. But there is a bit more in there than that, and you might wish to give it a read.

I will caution everyone that I obviously do not know what the future will bring, and that, within the context of a currency war and a post credit bubble adjustment which I very much believe is underway, markets are going to remain difficult if not treacherous.  So leverage is best left for professionals.  The lack of transparency and market reform is appalling.

One thing that puzzles me when discussing this subject with American economists and financial pundits who have been expounding on the decline in gold, and those who may choose to buy gold and silver for their portfolios, in some fairly over the top terms complete with name-calling.  And drawing some fairly dodgy but broadly sweeping economic conclusions from it in the process.

Do they realize that quite a few people also buy Swiss francs and other currencies for many of the same reasons like portfolio diversity that people might also buy gold and silver?    And they are often the same people?

And their motivation in making such a purchase is not a hatred of the Democratic Party?  It may be a vote of 'no confidence' in monetary policy of a particular central bank, motivated in part by the negative real interest rates for example.  And it might reflect concern about scandals and corruption too, but that is more of a practical than political matter. 

Unless of course you are a creature of the central bank and its subsidiaries who can admit no error and allow no questions.

Do they realize yet that the world's central bankers are now net buyers of gold?  Are the Chinese and Russians closet Republicans?

Do they have any idea of what is happening outside of the clubby enclaves of the Washington-New York metroplex, the Hamptons, and the City of London?

Do they understand what is happening in the global currency markets and the way in which they are evolving?  I see little evidence of that.  They are stuck on some fairly narrow self-interests and issues.

Do they look for anything beyond their comfortably entrenched place in the status quo or does this bring too much fear and even desperation?  Its a common problem for many, but few see it in themselves.  But they are quick to point to it in others.

I think that quite a few economists and pundits might be in for yet another rude surprise (again) in the not all that distant future, because it looks like a sea-change is coming, slowly but surely.

SP 500 and NDX Futures Daily Charts - Complacency Is Resurgent, Stocks as the New 'Safe Haven'

As they are saying on the financial networks today, stocks are 'unbeatable' and every dip will be bought.

Don't be left on the sidelines.

Or as incredulous as it may seem unless you mention Jeremy Siegel's name, this recent decline in the metals show that commodities are now unsafe, and people should seek safety in stocks.

This reminds me of the same sort of things we were hearing in 2007.

Well, let's see what happens.

Market Manipulation, News, and Leverage

This piece on leverage and market manipulation came out a few weeks ago. Philip Byrne reminded me about it, and he is right.

Using leverage in these markets is a dangerous strategy.

I was also reminded of this because of the recent 'leak' of the FOMC minutes by the Fed that demonstrated that they had a 'preferred recipients' list who receive the information ahead of the markets, although normally not by a day.

And I think one might suspect and assume that there is more ad hoc leaking going on than the Fed would care to admit, and other key data points as well, especially from non-governmental sources.

So using leverage as an outsider is double deadly in a thin market based largely on policy and artificial flows of hot money.   In this case he had been speaking about shorting stocks with leverage in the stock market.  But he  draws the same lesson for levered long positions in commodities.

I also have to chuckle a little.  Some of the financial networks are pitching stocks heavily as a 'safe investment' now that commodities like gold have been proven to be unreliable.  And they are trotting out the usual suspects to make the pitch.

I will never forget how former Fed Governor Wayne Angell remarked that 'the Fed will drive people out of their savings and money market funds and into stocks.'  This on a financial network in 2004, and it worked; people piled into financial assets and a housing bubble, with Greenspan himself as cheerleader.  And they got slaughtered in the 2008 market crash. 

Nicely done.  And now its come on back in suckers for another handoff.  Take your money out of the banks and commodities and pile into stocks, which have already been run up on some record thin volumes.   Its a safe haven!

This is from Phil Byrne:

"The best thing about yesterday is that the Fed gave us a glimpse of the future. Those people who owned gold with leverage were waiting to have their throats cut – almost begging for it.. The best part is that this market operation has created instability where they once had stability. Nobody will take a levered position against them anymore – not on the stocks short side and not on the levered long gold side.

Here’s what I wrote to clients a couple of weeks ago:

Market Manipulation

The price of gold is a good segue into explaining how the markets are being manipulated.

Anyone who has read about the Japanese martial art known as Judo knows that the basic tenet of the art is to use the attackers leverage against him. Instead of picking up one’s opponent and throwing them down, Judo experts redirect the force created in their opponent’s attacks to knock them down. It’s the same in the markets.

We’re not the only investment firm that understands the problems in our economy and markets. Since 2008, a lot of work has been done to understand the problems in the world and this work has led to bets on the market – oftentimes with leverage such as selling short a stock, buying a put option, or borrowing money and buying gold.

Whenever investors use leverage, they leave themselves vulnerable because leverage turns small losses into big losses – it’s the reason why Lehman Brothers is no longer around. Knowing this, the Fed and its agents wait for these traders to place leveraged bets, and then the Fed’s agents forcefully take the other side of the trade. This is why we include charts of the VIX – they represent leveraged option trades.

A year ago, US corporate earnings growth was slowing meaningfully, Japan was recovering from a nuclear disaster worse than Chernobyl – one that continues to get worse – and at the same time, southern Europe was at the point where nobody would buy their debt and traders were making extreme bets against European markets and the European currency.

All it took was a promise by Europe’s central bank to “do whatever it takes” to prevent bankruptcy and the markets reversed in a huge way. Anyone betting against the European central bank incurred heavy losses. Later in the year, the Fed, then the Bank of Japan did the same thing with similar rallies.

The market has figured out this strategy which is why nobody is willing to bet against the world’s central banks in a meaningful way any longer. It’s the reason why markets are going up despite the tremors we face such as Cyprus, Italy, Spain, Portugal, North Korea, China, Japan, Argentina, and economic stagnation in the US.

Without speculators to crush, the Fed’s ability to keep the markets moving higher is seriously compromised.

Gold was the final bet against the Fed – they’ve won and by winning, they’ve lost!"

Philip M. Byrne, CFA
Chief Investment Officer
GeoVest Advisors Inc.