WHEN BAD PASSES FOR GOOD
Currently, I’m plowing through a gossipy book entitled “F.I.A.S.C.O.” by Frank Partnoy. It provides lurid tales about how brokers market their wares, particularly the bad stocks. Inventing palatable names for high risk investments is key. The term emerging markets, for example, was invented to make the bad debt of third world countries appear to be opportunities for lucrative speculation. (“F.I.A.S.C.O.,” pgs. 74-75)
But the shenanigans Partnoy reveals pale when a bright light is turned on the Congress of the United States. Apparently, one set of laws exists for the nation and another for our elected leaders. Martha Stewart went to prison for insider trading when she sold stock in a company on the advice of its owner. Members of Congress are exempt from this restriction. They receive insider information through their work on committees and are free to turn a profit on that knowledge. (“Insider Trading: For Congress, It’s Legal,” The Week, 11/25/11)
There’s a simple solution to this conflict of interest. Congressional leaders could put their investments in a blind trust as federal judges and the President are required to do. A few brave spirits have offered such legislation. As yet the bill has never come up for a vote. (“This Week” pg. 23)
Before we blame Wall Street for being good at the bad it does, let’s make certain our officials don’t gain from it.