This is what Occupy Wall Street should denounce

This is what Occupy Wall Street should denounce

Here is a story that deserves more attention than Herman Cain’s egregious sexual misconduct or Rick Perry’s infamous ‘oops’ moment: the allegations of insider-trading by members of Congress. That story deserves more attention, but it won’t get it.
For one thing, there is no video to accompany it, no way to visualize it through a popular medium that gets millions of views. It’s not easy for Saturday Night Live to do a sketch lampooning insider-trading. (I do wish Jon Steward would take a crack at it, though.)
For another thing, it’s a complicated subject that many Americans don’t understand. (Half of Americans don’t own stock of any sort, not even through 401 (k)s.) It’s a little like the derivatives and other complex financial instruments that brought on the Great Recession: You can’t explain it on a bumper-sticker.
But here it is in a nutshell: Because of their positions as lawmakers, members of Congress were privy to information that you and I don’t get. They knew which stocks were likely to fall and which were likely to rise. The information they have is much more accurate than anything you’ll get from the loud-mouthed Jim Cramer and his compatriots. They used that information to buy and sell stocks and to get rich from it. (For reasons that have much to do with greed and hypocrisy, Congress has exempted itself from laws that made insider-trading illegal.)
A new book, Throw Them All Out, written by a conservative scholar/political activist named Peter Schweizer, details the allegations (“60 Minutes” did a report on it.) I haven’t read the book, but Slate blogger Dave Wiegel highlights charges from the book of insider-trader by Democrats and Republicans:

I’m working my way through it now, and one of the ugliest revelations so far — prodded in the Kroft story — is the degree to which Rep. Spencer Bachus, then ranking member of the House Financial Services Committee, bet against the market as it collapsed in 2008. Schweizer finds “no less than forty options trades” in Bachus’s records from July 2008 to November 2008. The trades made him wealthier; almost nobody else had the information he had, and could have made them. Take this example, from the bottom of the collapse.

On the evening of September 18, at 7 p.m., Bachus received [a] private briefing for congressional leaders by Hank Paulson and Federal Reserve Bank Chairman Ben Bernanke about the current state of the economy. They sat around a long table in the office of Nancy Pelosi, then the Speaker of the House. These briefings were secretive. Often, cell phones and Blackberrys had to be surrendered outside the room to avoid leaks.
What Bachus and his colleagues heard behind closed doors was stunning. As Paulson recounts, “Ben [Bernanke] emphasized how the financial crisis could spill into the real economy. As stocks dropped perhaps a further 20 percent, General Motors would go bankrupt, and unemployment would rise . . . if we did nothing.” The members of Congress around the table were, in Paulson’s words, “ashen-faced.”
Bernanke continued, “It is a matter of days before there is a meltdown in the global financial system.” Bachus was among those who spoke. According to Paulson, he suggested recapitalizing the banks by buying shares.
The meeting broke up. The next day, September 19, Congressman Bachus bought contract options on Proshares Ultra-Short QQQ, an index fund that seeks results that are 200% of the inverse of the Nasdaq 100 index. In other words, he was shorting the market. It was an inexpensive way to bet that the market would fall. He bought options for $7,846 on a day when the Dow Jones Industrial Average opened at 8,604. A few days later, on September 23, after the market had indeed fallen, he sold the options for over $13,000 and nearly doubled his money.

Bachus is a Republican, but Weigel makes clear that Democrats were in on the corruption. (Read more on his blog.)

If Occupy Wall Street turned up the heat on this, they’d do a real public service.