Congressional Insider Trading and the Media

RL Ellison

Someone once remarked Hollywood is all about money and Washington all about power.

Money and power, however, strangely enough, are five-letter words; and when it comes to Washington completely fungible. Money is power. Power is money.

Count the number of lobbyists slurping and slinking around our Capitol. Question: How do you spell money? Answer: Lobbyists. It’s a local joke with non-local consequences.

There is another joke about the golden rule: Whoever has the gold makes the rules. In Washington whoever makes the law has the power. Whoever has the power makes the lucre. Enter from stage crooked trading on insider information.

If you’re Martha Stewart about now you should be not only pissed off but outraged. If memory serves, mostly Martha went to jail for insider trading.  Now Martha is hardly alone, just more profile, more example prone. For those fortunate, elected chosen few who occasionally ambulate through the hallowed halls of our nation’s Capitol, claiming to do some of the public's bidding, insider trading is legal. Wonder how that happened? (Notice we purposely left out ethical. One of the things one learns early on is never bring up ethical and Congress in the same sentence.)

We’ll spare you all those sticky little, boring details, plowing back through decades to the 1950s when legislation defining what constituted insider trading violations somehow omitted Congress. It was, as they say, an accident I’m sure, a brief oversight or cerebral lacunae in attention. That brief oversight, lacunae in attention recently somehow celebrated its well-over-50th birthday. 

As exclusive as this exclusive club is, it’s hardly one of those things that doesn’t get passed around. Just ask the current and the former speakers of the House. What brought all this sleeping-dogs-should-hopefully-stay-left-alone-stuff up is a recent book by Stanford professor Peter Schweiger, Throw Them All Out.

Now the watchdog of the world, our illustrious media, has apparently treated this unseemly subject like a hot potato, taking their cue from a line in a famous Willy Nelson song, “Don’t hold on to nothing too long. Just take what you need and leave….”

Here’s how the Security and Exchange Commission defines insider trading:

Illegal insider trading refers generally to buying or selling a security in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include ‘tipping’ such information, securities traded by the person ‘tipped’ and securities traded by those who misappropriate such information.

Now we'll leave it up to you to decide if any of that at all is applicable to our august officials in Washington. We'd leave it up to the media, but they've already done what they do best, move on.

You Gotta Love It

November 27,2011

                                                

European lawmakers recently rejected Ireland’s nominee to the European Court of Auditors, according to an Associated Press report.

Reason:  He made a small miscalculation when he helped calculate Ireland’s national debt—3.6 billion Euros or $5 billion. The candidate, Kevin Cardiff, a senior servant in Ireland’s Finance Department, was endorsed by the Irish government for the $370,000 a year position. The Luxembourg-based court audits EU finances.

It seems Cardiff was deeply associated with Ireland’s ill-fated bank guarantee program that ended up costing 70 billion Euros to bail out six troubled Irish banks. The Budgetary Control Committee of the European Parliament in Brussels rejected Cardiff in a 12-11 vote, the first time a candidate has been turned away since the Court’s formation in 1975. Several lawmakers apparently informed Cardiff that they had received numerous emails from Ireland requesting that his nomination be blocked.

Switch quickly to the Obama administration. Though now, given the fallout from the MF Global meltdown, they will most probably try to deny it, the administration was highly considering appointing Jon Corzine as the next Treasury secretary of the US. But Corzine it appears will be spending at least part of his pre-Christmas holidays testifying before a senate subcommittee investigating MF Global’s sudden demise, Corzine’s abrupt resignation and what happened to $1.2 billion in customer funds.

tm hatter

Open Letter to Super-Duper Committee

LET THE CUTTING BEGIN

There is an old saying in medicine whenever one is dealing with an open wound or a contaminated laceration: "The solution to pollution is dilution."

In some cases the more dilution the better. And when it comes to pollution, you can forget about carbon dioxide and ozone layers. What we're talking about here is government pollution.

From the silly legislation that prevents start-up businesses from starting up to burdensome, complicated tax codes more mysterious than the Da Vinci Code to wasteful government spending that would make every drunken sailor who ever lived blush, it's as obvious as Barney Frank's sexual preference: Too many chits out, too many IOUs, the sum and substance of politics everywhere.

Now before all you epithet-hurlers get worked too tight, Mr. Frank has publicaly awowed his preference; that makes it a statement of fact, one of public record. If beauty is in the eye of the beholder, so too must be malice. No malice intended here, just fact.

Irrigating a wound helps remove the unwanted bacteria and debris. The wrong bacteria in the wrong place is just another name for debris. And that's what government waste has become, just so much debilitated, dead debris that will soon include, if something sensible isn't done, the U.S. dollar, DOA. And the answer sure isn't setting up a bunch of trade barriers, hello Chuck Schumer.

As is sometimes the case with wounds, irrigation often isn't enough. Unwanted waste must be excised. That usually means taking a scalpel and some scissors to cut away the unwanted so the remaining healthy tissue can florish. That's just about where we are today as a nation.

So forget all that political nonsense about bipartisanship; it never was and never will be. Just send your elected official a scalpel and a pair of scissors.

Drug Screens and Inventories

Inventories matter.

High inventories equal low demand or a bottleneck, meaning you can't get the stuff out faster than demand is building up or coming in. Think bathtub here. Low inventories are usually just the opposite, very little demand or can't keep up with what demand there is. If housing or energy, as in oil or natural gas, come to mind, you're onto to something. But you could just as easily toss in things like credit, money and jobs. Or Drug screening.

Drug screening is a huge part of employment these days. Companies routinely require it for many new hires. They also do random drug screening. Back when the economy was riping and roaring, a friend of mine who owns several industrial medical clinics used his own private economic indicator, pre-employment physicals. When the economy is good and firms are hiring, his daily numbers soared.

One day he called me, somewhat exasperated: "Man, I'm going to have to hire more staff.  It's so tight out there, a lot of firms are even hiring people whose tests are coming back positive. They don't care." They needed bodies. Supply wasn't keeping up. Anyone who really wanted a job back then could've had it. So much for the cry-babying-full employment crowd. They never get it. Not everyone wants a job.


A funny thing happened in late 2007. His numbers started to change. Like many things at first it was just a trickle. The rest of the story we already now know. With unemployment much higher than the government wants us to believe, an over-built housing market and a horde of tapped out consumers, an administration and a Congress that apparently haven't got a clue, the Ben Bernanke Printing Company, one could ask oneself: what's the nation's inventory?

Just for kicks, toss in the fact that the EU has a severe case of fiscal ptomaine poisoning and is looking for a place to conveniently upchuck; and you may get some idea that, as one of America's great metaphysical philosophers, Yogi Berra, said: "It ain't over until it's over."

How long is it going to take? As long as it takes. In the meantime, keep your eye on those inventories, especially your own.