The House passed a bill banning Congress and executive branch officials from insider trading, but brushed aside a provision aimed at reining in those who pry financial information from Congress and sell it to investment firms.
Thursday's 417-2 vote likely sends the legislation to a House-Senate conference, where supporters of the tougher regulation will try to restore the proposal that was included in the version passed by the Senate. Voting against the bill were Reps. John Campbell, R-Calif. and Rep. Rob Woodall, R-Ga.
The language in dispute would require so-called political intelligence firms to register the same as lobbyists, and they would have to file public reports on their spending and contacts with federal officials. Portions of the financial industry lobbied for removal of the proposal.
"The Republican leadership couldn't stomach the pressure," said Rep. Louise Slaughter, D-N.Y., who has been trying to get an insider trading bill passed for six years. She said the bill "let the political intelligence community off the hook."
Majority Leader Eric Cantor, R-Va., who wrote the House bill, countered that a study of this growing but little-known industry made more sense. He said inclusion of the new rules at this point would have "raised far more questions than they would have answered."
The Stop Trading On Congressional Knowledge (STOCK) Act was a reaction to a segment on CBS' "60 Minutes" in November. The show said members of Congress were legally enriching themselves by using nonpublic information gleaned from their official duties to make money in the markets.
With Congress' approval ratings in the teens, the television show caused lawmakers to line up in support of Slaughter's insider trading bill, a piece of legislation that had lain dormant for years. Cantor then used the prerogative of the majority to write his own bill.
Congress decided that executive branch officials, who already have tougher ethics rules than lawmakers, needed to be included in the bill so there's a level ethical playing field for all federal policymakers. About 28,000 executive branch officials file public, annual financial disclosure forms -- the same as members of Congress and their top staff.
Under the STOCK Act, however, reports would have to be publicly filed online with much greater frequency. Financial transactions of those covered -- in Congress and the executive branch -- would have to be publicly posted online, either 30 days after notification of a transaction or 45 days after the transaction.
The bill also would prevent members of Congress from getting special access to IPO's, or initial public offerings of stock. That provision was aimed at House Democratic Leader Nancy Pelosi, D-Calif., whose husband in 2008 purchased shares in a Visa IPO while a credit card reform bill was before the House. Pelosi denied there was any connection between the investment and the bill, but voted for the STOCK Act.
The House bill accepted Senate language that would require lawmakers to disclose all their mortgages, ending an exemption for loans on personal residences. And the House legislation vastly expands the list of felony convictions that would require lawmakers to be ineligible for their government pensions.
Supporters of Cantor's study of the political intelligence industry had warned that the bill could have violated the First Amendment rights of people who contacted members of Congress, but had nothing to do with trying to sell financial information to investment houses.
The harshest criticism came from a Republican, Sen. Charles Grassley of Iowa, whose amendment to regulate these firms won by 60-39.
"It's astonishing and extremely disappointing that the House would fulfill Wall Street's wishes by killing this provision," Grassley said. "The Senate clearly voted to try to shed light on an industry that's behind the scenes."
"If the Senate language is too broad, as opponents say, why not propose a solution instead of scrapping the provision altogether," he said. "I hope to see a vehicle for meaningful transparency through a House-Senate conference or other means. If Congress delays action, the political intelligence industry will stay in the shadows, just the way Wall Street likes it."