Congressional Aides Make Big Gains On Wall Street

In 1995, members of Congress were forced to follow many of the same labor, civil rights and safety laws they enacted for other employers under the Congressional Accountability Act.

But there's one area this piece of legislation didn't touch: insider trading.

Congressional aides and staffers are privy to information not yet known to the public, such as how favorable a vote looks for a certain energy policy, or when the government is about to pass a "yes" vote to rescue a drowning company.

And according to an investigation by The Wall Street Journal, some staffers are making large gains trading stocks of companies their bosses legislate.

Congressional aide Karen Brown is one example. Brown's boss, Republican Sen. Mike Crapo of Idaho, is on the Senate Banking Committee. In 2009, Brown traded Bank of America stock on seven occasions, and made a 43 percent return on her Bank of America stock in just 10 days, Wall Street Journal reporter Brody Mullins tells Weekend All Things Considered host Guy Raz.

And this is happening on both sides of the aisle.

In early 2008, a top staffer for Sen. Harry Reid (D-NV), Chris Miller, bought stock in a renewable fuels company. Meanwhile, a piece of renewable energy legislation was moving through the Senate that Reid helped push through to become law.

"During the process, Miller sold the stock a couple of times and made a bundle. And the issue is: Did Miller have information that you and I don't have?" Mullins asks.

In this case, Miller says he didn't have insider information — and there's no reason not to believe him, Mullins says.

"But there are hundreds if not thousands of staffers who every day are in possession of nonpublic information that can move stocks, and they are allowed to trade on that," Mullins says.

What the congressional aides are doing is not illegal, so the scandal, Mullins says, "is not what's illegal but what's legal."

So why don't insider trading laws apply to staffers or members of Congress?

Mullins says it's fairly complicated.

"The reason is the SEC insider trading law says someone cannot trade on information that's nonpublic in the market in violation of a duty to keep that information private. In the case of myself or yourself, we would have a duty to our bosses. On Capitol Hill, you don't have a duty to anyone to keep the information to yourself, because the lawmakers basically work for themselves," Mullins explains.

There are a few lawmakers attempting to change this practice. Democratic lawmakers Brian Baird (D-WA) and Louise Slaughter (D-NY) proposed legislation — called the Stop Trading on Congressional Knowledge Act — that would have banned insider trading

"At the time, about a dozen lawmakers signed on to their bill. Now [they] have even less lawmakers supporting their bill than before. And one of the sponsors of the bill, Brian Baird, is retiring," Mullins says.

He points out that Congress has the power to change its own internal rules and just ban this. It doesn't need to pass a law.

"This is something that could take five minutes to fix," Mullins says.

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