This morning, Breitbart editor Peter Schweizer appeared on MSNBC’s Morning Joe to discuss his new book, Throw Them All Out, which has shaken Washington to its core in the past few days. The battle over insider trading in Congress has set up a confrontation between bipartisan reformers on the one hand, and defenders of the insider-trading status quo on the other.
In the course of the interview, Schweizer responded to Rep. Spencer Bachus (R-GA), chair of the House Committee on Financial Services, who is fighting calls for his resignation. As it has become clear that the insider trading scandal is not going away, Rep. Bachus has abandoned his early reticence in favor of a more aggressive defense.
Schweizer, who was joined on the show by Steve Kroft of CBS, reiterated his case against insider trading in Congress:
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Bachus seems to be fighting a losing battle, as momentum for reform builds in Washington. Even Rep. Barney Frank (D-MA), the ranking member on Bachus’s committee–who belatedly discovered his enthusiasm for reforming Fannie Mae and Freddie Mac when facing a serious public backlash and a tough re-election–is now calling upon Bachus to join efforts to pass the STOCK (Stop Trading On Congressional Knowledge) Act.
Big Government has obtained a letter that Rep. Frank sent to Rep. Bachus urging him to support the STOCK Act–“which, I acknowledge, should have been addressed when I was the Chairman.”
Rep. Bachus’s letter to Schweizer’s publisher is posted below, followed by Schweizer’s response, and by Rep. Frank’s letter to Rep. Bachus.
Bachus Letter
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Schweizer’s response:
There is nothing a Member of Congress can do that is more
important than uphold the public trust.
–Rep. Spencer Bachus (R-AL), November 16, 2011,
Letter to the President of Houghton Mifflin Publishing
Rep. Spencer Bachus is upset that my book, Throw Them All Out, has exposed the disturbing realities of his continual use of material nonpublic information to execute almost perfectly timed stock trades during the financial meltdown in the fall of 2008 that made him tens of thousands of dollars in profit.
His attempt to obfuscate his trading habits will not distract citizens from analyzing the facts I report in my book and that CBS aired during its 60 Minutes investigation of Congressman Bachus’s insider trading practices.
Indeed, even now, less than 48 hours after the book’s release, Senators Joseph Lieberman (I-CT) and Susan Collins (R-ME) are announcing that they will hold hearings to examine how insider trading laws apply to Congress, and bipartisan support is growing for the STOCK Act to put an end to the kinds of behavior in which Rep. Bachus consistently engaged during the financial crisis of 2008.
In his letter to my publisher, Rep. Bachus never refutes the core facts I present involving his stock transactions. By implication, he accepts the following as fact. During the financial crisis of 2008, he actively and aggressively engaged in stock options trading in the following:
Sector SPDRS: September 2, October 15
IShares: October 22
Market Vector Trust: November 3
Sony Corporation: October 20
Powershares QQQ: October 7 (twice), October 9; October 20 (2 times); October 20 (2 times); October 21
Powershares Ultra-Short: September 19
S&P Depositor: October 6, October 7, October 14 (4 times)
As I point out in my book, these trades often came one day after either an important private meeting, or near the date of important legislative activities.
Instead, he raises questions about just a few of the forty transactions that happened during the time period discussed, none of which are germane to the point I make in my book that the insider trading laws that apply to us should apply to Congressman Bachus and the other 534 members of Congress.
The question remains: what on earth was Congressman Bachus, the ranking Republican member of the House Financial Services Committee, doing trading options in publicly-traded companies and the overall market while he had access to sensitive, private material information, even as America sat on the brink of a financial implosion?
Rep. Bachus also tries to paint a picture of the September 18th private meeting in which he took part, and which included senior congressional leaders overseeing the nation’s finances. The meeting was, in fact, so secretive that all cell phones, BlackBerries, or devices that could lead to communications to others that might roil world capital markets were banned from entering the room. Rep. Bachus does not deny being at that meeting.
The meeting was called by the Federal Reserve Chairman Ben Bernanke and Treasury Secretary Hank Paulson. As has been recounted in numerous memoirs, books, and a C-SPAN interview with Rep. Paul Kanjorski (D-PA), Mr. Bernanke and Secretary Paulson explained how of the mishandled bankruptcy of Lehman Brothers earlier in the week was triggering a financial tsunami that could potentially destroy the American financial system in 72 hours and the global system in three weeks, and perhaps lead to a breakdown of social order.
As described in Secretary Paulson’s memoirs, Bernanke told them: “It is a matter of days before there is a meltdown of the global financial system.” It was for that reason that the members sat “ashen faced.”
The purpose of the meeting was for the Secretary of the Treasury to ask for $800 billion to $1 trillion to stem the potential financial implosion. Thus began the saga of TARP. Furthermore, those inside the meeting were told that the information discussed was for their ears only, and that no discussion of the potential of a financial collapse of our country could be discussed. There is no record that any member of that meeting went on TV, radio, or talked to newspapers about the degree of financial calamity that the country faced until much later.
And what did Rep. Spencer Bachus do with this highly sensitive nonpublic information? At his first opportunity the next morning, he made a bet on the most aggressive type of options trading by placing a leveraged put that shorted the market (ProShares Ultra-Short QQQ) and would benefit tremendously from the potential crash. Rep. Spencer Bachus essentially used material nonpublic information to bet against his country and the people he represents in order to profit himself. And profit he did. He more than doubled his money. He has denied none of this.
Bachus’s claim that the meeting was no big deal and that everyone knew that the markets were in trouble is laughable and disingenuous. It fails to explain why both the Treasury Secretary and the Chairman of the Federal Reserve were extremely alarmed upon learning about the true scale of the financial calamity facing the nation. Furthermore, an examination of the Dow Jones Industrial Average eveals a several-weeks-long, precipitous decline of the market at that time. It was over the course of several weeks, not hours or days, that Americans and shareholders began to recognize the extent of the crisis. Yet Rep. Bachus knew it on September 18.
Similarly, Rep. Bachus’s letter has nothing to say about his long history of options trading, before and after the financial crisis, including a pattern of trading options in individual companies overseen by a committee on which he served. Should a representative who sat on the House Transportation and Infrastructure Committee at the time, which regulates airlines, really have been trading stock options in United Airlines? I don’t think I need to answer that question.
It is revealing that Rep. Bachus, in a letter to my publisher, enclosed a column by Holman W. Jenkins, Jr. of the Wall Street Journal–an author who is openly skeptical of insider trading laws, and recently sided with Wall Street’s highest profile insider trading defendants. Even Jenkins acknowledges that “congressmen let themselves behave in ways they wouldn’t permit for the rest of us, indeed would denounce as greedy.”
Rep. Bachus has tried his best to confuse people on these matters. Of course, at this point, what other “option” does he have?
The time has come for Rep. Bachus to admit to the American people what he did, and to take responsibility for a pattern of behavior that has exacerbated a profound crisis of confidence in the integrity of our political system.
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Frank Letter
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