House majority leader Eric Cantor kept his word and got the House to pass the STOCK Act, 417-2!, albeit only after stripping out the so-called political intelligence provision. I'm okay with that change for reasons Richard Painter explained:
... some hedge funds and other investment firms learn nonpublic government information before the rest of the investing public. Sometimes this is done through “political intelligence” firms that arrange meetings and conference calls with government officials and use other techniques to obtain nonpublic information which is then made available to clients for a fee. As I told the Wall Street Journal last year, gathering and selling confidential government information is a very good business model, if you can get away with it. This isn’t fair and something should be done about it.
The Grassley amendment responds to this problem by requiring firms that gather political intelligence to register under the LDA. The problems with this approach are many. First, persons who do not fit the definition of a “political intelligence” firm in the statute will not be required to register and will continue to gather nonpublic government information and use it for securities trading. Second, a definition of a “political intelligence” firm will need to be exceedingly broad if it hopes to include a significant portion of the persons and entities that use nonpublic government information for securities trading. Drafting such a definition is nearly impossible. Third, a broad definition of “political intelligence” firm that is coupled with a registration requirement imposes an undue burden on persons who seek to gather information about what their government is doing, a critical function in any democratic society. ...
The answer to selective disclosure (“leaks”) by government officials of nonpublic government information is not requiring people to register before they gather information about their government. The answer is stricter rules for government employees who selectively disclose government information to persons outside the government without disclosing the same information publicly. As I pointed out in a chapter on insider trading in my 2009 book on government ethics, selective disclosure by government officials needs to be regulated just as selective disclosure by officials in public companies is regulated by the SEC’s Regulation FD (“Fair Disclosure”). Donna Nagy and I are presently writing an article on how the executive and legislative branches could adopt and adhere to a Regulation FD regime. In short Congress should consider imposing on government some of the rules it imposes on the private sector, rather than trying to solve a problem in government ethics by enacting yet more regulation and a burdensome registration requirement for the private sector.
Anyway, I've been deeply suspicious of Cantor throughout this process. Whether he was really on the side of the angels all along or just saw the political handwriting on the wall, however, is now irrelevant. He got the job done and for that he gets my thanks.
