WASHINGTON -- A long-ignored proposal to ban insider trading by members of Congress gained new traction this week following news stories that reinforced the public's low opinion of Congress.
The issue gained national attention Sunday night when the CBS news show 60 Minutes reported that lawmakers have exempted themselves and their staffers from a law that has sent some of their constituents to jail. The broadcast questioned stock trades made by House Speaker John Boehner, R-Ohio, and House Minority Leader Nancy Pelosi, D-Calif. Both denied acting improperly.
Congress had an approval rating of 13% in a Gallup Poll released earlier this month, and a 9% rating in a CBS News-New York Times survey last month.
Democratic Rep. Louise Slaughter of New York first proposed the insider trading bill in 2006 after reading a Wall Street Journal story about day trading by the chief of staff of then-House Majority Leader Tom DeLay, R-Texas.
"That story really infuriated me,'' Slaughter said Wednesday. "Now we've seen a groundswell of support and I'm glad the issue is getting the attention that it deserves. No one in this Congress should be using anything we know here for their own personal gain. That's not why our constituents sent us here."
In the first two days after Sunday's 60 Minutes segment, the number of House lawmakers sponsoring the bill rose from 9 to 28. By 4 p.m. Wednesday, it had reached 43.
Republican Sen. Scott Brown of Massachusetts announced Tuesday he is sponsoring the first Senate version.
Three other senators — Democrats Kirsten Gillibrand of New York, Debbie Stabenow of Michigan and Jon Tester of Montana — said Wednesday they plan to introduce a slightly different version of the proposal as early as next week.
Former lobbyist Jack Abramoff, who is promoting a new book after serving three-and-a-half years in prison for influence-peddling, told CNBC on Friday he knows of up to a dozen members of Congress who have bragged about trading on insider information.
"All of a sudden, somebody from a background maybe in law, maybe in some other unrelated business area, is picking winners and losers in the market," Abramoff said.
The 60 Minutes broadcast relied on the findings in another book, Throw Them All Out, by Peter Schweizer of the Hoover Institution.
House Financial Services Committee Chairman Spencer Bachus, R-Ala., whose stock trading was criticized in Schweizer's book and the 60 Minutes report, issued a letter Wednesday stating "the book is absolutely false and factually incorrect'' in accusing him of short-selling General Electric stock. Short-selling refers to betting that a stock will drop in price.
According to Bachus, his purchases were options that would earn a return only if the stock rose in price.
"If I somehow had 'inside information' that GE was in dire straits, why on earth would I have purchased call options in the hope that the company's stock price would increase?'' Bachus asked in his letter to the book's publisher, Houghton Mifflin Harcourt.
Stock trading by congressional lawmakers who are meeting behind closed doors with regulators and corporate executives at roughly the same time at least creates the appearance of impropriety.
Many members of Congress are much wealthier than average Americans and have more extensive stock holdings. An analysis of lawmakers' 2010 personal financial disclosure reports conducted by the Center for Responsive Politics for USA TODAY found 11% have a net worth over $9 million and 250 are millionaires.
The average lawmaker annually buys 18 stocks worth $402,000 and sells 22 stocks worth $619,000, according to a study last year by Andrew Eggers of Yale University and Jens Hainmueller of the Massachusetts Institute of Technology. Their study covered 650 people who served in the House or Senate between 2004 and 2008.
But Eggers and Hainmueller also found that the stock portfolios held by members of Congress performed worse than average.
"Members of Congress are not investing geniuses," they wrote. "Most of what they know about political developments is probably quickly incorporated into (stock values) and many members likely recognize the possible political costs of trying to make money on whatever private political information they do possess.''
Craig Holman of Public Citizen's Congress Watch said Wednesday the new wave of publicity could give the proposed bill its first real chance of passage.
"This is a story that really resonates with a public that's already upset with Congress,'' Holman said.