Insider trading is a serious issue in our financial markets. It is hard to say how often it happens or how much money is involved, and it comes in many different flavors. The easiest example is that of the corporate executive who buys (sells) her own company's stock before the public release of good (bad) news. She then profits on her early access to information that can affect the stock price.
I heard this piece on Marketplace a while back:
Lawmaker's Inside Advantage to Trading September 17, 2009
This story brings to light a form of insider trading that is currently legal. Congresspeople can make stock trades using information from their private committee meetings. For example, if Barney Frank (Chairman of the House Financial Services Committee) was informed by the Consumer Credit sub-committee that they were going to recommend legislation that would potentially lower MasterCard's profits, he could sell his holdings in MasterCard (or sell short) before this news was publicly released. He, just like the executive in the example above, would profit from his early access to information that can affect the price of a stock.
Louise M. Slaughter (D-NY-28) and Brian Baird (D-WA-3) have introduced legislation that would create rules for congresspeople similar to those that exist already for corporate executives. They call it the STOCK Act, and you can read about it here and here.
Monday, March 22, 2010
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That is totally bogus that our congressmen are allowed that kind of freedom...talk about incentive to pass legislation! I like how you use "she" in your first example, Martha much? :)
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