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"In my 1966 book I said unequivocally that insider trading by any government officials on information received in the course of their work should be outlawed. The economic consequences of this trading on stock prices will be the same as any other informed trading, but there are many other aspects to the economic argument for legalizing insider trading generally that just will not pass the 'smell test' for government officials. The compensation argument for corporate insider trading cuts in exactly the opposite direction for government officials. We do not want them to receive extra compensation or outside compensation for doing their jobs. And, of course, all too frequently their access to this information is merely another form of a bribe, and that sure as hell is not legal. But proof will always be difficult (there are many ways government officials can hide the use of inside information, including using the information as a currency with which to pay off other contacts, thus avoiding buying or selling the securities themselves), and enforcement of any law against insider trading will be minimal at best. You can be sure that the SEC will not actively monitor Congressional trading, and the usual disclosure techniques will rarely elicit sufficient legal proof of a violation of the law. Ultimately the only thing that will reduce the value of the use of inside information by government officials is for the government to be involved in far, far fewer matters than it is at present, thus curtailing the amount of valuable information the government can force out of citizens."
Email to ProCon.org on June 29, 2008
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