"When discussing decisions that fall into moral and legal gray areas, I often ask my students: How would this look on the front page of the New York Times? If the answer is 'terrible,' then my advice is simple: don't do it. I think it's clear that insider trading by members of Congress does not pass this test. The fundamental principle underlying laws on insider trading is the notion that financial markets should be a fair and even playing field, not one where certain huge titans have unreasonable advantages over the widows and orphans. While we all know that the reality of financial markets is far less benign, this is not a good reason to abandon the principle altogether. We don't give up on speed limits because many people routinely ignore them; we don't even legalize marijuana because many people routinely ignore the laws against its use.
Similarly, the argument that we shouldn't bother legislating against insider trading by Congress because it would be impossible to enforce is worrisome. If we applied that principle to all laws, we would be veering toward anarchy. Moreover, as the Historical Timeline suggests, insider trading is difficult but not impossible to enforce. Indeed, the SEC [US Securities and Exchange Commission] and NYSE [New York Stock Exchange] have developed sophisticated technology to spot insider traders. Certainly it is a cat and mouse game, much like that played by the IRS [Internal Revenue Service] and would-be tax evaders -- they find a loophole, we plug it up, they find another loophole... But still, we continue to tax and we continue to pursue tax cheats. And recall that insider trading legislation has long embraced the principle that one does not need to be a senior executive of the company in question to be an inside trader. Anyone who knowingly trades on private information (printers, paralegals, and cabdrivers included) may be held liable, both legally and morally, for their activities.
Finally, it is worth noting that public scorn of Congress has never been lower. The public trusts its congressional representatives less than it does used car salesmen; less than 20 percent of the American people approved of the job Congress was doing in September 2008. This distrust is firmly rooted in both the perception and the reality of congressional antics over the past decade or so. Surely congressional representatives have ample opportunity to enrich themselves after they leave office; they should not require the benefit of insider trading to do so while they are serving at the will of their people.
The principle of a fair playing field is and should remain sacred (tarnished though it may be). There's no excuse for abandoning it." |
