Reading the reporting of Scott Highman and Dan Keating into allegations that House Financial Services Committee Chairman Spencer Bachus (R-AL) was abusing his position in congress to make money in the stock market, I’m left with this nagging worry: What if he didn’t do anything wrong? They report that “Bachus has made numerous trades, some of them coinciding with major policy announcements by the federal government and industries under his congressional oversight,” which, if the implication is correct, would at least make sense. It may or may not be technically illegal for a member of Congress to use his position to get ahead of the speculative markets, but it’s certainly sleazy and also potentially lucrative.
By contrast, what Bachus says he was doing—just speculating in stock options he had no particular insider info about—would be really stupid. That, as everyone knows, is basically a guarantee that you’ll lose money over the long haul. What’s more, the fact that a retail investor shouldn’t be trying to beat the market like that is one of the best-known and least-controversial ideas in all of financial economics. The notion that someone so ill-informed would be holding such an important regulatory post precisely over financial markets is pretty distressing. I think I’d rather live in a world where Bacchus is just making a quick buck in a sleazy way than in a world where the Financial Services Committee Chairman actually thinks it’s a good idea for non-insiders to pursue this kind of investment strategy.