Honest Graft, Dishonest Graft, Pelosi, Boehner, and the STOCK Act

Honest Graft, Dishonest Graft, Pelosi, Boehner, and the STOCK Act


George Washington Plunkitt  John Boehner Nancy Pelosi
John Boehner and Nancy Pelosi schooled by George Washington Plunkitt

In a recent feature story on 60 Minutes, Steve Kroft detailed how many in Congress use their privileged access to information on pending legislation, investigations and regulations to line their own pockets. Much of the piece was based on research of Hoover Institute fellow Peter Schweizer from his book “Throw Them All Out”. Among the surprising revelations in the book – Congress is exempt from prosecution for the same kind of insider trading that would send the rest of us to jail.

Coincidentally, über-lobbyist and felon Jack Abramoff was saying much the same thing to anyone who would listen while promoting his new book “Capitol Punishment”. CNBC has been covering the story for a while and offers a succinct summary in the video linked here (I would have embedded it, but my Donk permissions don’t allow).

Abramoff asserts the practice is widespread and growing. Schweizer connects the dots between the increasing entanglement of the federal government in the private economy and the consequential exponential increase in opportunity for our congressional leadership and their staff to partake in the profitable practice of insider trading. Both Abramoff and Schweizer name names.

Kroft focused primarily on the specific examples of our most recent Speakers of the House. He reported John Boehner and Nancy Pelosi participated in investment activity that, at best, created the appearance of conflict of interest. Some have criticized Kroft and 60 minutes for focusing on two of the weaker examples cited by Schweizer, presumably because of their leadership roles. But even these examples are illuminating. More interesting than the exposure of the trading activity itself, was the response from their respective offices. While we already knew that they did nothing illegal, predictably both offices also emphatically denied they did anything wrong.

Kroft described purchases of Visa stock by Nancy Pelosi and her husband while she controlled the timing of legislation that would have hurt credit card companies. Her spokesman:

“Congress has never done more for consumers nor has the Congress passed more critical reforms of the credit card industry than under the Speakership of Nancy Pelosi,”

Current Speaker John Boehner purchased health care stocks when he was aware that the “public option” was about to be dropped from Obamacare. His spokesman:

“The idea that the Republican leader in the House opposed the ‘public option’ – policy favored by the left of the left – for personal profit is, frankly, stupid,” said a GOP aide.”

Note that neither the response of Boehner or Pelosi directly addressed the question of whether their profitable trades benefited from insider knowledge. In both cases they defend their consistent record on the policy issue (credit card consumer protection for Pelosi, opposition to the public option for Boehner), and take umbrage at the mere suggestion that their positions on these issues might be influenced by personal financial gain. Fine and good, but that is not the point. The issue at question is whether they used insider information not generally available to the public to make trades that benefited themselves.

When sorting through these fine gradations in the taxonomy of congressional graft, it is useful to have a guide. There is no better guide or greater authority on the subject than George Washington Plunkitt, who literally wrote the book on political graft.

At the turn of century, George Washington Plunkitt was a Senator in New York, and considered one of the most corrupt members of possibly the most corrupt political machine in our history – New York’s Tammany Hall. He is famous for (among other things) writing his own epitaph – “He Seen His Opportunities and He Took ‘Em.

Yet – George Washington Plunkitt was not without a moral compass. He made a clear distinction between honest graft and dishonest graft. This distinction was a moral line in the sand that even he would not cross. Moreover he forthrightly defended this distinction in a series of public speeches, which were later compiled into a book: Plunkitt of Tammany Hall: A Series of Very Plain Talks on Very Practical Politics, Delivered by Ex-Senator George Washington Plunkitt, the Tammany Philosopher, from his Rostrum—the New York County Courthouse Bootblack Stand.”

We’ve have had occasion to consult this valuable reference before, when in 2006 we explored the Speaker of the House Denny Hastert’s land deals and came to the conclusion that they perfectly fit Plunkitt’s definition of “Dishonest Graft”. The Speaker of the House of the United States of America in 2006, the man who was third in line for succession to the presidency of the United States, was engaged in activity that would not meet the moral standards of one of the most corrupt 1906 political participants of the most corrupt political organization in the history of the United States.

That was then, this is now.

Good news. Our last two Speakers are no longer participating in “Dishonest Graft”. They are simply engaging in good old, perfectly acceptable, “grab your opportunities where you see ’em “Honest Graft”. GW Plunkitt explains in Chapter 7:

“There’s the biggest kind of a difference between political looters and politicians who make a fortune out of politics by keepin’ their eyes wide open. The looter goes in for himself alone without considerin’ his organization or his city. The politician looks after his own interests, the organization’s interests, and the city’s interests all at the same time. See the distinction? For instance, I ain’t no looter. The looter hogs it. I never hogged. I made my pile in politics, but, at the same time, 1 served the organization and got more big improvements for New York City than any other livin’ man. And I never monkeyed with the penal code.”

There you go. Plunkitt’s criteria for honest graft is: Do nothing illegal (monkey with the penal code); serve your party’s interest (the organization); and serve your constituent’s interest (New York City and the US). If you do those things, and you happen to learn about money making opportunities along the way, no problem. You are entitled to that money. Go for it!

With Plunkitt’s criteria in mind, now go back and reread Boehner and Pelosi’s dismissive brush-off of the 60 Minute charges. Nothing illegal. Good for the party. Good for the country. Nothing to see here. Move along.

Of course, there are always a few spoil-sports who don’t appreciate the moral certitude of Plunkitt’s Razor. These misguided souls continue to introduce The Stock Act every year, where it gets no co-signers, is never brought to the floor, and goes nowhere. Reporter Eamon Javers of CNBC is on the case:

Eamon Javers: “As you know, we’ve been talking about this issue of congressional insider trading for a long time. there is a bill out there that would stop it and make it illegal. Congresswoman Louise Slaughter is a key co-sponsor of the bill, and she is with me now. Congresswoman Slaughter, why is it that this bill never passes? “
Congresswoman Louise Slaughter: “It not only never passed, it never had a hearing. i don’t think at any time we had more than six or eight co-sponsors. No Senate action at all. I’m really happy now that finally we’re getting some action here. What this bill would do, it would make it expressly illegal for members to trade on information they get on the hill.”
Javers: “You also want to register the folks downtown on K Street selling information to the hedge funds.”
Slaughter: “One of the things that was so
distressing to me, the fact we had this political intelligence group springing up that was so lucrative. obviously they were getting good intelligence. that is just as bad as the insider trading. In fact, I think it is insider trading. Also we mentioned about the staffers, too. We want to make sure they understand that’s not to be done. And what we said is if you are going to make a trade over $1,000, you have to report it in 30 days. But mostly I do want the political intelligence people to be registered as lobbyists with both the House and the Senate.”

This one bears watching. It looks like Representative Slaughter’s bill might even get some action in the Senate. No one has a better nose for political opportunism than Sarah Palin. Palin jumping on the bandwagon may indicate this issue will have legs. Maybe even – dare I say it?bipartisan support.

It could happen.

X-posted from Divided We Stand United We Fall.

  • JB in VA

    Actually, Palin isn’t “jumping on the bandwagon”. She more or less built the bandwagon, or at least the 2011 model of the bandwagon.

    Palin has been working against cronyism in govt. since her days as city council member and mayor (nearly 20 years). On the national level she has written several Facebook essays about it dating back to the spring of 2010. Earlier this year she hired Peter Schweizer as one of her main policy advisers.

    On September 3, 2011, she gave a major speech on crony capitalism and the permanent political class. Her speech became the subject of widespread, nearly universally approving commentary for some weeks. A few weeks later some of the Republican presidential candidates and even some Democratic officeholders and pundits started talking about it as if they had just thought of the idea, but they hadn’t — Sarah Palin had.

    (Of course crony capitalism has existed for well over a century, it’s just that in the CURRENT political season, she has been pushing this issue much more cogently and consistently than any other public figure.)

    Now with Schweizer’s book coming out, she has stated plainly she will continue working to end the massive corruption — on both sides of the aisle — centered in Congress.

  • cranky critter

    I saw that story too. Lots to be appalled at. But let’s boil it all down to simply this:

    Why is congress exempt?

    Why is there one set of rules for we, the great unwashed, and another set for the powerful?

    Conservatives love-love-love to talk about “the liberal elite.” But the elite class doesn’t fall along any party lines.

  • Tully

    Hear hear, CC! Why is Congress exempt?

    It’s amazing how many people of resonably modest means go to the Hill and quickly become millionaires. Pretty much all of them, it seems.

    Personally I operate on the assumption that all incumbents who have been in office over one term are at least somewhat corrupt(ed), and try to stick with the ones doing the least damage. The Hill manages to corrupt pretty much everyone who makes it there, sooner or later. One of the best practical argument for term limits

  • cranky critter

    Term limits might do some good if they were coupled with toothy bans on post-congressional lobbying (how does 5 years sound) and taking jobs or consulting in any sector they legislated directly on or oversaw via committee.

  • http://westanddivided.blogspot.com/ mw

    “let’s boil it all down to simply this: Why is congress exempt?” -cc

    Great. Now what am I supposed to do with the other 1400 words?

  • Tillyosu

    Why is Congress exempt?

    Good question. But I think a vastly more interesting question is – why is insider trading illegal in the first place?

  • Tillyosu

    Term limits might do some good if they were coupled with toothy bans on post-congressional lobbying (how does 5 years sound)

    Good start. But I think a better idea would be to ban post-service lobbying for a time equal to the time spent in service. It would present an interesting dilemma for congress critters – the more time spent in office, the more connections and influence you have, but the longer you’ll be banned from actually using it.

  • Angela

    Good question. But I think a vastly more interesting question is – why is insider trading illegal in the first place?

    We don’t want our elected officials to vote on issues based on how much money they can make.

  • cranky critter

    I think Til meant “why is it illegal in general?” He’s asking this question so that someone will defend it’s current illegality, and then he can argue that it should be legal.

    Insider trading is illegal because our elected representatives felt such a policy was necessary for public confidence in the stock market as a relatively fair game.

  • khaki

    @ Tillyosu: “…I think a vastly more interesting question is – why is insider trading illegal in the first place?”

    Because most of us hold this truth to be self evident: that members of a free society should be allowed to compete on a level playing field, and that it is at the heart of a free market that the rules be transparent, accessible to anyone, and not weighted unfairly toward a special class of individuals “in the know”. This argument, IMO – that the playing field be level – is fundamentally at the heart of both the Tea Party and Occupy Wall Street movements.

  • Josh Alexander

    Do you believe that the world is basically dishonest and that dishonest behavior is normal?

  • Courtney Joyce

    Graft usually implies the existence of theft, corruption, fraud, and the lack of integrity that is expected in any transaction involving a public official.