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The chairman of the House Financial Services Committee is under investigation for possible insider trading. Alabama Republican Spencer Bachus said in a written statement that he looks forward to being exonerated by the congressional ethics process. The news comes just a day after the House approved a bill that would ban members of Congress from making trades based on nonpublic information. NPR congressional reporter Tamara Keith has our story.
TAMARA KEITH, BYLINE: In 2008, as the financial crisis was unfolding, Congressman Spencer Bachus was trading stocks and betting the markets would fall further. Peter Schweizer is a fellow at the Hoover Institution and author of the book "Throw Them All Out," which looks into Bachus' trading activity. He says on September 18th, Bachus and several other House members were given a private briefing by the Treasury secretary and the chairman of the Federal Reserve.
PETER SCHWEIZER: Literally the next day, we know that Spencer Bachus went and not only shorted the market, that is betting that it would go down, he bought a highly leveraged short fund which allows him to get a 200 percent gain for every drop that takes place in the market.
KEITH: According to financial disclosures, Bachus sold about a week later with more than $5,000 in profit. To Schweizer, these trades are just too convenient.
SCHWEIZER: In terms of timing, his access to information is a particularly egregious example of the kind of trading we're talking about.
KEITH: Bachus, though, defends his trading at that time and says he has never invested using nonpublic information. In November, just after Schweizer's book came out and a story about congressional insider trading aired on CBS's "60 minutes," Bachus explained how he made his investments.
REPRESENTATIVE SPENCER BACHUS: He says that, you know, in late September, that I bought some puts on the market, and that I must - Bernanke or Paulson must have told me that the market was going down. The market had come from 15,000 down to 12,000. The headline on September the 17th was markets in turmoil.
KEITH: With a growing crowd of reporters surrounding him in a Capitol hallway, Bachus went on to say that he's traded stocks actively and quite successfully most of his life.
BACHUS: When I paid my way through law school investing in the stock market, I bought a car. I invested. Do you think that I was getting inside information then? I made money before the financial crisis. I mean, in 2007, I wasn't talking to Bernanke and Paulson. How did I make all that money?
KEITH: In a statement released by his spokesman this morning, Bachus says he respects the congressional ethics process and welcomes the opportunity to set the record straight. Craig Holman, the government affairs lobbyist for Public Citizen, is just thrilled an investigation is taking place.
DR. CRAIG HOLMAN: This is the very first time in the entire history of Congress that any member or staff person has been investigated for insider trading.
KEITH: That is based on information learned through their work in Congress. Both Holman and Peter Schweizer say they are encouraged the STOCK Act, to explicitly ban insider trading among members of Congress, appears to be moving towards the president's desk. But Schweizer says the true test will be whether it is enforced. Tamara Keith, NPR News. Transcript provided by NPR, Copyright NPR.
