Sen. Dick Durbin, the second most senior democrat in the Senate, cashed out his stock the day after meeting with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. Durbin took the money and invested much of the $115,000 in Warren Buffett’s Berkshire Hathaway Inc.
The transfers occurred on Sept. 19th. The prior day he met with Paulson and Bernanke on the banking crisis. Bloomberg reports that “The Standard & Poor’s 500 Index plunged 4.7 percent last Sept. 15 after the bankruptcy of Lehman Brothers Holdings Inc. and Bank of America Corp.’s government-engineered takeover of Merrill Lynch & Co. By the end of October, the index had fallen 22.6 percent.”
I have long advocated a change in the ethics rules to require blind trusts for all members of Congress. Currently, members can make killings on the market by using their access to policy changes and special tips. For prior columns, click here and here.
Durbin, 66, insists that he was only doing what other people were doing: moving his money to safer investments. Moreover, he insists that the thrust of the information that he received from the Administration was released publicly the next day. This may be so. However, as noted in the above columns, senators have performed better than industry experts in the the past and the suspicion is that their success is due in some part to the special information that they received through their positions. More importantly, these trades and investments create an obvious appearance of self-dealing. Why should Senators (who generally have no skills or training in the market) insist on making these investments instead of using an expert in a blind trust? They obviously believe that they can do better — and historically they have. The result is that members routinely invest in areas where they are voting and legislating. If you want to write the laws affecting the markets, you should not be allowed to play the markets.
For the story, click here.