Obama Administration — May 5, 2013 at 10:11 am

While everyone was distracted with Tax Day, Congress repealed disclosure requirements in the STOCK Act


Sunlight extinguished

Jefferson Memorial photo by Anne C. Savage

A couple of weeks ago on Tax Day, April 15th, Congress passed a bill that gutted the Stop Trading on Congressional Knowledge (STOCK) Act, a law passed just last year to stop insider trading by government employees and elected officials. Later that day, President Obama signed it into law. The justification for the removal of disclosure provisions in the STOCK Act is that putting the financial information of congressional aides and executive branch staffers would endanger national security.

While Congress might be stuck in a deadlock on just about every issue imaginable, there’s one piece of legislation that both Democrats and Republicans hate unanimously: the Stop Trading on Congressional Knowledge (STOCK) Act, a law passed last year designed to prevent insider trading among lawmakers and government officials by requiring them to post disclosures of their financial transactions online.

Both parties and both houses of Congress hated the disclosure portion of the law so much that it was repealed on Friday without debate—the measure was sent to the president by unanimous consent. The ordeal took about 10 seconds in the Senate and 14 seconds in the House, according to official records.

The STOCK Act would have required members of Congress, their aides, and other federal employees making more than $119,554 a year to disclose their financial dealings in an online database. It was supposed to prevent government officials from using insider knowledge about policy-making to profit from stock trades and other investments.

OpenSecrets.org details what this bill changes:

The bill doesn’t just eliminate a controversial requirement that personal financial disclosures of tens of thousands of high level federal employees be made publicly accessible online. It also reverses two critical components of the original STOCK act: mandatory electronic filing of PFDs by the president, his cabinet and members of Congress, and the creation of a publicly accessible database.

The elements of the STOCK Act that were removed include:

  • Creation of searchable, sortable disclosure of the information contained in reports even for Congress, the president, vice president, the president’s cabinet and congressional candidates.
  • Required electronic filing for Congress, the president, vice president, the president’s cabinet and congressional candidates, as well as high-level executive and congressional branch employees. Even images of the staffers’ filings will not be available for viewing on the web.

Without the provisions, the STOCK act is made toothless. Insider trading by members of Congress and federal employees is still prohibited, but the ability of watchdog groups to verify that Congress is following its own rules is severely limited because these records could still be filed on paper — an unacceptably outdated practice that limits the public’s access.

This is not true disclosure.

The President used a report by the National Academy Of Public Administration (NAPA) that indicated a security risk involved with the disclosure requirements. The report said these disclosures could lead to “negative outcomes to the missions of national security and law enforcement agencies and their staff members” because enemies of the USA could exploit the information in the database to threaten government officials.

Government transparency advocates are not pleased:

“They used the NAPA report and said ‘this is a bad idea let’s undo all the disclosure parts of this bill,’” says Lisa Rosenberg, a Washington lobbyist for the Sunlight Foundation. “What we had advocated is if you are really worried about certain categories of jobs then maybe we need to exempt them with carve outs.” Adds Rosenberg: “There is a much more targeted way of addressing the security concerns, we are not dismissive of the security concerns, but putting the information in file cabinets is not fixing the security concerns.”

This is a truly disappointing move. The flaws in the original bill could easily have been fixed with some targeted changes. Instead, a major step forward in government transparency has been walked back and the shade of secrecy has deepened considerably.

H/T Adam Z.