Monday, November 14, 2011

60 minutes on insider trading by congress.

Last night, the CBS news program - 60 minutes -  "exposed" legal insider trading by members of Congress.  Apparently it is entirely legal for members of congress to trade on private information - you can read a nice summary on the InvestorCookbooks blog.

Basically our elected officials on either side of the aisle are trading using information that they gathered in their capacity as lawmakers.  However, this actually isn't really new news.  Several academic finance studies have shown that congressmen and women earn abnormal returns on their stock trades.

This story got me thinking about a blog post that I read on another academic finance blog recently.  The basic gist of that post was that the Occupy Wall Street crowd are misguided in their claims that the system isn't fair.  The blogger's view was that this is much like a child complaining about fairness.

But I think that the blogger was wrong - the issue of fairness is a serious issue.  Whether you support the OWS movement or not, it seems that we should have a system that is a fair and level playing field.  The system should not grant a select few the ability to trade and invest at the majority's expense.  This type of fairness is not about everyone winning, or everyone getting a fair share, but is about a fair game where the rules are the same for everyone.

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