Insider Trading on Capitol Hill: Congress Missed Ethics Session

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- Congress people may not know much about a lot of things but as the nation's legislative creators they know the law, even before it becomes law. They also have the inside track on the economy.

Congress has insider information on laws that can affect entire industries. Briefings by the Treasury Secretary and Chairman of the Federal Reserve give them insider information on the entire economy.

But, the people in the U.S. with the greatest sources of insider information are immune from insider trading laws. A 60 Minutes report indicated that there are Congress people that know this legal position and they have profited from it.

The pass on insider trading was evidently based on a belief that Congress people didn't have insider information on individual corporations. This preceded the proliferation of ETFs, but that's not the point. Why are Congress people doing something that they know is wrong?

Do legislators not know that being on the right side of the law can be the wrong side of ethics -- and ethics really matter. When Anthony Wiener's transgression made the news, his response was for someone to show him in the Constitution where what he had done was wrong. He found out the hard way that violations of ethics take place in the court of public opinion and their sentences can be severe.

60 Minutes noted that Nancy Pelosi and her husband have participated in an astounding eight IPOs. When questioned about an IPO with VISA(V), at a time when Congress was reviewing legislation related to the credit card industry, Pelosi appeared nervous. But it's unlikely it was because she feared that what she had done violated the law. She might have gotten more nervous if she has been asked how she had managed to get in on eight IPOs? Pelosi knows the law well enough to steer clear of violating it, but ethically there are probably some stinkers in here, too.

Occupy Wall Street is fueled by injustices in our legal system. Wall Street executives walked away with bags of money leaving the nation's financial system on shaky ground. But, they aren't serving time because their crimes were ethical violations not legal. They may still have tons of cash but people that work on Wall Street today are reviled rather than revered. In the end, the court of public opinion will see to it that Wall Street pays a heavy price for its ethical transgressions.

The public's approval ratings for Wall Street and Congress are both in the gutter. They share a common origin: the public expects its leaders to be ethically outstanding -- to be law abiding is taken for granted. Complaints about too many government regulations are common. if the nation's private and public sector leaders met the public's expectations, there wouldn't be so many laws related to legislating morality. It looks like there is one more in the making.

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