Sahil Kapur February 3, 2012, 5:50 AM

The Senate reacted Thursday to a public uproar over the awkward reality that insider trading laws don’t already apply to members of Congress. With lawmakers fearful of being painted on the wrong side of the issue, the STOCK Act passed 96-3. Senators from both sides of the aisle practically fell over themselves to herald the bill’s passage and tout the importance of restoring the public’s trust in Congress.

But does this bill really help with that? Critics say it’s heavy on grandstanding, but short on substance.

The purpose of the Stop Trading on Congressional Knowledge Act is to crack down on members of Congress and their staff who engage in commodities and securities trading on the basis of non-public information attained on the job. It requires lawmakers and aides to disclose trading activities involving over $1,000 on a monthly basis and empowers the Government Accountability Office to investigate misuse of “political intelligence” including when it’s provided to third-party companies who use it for their trading benefit.

It’s an issue lawmakers feel uncomfortable being on the wrong side of, particularly after a recent CBS “60 Minutes” report on the issue incited outrage. That led President Obama to call for a better approach in his State of the Union last week, after which Senate Democrats began pushing the STOCK Act.

The Senate passage of the bill is pretty quick going for the often sedentary chamber, and some critics are suspicious. “On closer examination, it appears that what Congress really wants is to keep making the big bucks that come from trading on inside information but to trick those outside of the Beltway into believing they are doing something about this corruption,” wrote Yale law professor Jonathan Macey in the Wall Street Journal. “For one thing, the rules proposed for Capitol Hill are not like those that apply to the rest of us. Ours are so broad and vague that prosecutors enjoy almost unfettered discretion in deciding when and whom to prosecute.”

Macey explained that under STOCK, prosecutors would have far less discretion with which to investigate members of Congress than they do with the general public. “If enacted, the law of insider trading will remain one of many where one reality applies to Congress and an uncomfortable and insecure reality applies to everybody else,” he declared.

Sen. Susan Collins (R-ME), who played a role in developing the bill, didn’t agree with Macey’s argument. “I don’t see how that could possibly be the case,” she said in response to a question from TPM, and argued that the bill makes “crystal clear that members of Congress are not exempt from insider trading laws, regulations or rules.”

Grumblers have said the 112th Congress is going to have a hard time getting anything passed — at least until the election is resolved and it can rush through a roster of bills in its final weeks. This vote suggests that’s not entirely accurate. In this instance lawmakers were handed a virtual dream-come-true: an arguably soft-gummed bill that nonetheless gives valuable material for campaign ads touting one’s ethics in an election year. Faced with that, the spirit of bipartisanship prevailed.

We’ll see if that holds when the bill moves on to the House. GOP signals there have been mixed but after the Senate’s action Majority Leader Eric Cantor (R-VA) said his chamber will “quickly review” the bill and that “it is my intention to schedule consideration of the Senate-passed STOCK Act on the House floor next week.”

Image from Sergey Mironov/ Shutterstock

STOCK Act