Bacon's Rebellion

Democracy Thrives in Sunlight

The Kind of Behavior that Spawned the French Revolution

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by

James A. Bacon
in

by Kerry Dougherty

Some well-meaning person tagged me and about 100 others on Facebook last weekend urging us to pray to Saint Rocco. The patron saint of pandemics.

I appreciate the sentiment. But I have a better idea. Find me the patron saint of lost life savings. I want to pray to THAT guy.

I want to send up petitions for all of us who worked hard, lived within our means, paid our bills, saved our money, invested in American companies and who – in a few horrible weeks – watched our life savings shrink to alarming levels while several morally reprehensible members of Congress dumped their investments just before the stock market crashed.

Yes, I’m talking about a quartet of alleged profiteers in the U.S. Senate:  Richard Burr, Kelly Loeffler, James Inhofe and Dianne Feinstein. Inhofe may have a plausible excuse for his actions. The others? Not so much.

Their wealth was protected. The little people? Meh, who cares.

All around the country Americans are fretting about how they’ll pay their rent, mortgages, car payments or buy food after suddenly losing their jobs due to shutdowns ordered by governors. Many small business won’t be able to survive even short-term closings. Airlines and hotels risk bankruptcies if travel bans last through the spring.

Yet late Sunday night – in the middle of a national emergency – the Senate was unable to pass a $1.8 trillion coronavirus rescue package. After negotiating all weekend, Democrats at the last minute blocked the plan that would have sent relief to individuals and businesses.

Craven gamesmanship while people suffer. This was disgusting behavior by partisan hacks.

Even The New York Times expressed astonishment over the late-night development.

The party-line vote was a stunning setback after three days of fast-paced negotiations between senators and administration officials to reach a bipartisan compromise on legislation that is expected to be the largest economic stimulus package in American history…In voting to block action, Democrats risked a political backlash if they are seen as obstructing progress on a measure that is widely regarded as crucial to aid desperate Americans and buttress a flagging economy.

A vote on the package set for Monday morning was pushed back to noon reportedly at the insistence of Democrats, guaranteeing another harrowing day on Wall Street.

Almost as if they’re trying to crash the economy for political reasons.

Five Republican senators missed the vote. Sen. Rand Paul of Kentucky tested positive for the virus this weekend and left Capitol Hill. Senators Mike Lee and Mitt Romney of Utah, Corey Gardner of Colorado and Rick Scott of Florida are all in self-quarantine because they’ve been in contact with Paul or other individuals who tested positive.

Members are not allowed to vote remotely – even in the middle of a pandemic. Senate Majority Leader Mitch McConnell has so far resisted pleas to make such accommodations.

Ridiculous.

They should all be working from home. If they stall long enough there won’t be 1/3 of the members healthy enough to vote.

Angry? You bet I’m angry. You should be too. Not just about craven partisanship in Congress. Or the financial chicanery of a few elected officials. Or the double standards. We should also be outraged that for more than a month politicians deliberately kept critical information about a looming pandemic from the public.

According to news reports, some members of Congress were briefed on the threat of the coronavirus on January 24. Yet they remained mute.

Behind the scenes, of course, it looks like three – maybe four – senators used that knowledge to save their derrieres from financial devastation. They’ll continue to slurp up their salaries no matter how badly the economy is battered, with their fortunes tucked safely under their mattresses.

This is the sort of behavior that spawned the French Revolution.

A huge sacrifice is being asked of Americans. Most want to do their part to slow the spread of this virus – without eating cat food for the rest of their lives.

In times like these we need a Congress that puts aside partisanship to work together for the common good.

Clearly we don’t have one of those.

This column was published originally at www.kerrydougherty.com.

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18 responses to “The Kind of Behavior that Spawned the French Revolution”

  1. James A. Bacon Avatar
    James A. Bacon

    Editor’s note: I normally republish only columns from Kerry’s website that have a direct Virginia tie-in. I made an exception in this case because I think she has identified a latent feeling in this time of widespread suffering, sacrifice and fear that could turn into rage against self-serving members of the political class. I would particularly hope that Virginia’s elected officials in Congress and the General Assembly pay close attention.

    Also note: I changed the headline and selected different artwork than Kerry used in her original post. But the allusion to the French Revolution was hers.

  2. LarrytheG Avatar
    LarrytheG

    following……….

  3. Steve Haner Avatar
    Steve Haner

    The craven partisanship and second guessing is not confined to Washington DC. It is rampant on this blog, one reason I haven’t even wasted my time writing a post in almost two weeks. The members of Congress who liquidated some or all of their portfolios saw the same signals as others, and frankly I thought about it. One of our other regulars said he did liquidate, and he had no inside info available only to Congress. I agree this is the kind of thinking that leads to bad outcomes, but Kerry is the one bringing knitting to the guillotine it seems. Not helpful. So what if it takes a few days rather than a few hours to pass a “rescue package.” What a joke. Deck chairs on the Titanic, people….

    1. James A. Bacon Avatar
      James A. Bacon

      To repeat, I, not Kerry, selected the guillotine image.

      1. Steve Haner Avatar
        Steve Haner

        But she is the one talking (inciting?) a violent reaction to the folks in Washington.

    2. djrippert Avatar
      djrippert

      Yep, I liquidated the equity side of my portfolio a few weeks ago. I mentioned that in comments on this blog at the time. I was already worried that the market was significantly overbought. Then came the virus. I took a minor beating from the Coronavirus fallout but not nearly as much of a beating as I would have taken if I had held. The question, of course, is whether I get back in early enough to get the upside in the inevitable turnaround (whenever that may come).

      I wish I could say that I was a prescient investor. I’m not. I had no inside information from Congress. I was already nervous and COVID-19 was enough of an unknown a few weeks ago to get me to act.

      Loeffler and Feinstein supposedly have blind trusts (although Feinstein’s may be run by her husband – no so blind). If so, it wouldn’t surprise me that a good money manager might have moved out of equities without any inside information. I blundered into that idea – why wouldn’t they?

  4. Jane Twitmyer Avatar
    Jane Twitmyer

    I keep getting ‘progressive’ emails telling me to tell those Senators they must resign. My response … what they did is called ‘insider trading’ and it is against the law. Resignation is not enough. Remember Martha Stewart?

    1. djrippert Avatar
      djrippert

      The reason markets go down is because a lot of people are selling. I exited the equity market relatively early and I have no access to inside information. Just because they sold doesn’t mean they relied on insider information to do so. We’d have to see a much more detailed timeline to even get close to suspecting insider information. Loeffler’s husband is the CEO of the New York Stock Exchange. She uses a blind trust. Given the scrutiny she and her husband are under I’d be amazed if she secretly told her trust executor to sell. My guess is that she has a good executor who made a good decision.

  5. Jim Loving Avatar
    Jim Loving

    Better for us to vent on the blog, and note when it is venting, as long as we return to constructive suggestions in the event leaders (and/or voters picking leaders) read this.

    Hopefully, there WILL be an election in November.

    But Jim – there most certainly IS a Virginia connection too the French Revolution, in the form of one T. Jefferson, who also talked about the need to have one of these every now and then. https://www.monticello.org/site/research-and-collections/french-revolution

  6. Acbar Avatar
    Acbar

    Well said, Jane — and JimL, the TJ reference is apt. The guest columnist’s anger however is real, and there will be much, much more. It brings to mind something I heard David Brooks (Times columnist) say on TV the other day: pandemics historically (e.g. 1918) trigger special anger among individuals and groups who think they have been treated unequally — family deaths and hardships are difficult in any circumstance but perceived slights during the crisis by the government and health care system and even neighbors fester for a long time afterwards.

    1. Steve Haner Avatar
      Steve Haner

      The lines outside the gun stores tell me all I need to know. This is going to get very ugly. Again, too many zombie movies are shaping public thinking…

  7. TooManyTaxes Avatar
    TooManyTaxes

    My advisors had me move money from equities last year. They didn’t see coronavirus but an overvalued stock market.

    Let the SEC go after insider trading. But that’s been traditionally limited to insider information received from the company involved or its principals.

    However, in January this year, a divided panel of the Second Circuit Court of Appeals in SEC v Blaszczak held that the federal wire fraud statute and a rarely used securities fraud statute criminalize insider trading beyond the reach of what is covered by the statute historically used to prosecute the offense. The case involved a former Center for Medicare employee and current consultant obtaining advanced information about Medicare reimbursements. The latter provided and the former obtained and used not-yet-released information about reimbursements that would affect the price of bio-tech companies. Jury verdict convicted these and other defendant of wire fraud and Title 18 securities fraud statute.

    The appeals court upheld the convictions.

    Whether the information obtained by the Senators that the virus was going to hit big time and their easy-to-draw conclusion that the economy will start tanking is comparable to advance knowledge of changes in Medicare reimbursement rates for certain treatments is not clear to me. One could argue that the former really isn’t tied to a specific company, which inside information has traditionally been. I guess we will see this play out over time.

    1. Reed Fawell 3rd Avatar
      Reed Fawell 3rd

      Questionable case, but mobs eager for folks to hang, hopefully it doesn’t ignite nation.

    2. Jane Twitmyer Avatar
      Jane Twitmyer

      It was information that was information from a security briefing that was not available to the rest of us … doesn’t that make the case?

      1. Reed Fawell 3rd Avatar
        Reed Fawell 3rd

        Guilt depends on facts, here are reportedly very substantially different fact patterns in at least two of four case, and perhaps as regards all cases.

        1. Jane Twitmyer Avatar
          Jane Twitmyer

          I didn’t say positively guilty … I said…Since they had information from a secure briefing, regardless of the supposedly ‘blind’ status of some of their funds, this is a case that should be investigated.

        2. TooManyTaxes Avatar
          TooManyTaxes

          Insider information has traditionally about specific information that directly affects a specific company. Often it’s been information that a company’s quarterly sales declined (or increased) much more than expected that is given to someone before it’s publicly released as required by our securities law. Then a person sells (or buys) based on the non-public information. That’s insider trading that is illegal.

          In the Blaszczak case, we go one step further. It’s government information about Medicare reimbursements not released that directly affects some companies that sell very specialized products purchased by doctors and hospitals that get reimbursed by Medicare. An increase in reimbursements could increase manufacturers’ sales and profits. The connection is more remote but still foreseeable. SCOTUS may or may not affirm it if it grants cert.

          But advance knowledge of a pandemic that is extremely likely to occur and that will have major negative consequences on the economy, not just for any specific stock or groups of stock, but rather for almost every stock. It’s almost too broad for insider trading under the law.

          The federal government, including government leaders, had knowledge that the Japanese government was planning an attack on the United States for months before Pearl Harbor. Any fool would realize that would likely mean war. But the federal government, which did not publicize its secret intelligence, did not have any specifics. Where and when? Knowing that war with Japan was imminent could have caused government leaders to make stock transactions. But is this knowledge the type to trigger insider trading? It seems a bit stretched to me. And if this is too remote, why is knowing COVID-19 was coming different? I think arguments can be made on both sides but I’m still on the fence.

          And what bothers me as a lawyer is that too many of my younger peers don’t do the deep dive into the law. The more I practice, the more I respect the law whether or not I agree with it. But sloppy analysis is not good lawyering.

          1. Jane Twitmyer Avatar
            Jane Twitmyer

            Found this interesting piece … discouraging at best.
            “One thing you can do to increase your net worth by 10-fold is get elected to Congress…. Their suspicious out performance is made possible by the widespread and technically legal practice of congressional insider trading.”

            In 2012, President Obama signed the Stop Trading on Congressional Knowledge (STOCK) Act.

            “This law sought to crack down on white-collar crime in Washington. Among other provisions, it instituted strict disclosure requirements for congressmen who were buying and selling securities. … At first, the law worked like a charm. The number of stock transactions made by congressmen plunged more than 50% from 2011 to 2012. Those who kept trading had to post their trades to a searchable online database. But then, just a year after the STOCK Act was passed, Congress amended it in a quick procedural vote. Surprise, surprise – it got rid of the online disclosure requirement.”

            “Today, in order to see the inner workings of your representative’s portfolio, you have to go down to the basement of the Cannon House Office Building in Washington, D.C., and ask for a printed file. Technically, that file in a damp D.C. basement still constitutes a public disclosure. Thus, your congressman’s market-beating transactions are technically not insider trading.”

            Why Isn’t Congressional Insider Trading Illegal?
            https://investmentu.com/why-congressional-insider-trading-legal-profitable/

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