Thanks to David Boaz of the Cato Institute for his blog post making me aware of this important investigation by the Securities & Exchange Commission (SEC) and Senator Charles Grassley (R-IA):
An April 1 alert to stock traders that predicted the outcome of a key Medicare funding decision has gained intense legal and public scrutiny.
But a series of events in Washington and on Wall Street in the weeks before the alert raise the possibility that information related to the government’s decision may have previously circulated and moved the market, according to a trail of e-mails and market data.
A small Washington-based firm called Height Securities alerted its clients on April 1 that the government would soon make a decision favoring private health insurers that participate in a Medicare program. The alert went out just before the trading day ended, sparking a surge of trading in shares of Humana, Aetna and other major health-care firms.
The Obama administration made its decision public after the markets closed that day, and federal investigators along with Sen. Charles E. Grassley (R-Iowa) are looking into whether there was a leak.
Grassley is also examining the activities of another Washington firm, Capitol Street, that sent out a bulletin to its clients in late March about a government report that suggested that private insurers participating in Medicare could soon see good news.
The article about the investigation is worth a read, but the short version is that a couple of firms may have received inside information from Congress and the White House, and then leaked it to Wall Street businesses. Since these problems start with Washington, I’d guess the immediate “solutions” will include cries for more regulations, more investigations, etc. instead of the real solution to the problem. From Boaz:
We can pass all the laws we want, launch insider training investigations – but as long as the federal government is acquiring and redistributing so much wealth, businesses and investors are going to go to great lengths to figure out where it’s going and how to get a piece of it.
Exactly. The Beltway can regulate everything as much as possible, and corruption will still exist in the power center of America. The best, and only, solution to this kind of corruption is a weakening of the center of power.
In other words, Washington needs to go back to the Constitution’s limits on power. There’s no need for new powers or regulations; merely reuse ones that are hundreds of years old.