Henderson Argues for Allowing Politicians to Trade Based on Their Information

Let members of Congress trade!
M. Todd Henderson and Larry Ribstein
December 1, 2011

Former House Speaker and current Minority Leader Nancy Pelosi (D-Calif.) is being called out for delaying a bill involving credit card companies from going to the House floor until she and her husband allegedly sold shares in Visa that they received before its IPO. Shouldn’t a ban on moves like this be a no-brainer? Contrary to first instincts, the answer is no.

Allowing politicians to trade based on their information has benefits that critics have overlooked. A ban, in any case, would only force trading by politicians underground. It’s far better to permit the trading — but expose it to public scrutiny.

The issue of congressional trading came to light when the journalist Peter Schweizer recently examined trades by politicians and found many earned tidy sums trading in advance of the public disclosures by companies. Summing up the conventional wisdom, he told “60 Minutes,” “[I]t’s simply wrong and it shouldn’t take place.”

M. Todd Henderson