U.S. Representative Spencer Bachus (R-AL) had access to highly sensitive financial information during the 2008 bailout debates that may have helped him earn tens of thousands of dollars by trading stock options, even as most Americans’ portfolios took a beating.
On Sunday, Rep. Bachus’s trading behavior came under fire in a 60 Minutes
report based on Throw Them All Out
, the book by investigative journalist and Breitbart editor Peter Schweizer that has triggered a political earthquake in Washington. Schweizer, who is also a Breitbart editor, devotes a significant portion of the book to exposing possible congressional insider trading.
Bachus's trades during debate over the Troubled Asset Relief Program (TARP) raise serious questions about whether he invested based on information he acquired as a result of his political power.
“Here’s the rub: all too often his trades coincided with his congressional work,” says Schweizer. “Bachus was neck-deep in crucial financial decision-making at the highest levels.”
BigGovernment.com has obtained and reviewed Rep. Bachus’s Fidelity stock options trading records. The dates of the congressman’s trading patterns paint a troubling picture.
In the summer and fall of 2008, Rep. Bachus--who is the current chairman of the House Financial Services Committee--was then the ranking Republican on the committee. That gave him access to high-level private meetings and phone conversations with then-Treasury Secretary Henry Paulson, among other senior financial officials.
From July to November 2008, by executing well-timed, highly risky options trades throughout the turbulent period, Congressman Bachus made at least 40 options trades that netted him as much as $50,000 in capital gains.The timeline of Rep. Bachus’s trades is unsettling:
- July 14th: Bachus bets $4,500 that the financial sector will fall, and sells short. Bachus comes up a winner and cashes out the next day for $1,500 in profit.
- August 15th and 22nd: the Alabama congressman buys over $11,000 of SPDR sector option contracts, and sells them a few days later for $5,000.
- September 8th: Paulson gets a troubling call from General Electric CEO Jeffrey Immelt, saying GE is having trouble moving its bonds. Two days later, Bachus shorts GE options four times in a single day, more than doubling his money.
- September 10th and 15th: Bachus shorts GE a total of 12 times and comes up a winner 9 times—an impressive average for the high-risk options game.
- September 18th: Bachus and congressional leaders receive a private briefing from Paulson and Federal Reserve chairman Ben Bernanke inside then-Speaker Nancy Pelosi’s office. Bernanke warns of a total financial meltdown in a matter of days. The very next day, September 19th, Bachus shorts the market by buying contract options on Proshares Ultra-Short QQQ, an index fund that strives for results 200% of the inverse of the Nasdaq 100. He nearly doubles his money when he sells his shares four days later for over $13,000.
- October 21st: the Federal Reserve announces it will spend $540 billion to buy debt from money market mutual funds. The next day Bachus buys over $5,000 of options in Market Vectors TRN, and more than doubles his money.
How Rep. Bachus had the time to juggle his frenetic stock-picking with his actual job as a legislator remains unclear. But Schweizer says Spencer Bachus’s lucrative investment habit predates the 2008 financial crisis, stretching all the way back to 1997. In fact, in 2007, Bachus made enough supplemental income from buying stocks that he almost doubled his total $165,200 congressional salary with $160,000 in profits from his put and call options on stocks.
In Throw Them All Out
, Schweizer catalogs several other incidents in Bachus’s unusually good stock track record, dating back nearly fifteen years, and concludes that “in over two dozen cases, representing more than two-thirds of all the trades he made, he guessed correctly."
Jeff Emerson, a spokesman for Bachus, told Schweizer there’s nothing wrong with the congressman’s actions. “There is no conflict of interest,” says Emerson. “He asked the [U.S. House of Representatives] Ethics Committee if he could do this, and they said there’s no problem.”
Indeed, therein lies the real scandal; congressional insider trading is totally legal, no matter how egregious.
Schweizer is careful to point out that it is impossible to know with 100 percent certainty whether Rep. Bachus had perfect and prior insider knowledge that led to each of his scores of option trades. Furthermore, Schweizer notes that the Alabama congressman was hardly the only member of Congress engaged in aggressive and heavy trading throughout the financial crisis.
Still, says Schweizer, the opportunities for misconduct and undue influence are too glaring to ignore.
“If you bet on a particular sector of the economy to fall over the course of a few days or weeks,” writes Schweizer, “how can you be sure that your subsequent decisions are not influenced by that bet?”