Alex Tabarrok picks up the scent that the SEC has detected that there might be stock picking cheating going on among our nation's legislators. He seems somewhat surprised that the SEC is highly reluctant to investigate. The problem is not that the SEC is in cahoots with inside trading congressmen but that it's powerless to act and does not want to draw attention to that fact. Executive agencies can't just burst into congressional offices, seize records or otherwise do what they would normally do with any other US institution (outside the Supreme Court, I wonder what their stock market gains are like) because the US Senate and House of Representatives are uniquely privileged against such investigations.
Imagine if they weren't. Congressmen could be brought up on trumped up charges right before elections, they could be brought in for questioning far away from Washington, DC and miss crucial votes, there are all sorts of nefarious things that the executive could do to the legislative branch to tilt 5 or 10 votes in a house with dirty investigations.
This, of course, means that when there is actual wrongdoing (there may or may not be, I'm reserving judgment) the SEC can make a bit of noise to brush back legislators but they really can't do much more than issue a few releases because Congress takes those privileges against executive investigations very seriously and for good reason. In any sort of analysis of such a situation, you really need to get a feel for the precedential consequences of action v. inaction.
In this case, the problem seems to be so widespread that it's better taken care of by making it an issue that any challenger can grab ahold of and use to beat incumbents about the head with their personal profiteering in the stock market. And this seems to be what the SEC is setting up, doing the grunt work and backing off without damage to their regulatory reputation while leaving the issue alive for any savvy opposition researcher to pick it up in a couple of years.
Posted by TMLutas at November 14, 2004 08:57 PM