That was November 14, 2011.

Now, with news that the Office of Congressional Ethics has launched an insider trading investigation of Rep. Bachus, among possible others, I once again call on the Alabama Republican to do the right thing and leave Congress for good.

At the historic moment when the American people were looking to their elected leaders to protect them and their families’ portfolios, Rep. Bachus was busy using nonpublic information to enrich his own portfolio. In the summer and fall of 2008, Spencer Bachus’s position as the ranking Republican on the House Financial Services Committee gave him access to high-level private meetings and conversations with the then-Treasury Secretary Henry Paulson and other senior officials. The meetings Bachus was privy to were so secretive that those in attendance were not even allowed to bring cell phones into the meetings so as to prevent sensitive information that could threaten our nation’s financial system from leaking out.

And what did Congressman Bachus do with such trust and responsibility?

From July to November 2008, Bachus executed at least 40 well-timed, highly risky options trades throughout the turbulent period that netted him as much as $50,000 in capital gains. As Americans were losing their life savings, Bachus was padding his.

What Congressman Spencer Bachus did was wrong, vile, and an affront to the decency of the American people and the principles of honesty and fairness upon which our system rests.

I have received criticism from some Republican quarters who think I should never have spoken out against such an influential Republican member of Congress. But the conservative movement has a long tradition of ousting forces that stand to threaten the principles we fight for, regardless of party. We must do so again now—especially now.

I seldom call for resignations. Even at the height of the Anthony Weiner scandal, I remained silent on whether Rep. Weiner should leave office. But what Spencer Bachus did was egregious and fundamentally unethical.

On November 17, 2011, the Tea Party’s commitment to principle, not party, compelled them to organize a protest at Rep. Bachus’s Alabama office and call for his ouster. They were right then, and they are right now.

Our Founding Fathers believed political leadership was a call to stewardship, not self-enrichment. We must protect the principles that made America great. And that starts with throwing out those who smirk at fair play and shrug at the laws of our land.

Spencer Bachus: it’s time for you to go.

Bachus was one of several Capitol Hill leaders from both parties involved in insider trading, according to Breitbart editor Peter Schweizer, who raised the issue in his recent book, Throw Them All Out. Subsequently, President Barack Obama called on Congress this week to pass a law banning congressional insider trading–though the book also documented crony capitalism in the Obama administration’s green energy programs.

Bachus could have sought a waiver from the Republicans Party’s self-imposed six-year term limit on committee chairs, which includes time spent leading the minority as ranking members. However, he chose not to do so, though he has indicated that he wishes to play a role in selecting his successor.

Bachus faces a challenge in the Republican primary from Alabama state senator Scott Beason.

From the Chicago Tribune:

The measures under consideration strike us as window dressing. We suspect the push for new rules is about protecting the reputations of Bachus and others spotlighted in the news.It sure does seem that being a member of Congress carries benefits beyond the salary. The New York Times reported this week that the median net worth of the members rose 15 percent from 2004 to 2010, when the median net worth for all Americans dropped 8 percent.

But spare us a phony effort to “reform” the rules. The public won’t buy it. And the public has even greater reason to be disgusted with Congress, starting with a national debt of $15 trillion and climbing.

A Breitbart News exclusive report revealed that Rep. Spencer Bachus’s options trading records during the summer and fall of 2008’s debates over the Troubled Asset Relief Program (TARP) were curiously well-timed with market trends.  Specifically, from July to November 2008, Rep. Bachus executed at least 40 options trades that resulted in as much as $50,000 in capital gains.   As Peter Schweizer revealed, Rep. Bachus’s position as the Chairman of the House Financial Services Committee gave him access to high-level private meetings and phone conversations with then-Treasury Secretary Henry Paulson, as well as other senior financial officials.

A spokesman for Rep. Bachus, Jeff Emerson, said the Alabama congressman’s trades did not represent an ethical dilemma.  “There is no conflict of interest,” said Mr. Emerson.  “He [Rep. Bachus] asked the Ethics Committee if he could do this, and they said there’s no problem.”

As the Chicago Tribune editorial notes:

The Wall Street Journal reported that Bachus made more than 200 trades in stocks and options during 2008, the year of the financial crisis. His recent activity included bets on Apple Computer, the Nasdaq 100 index and a portfolio of Chinese stocks.

Bachus told The Journal he never took advantage of insider information. But to avoid any appearance of impropriety, he said he has stopped trading. Bachus also helped revive a long-dormant bill that would place additional restrictions and disclosure requirements on Congress beyond established insider-trading laws.

That sounds like damage control.

Instead of seeing the Bachus example as a justification for a ban on insider trading by members of Congress, however, the Chicago Tribune believes such legislation is unnecessary because “contrary to some news reports, the Securities and Exchange Commission has affirmed that members, their families and staffs are subject to the anti-fraud provisions of the law governing insider trading.”

The trouble with that logic, say some proponents of bills barring members of Congress from using nonpublic, material information to inform their private investments, is that it ignores the fact that Congress controls the SEC’s budget, and therefore holds a powerful instrument for possible political retribution.  This, critics say, explains why the Securities and Exchange Commission has never brought an insider trading charge against a sitting member of Congress.

Former Alaska Gov. Sarah Palin is among those who believe that the SEC’s reliance on Congress for funding makes it a poor enforcer of insider trading laws for members of Congress.  As Gov. Palin wrote in a USA Today op-ed:

Some said there was no need for new laws or action because the Securities and Exchange Commission could prosecute members of Congress under existing laws against insider trading.

But under current law, there is no way the SEC will ever go after a powerful congressman or senator. The SEC never has, even though insider trading prohibitions have existed since the 1930s.  Here’s why: Congress sets the SEC’s budget, and senators approve the head of the SEC. Congress uses its power of the purse strings to threaten federal agencies that get in their way.

Gov. Palin points out that in 2006, Congress threatened the Justice Department with budget cuts when the FBI, acting on evidence that former Rep. William Jefferson (D-LA) was accepting bribe money, got a search warrant to enter then-Rep. Jefferson’s office.  Similar budgetary retributions, argues Palin, are likely if Congress fails to pass a law explicitly banning members of Congress from using private information to enrich themselves:

Does anyone really think the SEC under current law will have the courage to investigate the insider trading in Congress? Remember that this corruption (and failure to deal with it) encompasses both sides of the aisle. We fool ourselves thinking we can trust an agency dependent on Congress for its budget to investigate Congress.

I hate the idea of more laws, but because our politicians have shown a failure of ethical leadership, we must reassert the rule of law through strong new legislation that holds Congress accountable and prevents retaliation against whistle-blowers and regulatory agencies investigating corruption.

Still, the Chicago Tribune doesn’t see it that way.  They argue that laws such as the STOCK Act, or the more recently introduced RESTRICT (Restoring Ethical Standards, Transparency, and Responsibility in Congressional Trading) Act by Rep. Sean Duffy (R-WI), are superfluous because existing laws are sufficient to keep members of Congress honest.

Lawmakers and their staffs are going to have discussions with company officials or finance experts from the private sector to make effective policy. There’s no reason members of Congress shouldn’t invest in the market — as long as they follow existing laws on dealing with insider information. If more elected officials experienced how market forces work to establish prices, respond swiftly to new developments and discipline those who get greedy, America would profit.

If members of Congress engage in illegal insider trading, enforcement tools are available to the SEC and Justice Department. Let’s use them.

Congress is set to resume discussion of a ban on congressional insider trading when Congress returns.  In the end, the legislative outcome may prove both the Chicago Tribune and supporters of insider trading laws correct: while such bills may be merely “window dressing” and “damage control” to protect politicians’ image, the potential for budgetary retaliation against the Securities and Exchange Commission by members of Congress makes a an explicit ban on insider trading vital and necessary.

Frank finally apologized for his role in the housing bubble that led to the financial crisis of 2007-8 and set the stage for the worst recession since the Great Depression. Frank had shielded Fannie Mae and Freddie Mac from regulation, which in turn encouraged banks and buyers to embrace unstable mortgages. These were repackaged and sold as securities whose instability was masked due to their implicit government guarantees.

That’s not actually what happened today, though it is what should have happened long ago. Instead, Frank is retiring because he barely survived a tough challenge by Sean Bielat in the 2010 elections, because redistricting will make it harder for him to hold onto his seat, and because he cannot foresee Democrats re-taking the House. The road ahead is rough, and Frank believes he has better–perhaps more lucrative–things to do.

I am not celebrating Frank’s departure–partly because it is long overdue, partly because it would have been more satisfying to see him defeated, and partly because he is somewhat responsible for launching my political career in an exchange that went viral on YouTube:

As I recalled in Jonah Goldberg’s anthology, Proud to Be Right (HarperCollins 2010):

I wanted to challenge the hypocrisy of Rep. Frank’s attack on corporate bonuses, when congressional staffers had just earned a bonus for 2008. As I listened to his speech and heard his response to the first few questions from the floor, I was struck at how breezily he blamed everyone else for the crisis. Not content with blaming George W. Bush, Rep. Frank tried to implicate every conservative from Ronald Reagan in the 1980s all the way back to Robert Taft in the 1930s. A new question formed in my mind as I stepped to the microphone.

“How much responsibility, if any, do you have for the financial crisis?” I asked.

Rep. Frank lost his temper, labeling me as part of a “Right-wing attack” and avoiding an answer. So I do what young lawyers are taught to do when facing a hostile witness: repeat the question.

That outraged him even more, but I kept my cool. My wife did not. “Stop labeling him!” she yelled at Rep. Frank. “I like labels,” he snapped back.

Our exchange continued for a few more minutes before the dean of the school called proceedings to an abrupt and early end. I went back to the library, expecting that my standoff with Rep. Frank might merit a mention in the next morning’s Harvard Crimson, if that. Little did I know that the local Fox News affiliate had taped the debate and posted it online. Soon it was on YouTube, being watched by thousands. It was featured by both Fox and MSNBC, the Right- and Left-wing networks finding rare agreement in their judgment that Rep. Frank had behaved boorishly. I was on several television and radio shows, and received e- mails and letters from around the country. Soon afterward, several Republicans back home in Illinois encouraged me to run for Congress in my home district.

I had stumbled into Frank’s signature debating style–a form of intellectual bullying that combines partisan abuse with a barrage of meaningless detail and legislative minutiae. It is resented even by those who agree with him on the substance of the issues, and after my confrontation with Frank, I received congratulations from several left-wing Harvard professors who were happy that someone had stood up to him on a public platform.

Barney Frank is also a quick wit–all too rare on the left–and will be remembered well for being the first openly gay member of Congress, among other achievements. Yet his most damaging legacies–the housing crisis, the financial “reform” that bears his name, and the hyper-partisanship to which he eagerly contributed–outweigh Frank’s positive contributions. How unfortunate that his constituents did not eject him much sooner.

Many constituents are upset by information released in the new book Throw Them All Out by Peter Schweizer, and the ensuing segment on 60 Minutes exposing insider trading and short selling by Rep. Bachus, among others.

“The idea is to be honest, and police our own, because we are the Party that does it right,” said one demonstrator, “we don’t want election time to come around in 2012 and figure out then that people won’t vote for conservatives because of what one bad player did. We want to keep our name clean. We are the party of ethics, and whether Congress wants to admit it is illegal or not, it is wrong. Conservatives know the difference.”

Upon protestors’ entry into the building, they were told that they would not be allowed to assemble on the grounds of the Congressman’s office, and that they should go across the street. They stayed, and were peaceful. They agreed not to wave their signs, or shout, or disrupt the peace in any way, with one protestor commenting to security, “We aren’t the Occupiers, we are the Tea Party, for crying out loud.”

Alabama realizes that the scope of what happens here extends far beyond our state, and that this is a fully national story now. We want to set an example, as a constituency willing to police our own, and demonstrators discussed many reasons why this particular Congressman needs to go, in addition to those reasons mentioned in the media today.

As of this morning, no one in the House had actually agreed to hold hearings on legislation prohibiting insider trading in Congress. Considering that Republicans hold a majority in that chamber, it is surprising that the Democrat-held Senate was the first to act.

After the rally today demanding that Bachus commit to the same sort of reform, the Congressman announced that the House Financial Services Committee (of which he is Chairman) would be considering legislation to prohibit lawmakers from investing based on private information.

Out of more than one hundred people who came out to the event over the course of the day, some small groups, couples, and individuals went in to visit the Congressman’s staff. He was not there. Television and radio media were present, as were candidates who intended to challenge the Congressman in the upcoming elections. Two candidates declared on “The Dr. Gina show” on Monday and Tuesday, when the news of the scandal broke.

I joined other speakers in addressing the crowd about staying strong in the interest of what is right, and not being intimidated by a multimillion dollar war chest, or a powerful DC insider Congressman. I mentioned that after dedicating my 3-hour talk show to this topic every day this week, and having taken countless calls, I have yet to receive a contrary comment in support of the Congressman, or what he did.

The eyes of Alabamans are on Rep. Bachus as we wait to see if he follows through on his pledge for reform. And the eyes of the nation are on the state of Alabama to see just what they are going to do about a Congressman that is already being portrayed as representative of the corruption in Washington, D.C., and the Wall Street cronyism whose benefits are available only to the powerful and privileged.

Rep. Spencer Bachus (R-AL), under pressure from conservatives, liberals, and his own constituents, has announced that the House Financial Services Committee, which he chairs, will hold hearings on Dec. 6 to consider legislation to prevent insider trading by members of Congress.

From Breitbart.tv:

Both the House and the Senate are now planning hearings on congressional insider trading, following exposés by Breitbart editor Peter Schweizer in his new book, Throw Them All Out.

In a lovely bit of irony, Rep. Barney Frank–he who rejected 18 requests by George W. Bush to tighten up standards at Fannie Mae and Freddie Mac–wrote a letter to Rep. Bachus, encouraging him to craft legislation against Congressional insider trading practices:

I am still not sure that this is widespread, but given the attention that we have seen on this matter now, and given the importance of those whom we represent being fully assured that we are behaving appropriately, I think that we should now take up this legislation and, after suitable study, enact some version of it.

And now, Congressman Bachus has agreed to a hearing.

Initial reluctance by some media outlets to take on this controversial issue is now yielding in the face of public outrage.

From The Hill:

House Financial Services Committee Chairman Spencer Bachus (R-Ala.) announced Thursday that his panel would be considering legislation to prohibit lawmakers from investing based on private information.

The chairman announced the Dec. 6 hearing one day after ranking member Rep. Barney Frank (D-Mass.), sent a letter to Bachus, calling on the committee to consider such legislation and eventually pass it. The announcement also comes after Bachus has come under scrutiny for allegations that he profited on investments made based on private information.

“Existing law clearly prohibits insider trading by members of Congress.  However, the American public deserves for there to be no question or equivocation concerning members of Congress or any citizen being exempted from laws prohibiting insider trading,” Bachus said in a statement.

Frank told Bachus in his letter that he had “neglected” similar legislation when he was chairman of the committee, but that recent attention to the matter meant the bill should be considered and passed.

The panel will consider a bill, introduced by Reps. Louise Slaughter (D-N.Y.) and Tim Walz (D-Minn.), which would prohibit members and White House employees from investing based on private information, or from passing that information along to others for investment purposes.

Read the rest of the story here.

In the course of the interview, Schweizer responded to Rep. Spencer Bachus (R-GA), chair of the House Committee on Financial Services, who is fighting calls for his resignation. As it has become clear that the insider trading scandal is not going away, Rep. Bachus has abandoned his early reticence in favor of a more aggressive defense.

Schweizer, who was joined on the show by Steve Kroft of CBS, reiterated his case against insider trading in Congress:

Visit msnbc.com for breaking news, world news, and news about the economy

Bachus seems to be fighting a losing battle, as momentum for reform builds in Washington. Even Rep. Barney Frank (D-MA), the ranking member on Bachus’s committee–who belatedly discovered his enthusiasm for reforming Fannie Mae and Freddie Mac when facing a serious public backlash and a tough re-election–is now calling upon Bachus to join efforts to pass the STOCK (Stop Trading On Congressional Knowledge) Act.

Big Government has obtained a letter that Rep. Frank sent to Rep. Bachus urging him to support the STOCK Act–”which, I acknowledge, should have been addressed when I was the Chairman.”

Rep. Bachus’s letter to Schweizer’s publisher is posted below, followed by Schweizer’s response, and by Rep. Frank’s letter to Rep. Bachus.

Bachus Letter

***

Schweizer’s response:

There is nothing a Member of Congress can do that is more
important than uphold the public trust.

—Rep. Spencer Bachus (R-AL), November 16, 2011,
Letter to the President of Houghton Mifflin Publishing

Rep. Spencer Bachus is upset that my book, Throw Them All Out, has exposed the disturbing realities of his continual use of material nonpublic information to execute almost perfectly timed stock trades during the financial meltdown in the fall of 2008 that made him tens of thousands of dollars in profit.

His attempt to obfuscate his trading habits will not distract citizens from analyzing the facts I report in my book and that CBS aired during its 60 Minutes investigation of Congressman Bachus’s insider trading practices.

Indeed, even now, less than 48 hours after the book’s release, Senators Joseph Lieberman (I-CT) and Susan Collins (R-ME) are announcing that they will hold hearings to examine how insider trading laws apply to Congress, and bipartisan support is growing for the STOCK Act to put an end to the kinds of behavior in which Rep. Bachus consistently engaged during the financial crisis of 2008.

In his letter to my publisher, Rep. Bachus never refutes the core facts I present involving his stock transactions. By implication, he accepts the following as fact. During the financial crisis of 2008, he actively and aggressively engaged in stock options trading in the following:

Sector SPDRS: September 2, October 15
IShares: October 22
Market Vector Trust: November 3
Sony Corporation: October 20
Powershares QQQ: October 7 (twice), October 9; October 20 (2 times); October 20 (2 times); October 21
Powershares Ultra-Short: September 19
S&P Depositor: October 6, October 7, October 14 (4 times)

As I point out in my book, these trades often came one day after either an important private meeting, or near the date of important legislative activities.

Instead, he raises questions about just a few of the forty transactions that happened during the time period discussed, none of which are germane to the point I make in my book that the insider trading laws that apply to us should apply to Congressman Bachus and the other 534 members of Congress.

The question remains: what on earth was Congressman Bachus, the ranking Republican member of the House Financial Services Committee, doing trading options in publicly-traded companies and the overall market while he had access to sensitive, private material information, even as America sat on the brink of a financial implosion?

Rep. Bachus also tries to paint a picture of the September 18th private meeting in which he took part, and which included senior congressional leaders overseeing the nation’s finances. The meeting was, in fact, so secretive that all cell phones, BlackBerries, or devices that could lead to communications to others that might roil world capital markets were banned from entering the room. Rep. Bachus does not deny being at that meeting.

The meeting was called by the Federal Reserve Chairman Ben Bernanke and Treasury Secretary Hank Paulson. As has been recounted in numerous memoirs, books, and a C-SPAN interview with Rep. Paul Kanjorski (D-PA), Mr. Bernanke and Secretary Paulson explained how of the mishandled bankruptcy of Lehman Brothers earlier in the week was triggering a financial tsunami that could potentially destroy the American financial system in 72 hours and the global system in three weeks, and perhaps lead to a breakdown of social order.

As described in Secretary Paulson’s memoirs, Bernanke told them: “It is a matter of days before there is a meltdown of the global financial system.” It was for that reason that the members sat “ashen faced.”

The purpose of the meeting was for the Secretary of the Treasury to ask for $800 billion to $1 trillion to stem the potential financial implosion. Thus began the saga of TARP. Furthermore, those inside the meeting were told that the information discussed was for their ears only, and that no discussion of the potential of a financial collapse of our country could be discussed. There is no record that any member of that meeting went on TV, radio, or talked to newspapers about the degree of financial calamity that the country faced until much later.

And what did Rep. Spencer Bachus do with this highly sensitive nonpublic information? At his first opportunity the next morning, he made a bet on the most aggressive type of options trading by placing a leveraged put that shorted the market (ProShares Ultra-Short QQQ) and would benefit tremendously from the potential crash. Rep. Spencer Bachus essentially used material nonpublic information to bet against his country and the people he represents in order to profit himself. And profit he did. He more than doubled his money. He has denied none of this.

Bachus’s claim that the meeting was no big deal and that everyone knew that the markets were in trouble is laughable and disingenuous. It fails to explain why both the Treasury Secretary and the Chairman of the Federal Reserve were extremely alarmed upon learning about the true scale of the financial calamity facing the nation. Furthermore, an examination of the Dow Jones Industrial Average eveals a several-weeks-long, precipitous decline of the market at that time. It was over the course of several weeks, not hours or days, that Americans and shareholders began to recognize the extent of the crisis. Yet Rep. Bachus knew it on September 18.

Similarly, Rep. Bachus’s letter has nothing to say about his long history of options trading, before and after the financial crisis, including a pattern of trading options in individual companies overseen by a committee on which he served. Should a representative who sat on the House Transportation and Infrastructure Committee at the time, which regulates airlines, really have been trading stock options in United Airlines? I don’t think I need to answer that question.

It is revealing that Rep. Bachus, in a letter to my publisher, enclosed a column by Holman W. Jenkins, Jr. of the Wall Street Journal–an author who is openly skeptical of insider trading laws, and recently sided with Wall Street’s highest profile insider trading defendants. Even Jenkins acknowledges that “congressmen let themselves behave in ways they wouldn’t permit for the rest of us, indeed would denounce as greedy.”

Rep. Bachus has tried his best to confuse people on these matters. Of course, at this point, what other “option” does he have?

The time has come for Rep. Bachus to admit to the American people what he did, and to take responsibility for a pattern of behavior that has exacerbated a profound crisis of confidence in the integrity of our political system.

***

Frank Letter