A new ethics investigation of the House Financial Services Committee chairman's investment activities during the events leading up to and surrounding Congress' $700 billion bailout of Wall Street sets back lawmakers' election-year efforts to rebound from their record low standing with the public.
Rep. Spencer Bachus, R-Ala., confirmed Friday that he is being investigated by the independent Office of Congressional Ethics. Just a day earlier, the House passed a bill explicitly prohibiting lawmakers from engaging in insider trading on nonpublic information they learned as officeholders.
Bachus has been the financial services panel's chairman since January 2011 when Republicans retook control of the House. Before that, as the committee's senior GOP member, he participated in closed-door briefings in September 2008 by Federal Reserve Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson warning that Wall Street and the economy were in danger of a complete meltdown.
A 2008 Fidelity investment statement attached to Bachus' annual financial disclosure form for that year shows that he was an especially active trader in September and October 2008 with more than three dozen buy and sell orders. On some he made money but, totaled up, he suffered a net loss of $19,490 for the two months.
"I welcome the opportunity to set the record straight," Bachus said in a statement issued by his office. "I respect the congressional ethics process. I have fully abided by the rules governing members of Congress and look forward to the full exoneration this process will provide."
The investigation couldn't come at a worse time for lawmakers _ eight months before they stand for re-election and with the latest Gallup poll figures putting Congress' approval rating at 10 percent, its lowest level since the company began tracking the measure in 1974.
It also is occurring in the middle of an effort to allay perceptions that lawmakers are flouting insider trading laws after a CBS "60 Minutes" report last November examined stock and other investment transactions by Bachus, House Speaker John Boehner, R-Ohio, and House Minority Leader Nancy Pelosi, D-Calif.
Over the last eight days, both the House and Senate have rushed to pass bills that explicitly ban insider trading by lawmakers and thousands of other top government officials. The bills differ just enough to require what could be lengthy negotiations on a compromise.
Bachus' committee oversees banks and the regulation of other financial companies, and its members would be privy to the kind of financial information that would be useful in stock trades.
It won't be known for some time whether Bachus' trades violated the law. The independent Office of Congressional Ethics turns over its reports and recommendations to the member-run House Ethics Committee, which could then begin its own lengthy investigation.
The Washington Post first reported the investigation into possible violation of insider trading laws.
Even the appearance of a conflict of interest can lead to ethical problems. Bachus' penchant for playing the stock and futures markets with short-term trades while serving on the financial services committee has been criticized in the past.
Bachus had several dozen rapid-fire transactions, keeping some investments a matter of days, and had both gains and losses. The key question for investigators, however, is whether any of the transactions were the result of nonpublic information that Bachus received.