4 Million Pounds of Horse Manure- and Insider Trading in Congress
So, how much horse manure was on the streets on New York on a typical day in 1900?
Tony Seba is a Futurist, and the YouTube video link on this home page shows a picture of Broadway in New York City, 1900. The street is crowded with horses and one car.
A picture of the same street in 1913 shows a street crowded with cars- and one horse.
He uses this example to illustrate technological disruption.
By 1900, it’s estimated that there were upwards of 200,000 horses in NYC, producing 3 million to 4 million pounds of manure each day.
EACH DAY.
Sailors approaching New York could smell the manure from up to six miles away.
Which brings us to the United States Congress.
Members of Congress and Insider Trading
So, what is insider trading?
Generally speaking, it’s when an investor buys or sells a security based on non-public information. In other words, the investor knows something that the general public doesn’t- and profits from that information.
Here’s a perfect example.
I present to you Representative Mike Garcia.
“In August 2020, Rep. Mike Garcia (R-CA) sold up to $50,000 in shares of aerospace giant Boeing, weeks before his committee released the damning results of its investigation into deadly crashes involving the company’s 737 Max airliner.”
Did you know about the congressional committee’s damning report on Boeing weeks before it was released?
No- I didn’t either.
However, proving that the Boeing stock sale was insider trading is difficult:
“That criminal allegation hangs on a precise technical definition—access to material non-public information—which can be notoriously difficult to prove.”
The problem is that bad news about Boeing was in the public before Garcia sold shares- but the congressional committee’s damning report was published after the sale.
Oh, but the best part?
Garcia didn’t disclose the transaction- he waited until after he was reelected.
“When he finally did disclose the sale, it was two weeks after the 2020 general election votes were cast, and three days after Garcia declared victory. He won by 333 votes.”
The most insulting thing: Did Garcia think that the public wouldn’t find out?
It’s called the internet, congressman- we’re gonna find out.
There’s a simple solution to this type of activity: Ban all elected officials from trading any security while in office. Your money goes into a blind trust, and the money is managed by a third-party professional.
Sounds too restrictive?
Consider the standards that accountants must follow.
CPA Rules on Independence
CPAs must follow dozens of rules regarding independence and potential conflicts of interest.
To perform an audit, the only benefit the CPA firm can receive is the audit fee. No consulting income.
CPAs must disclose banking relationships, investment relationships and other data to their firms to prevent conflicts of interest. A partner in a CPA firm can’t have any outside business relationship with an audit client. Heck, no one in the partner’s family can have an outside business relationship with an audit client.
What about lawyers?
Same deal- tons of disclosure rules to find out if an attorney can represent a client.
Why all the fuss?
The purpose of these rules is so consumers can have confidence that a lawyer or a CPA is not taking advantage of their position to enrich themselves.
I don’t want the CPA partner auditing a firm if the partner’s brother sells raw materials to the firm under audit.
It’s a potential conflict. Maybe the relationship doesn’t influence the CPA partner’s decision- but it might.
Ban all elected officials from trading securities.
If you don’t like it, don’t run for office.
Build back some level of trust- congress doesn’t have much left.