Anyone who trades on inside information from Congress or from any other part of the government about the present federal debt crisis will have the federal securities laws to contend with. I discuss trading on inside government information in Chapter 7 of my book, Getting the Government America Deserves (Oxford 2009), but Donna Nagy discusses the problem with considerably more detail and analysis of federal insider trading law in an important article that should be read by any government official -- or tippee of a government official -- who might be tempted:
Insider Trading, Congressional Officials, and Duties of Entrustment, 91 B.U. L. Rev. 1105
(2011).
http://ssrn.com/abstract=1750308
A very good case can be made that the present crisis is so serious that information about its resolution is material to an investment in just about any security -- not just U.S. government debt. This means that any trading in or out of the securities markets while in possession of inside information about the crisis could be a violation.
1789 was the last time there was a serious question about whether the United States would make good on its debts. While Congress debated Treasury Secretary Alexander Hamilton's plan to pay off federal and state notes at 100% of face value, speculators including Members of Congress and their allies bought up the notes for as little as 20% of face value. Stage coaches were sent around the south and west to buy up the supposedly worthless notes from farmers and Revolutionary War veterans. Then Congress passed Hamilton's plan and it was time to cash in. Senator William Maclay, Democrat of Pennsylvania, was rightly furious at this corruption. See Chapter 7 of Getting the Government America Deserves quoting the Diary of William Maclay 1789-1791.
The Country once again stands on the brink of an economic crisis while Congress fiddles around. The politicians who created this crisis had better not push their luck.
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