House Speaker Nancy Pelosi’s husband bought shares in VISA shortly before Nancy Pelosi voted on the Credit Cardholders’ Bill of Rights.
That legislation limited credit card companies’ ability to manage their own risk in lending. Meaning that instead of assessing each debtor’s risk profile and setting limits and interest rates accordingly, they had to set standard rates for everyone. These kinds of “truth in lending” regs have of course led to all sorts of expensive, hassling unintended consequences for cardholders.
It’s generally understood that a reasonable person doesn’t don’t buy stock in a company whose profits he or she expects to decrease as a result of punative legislation. So here we have two possibilities.
A. Nancy Pelosi’s husband was so far in the dark about his wife’s job and the state of possible regulations on VISA in general that he didn’t know what was going to happen with VISA yet bought stock anyway despite his ignorance.
B. He knew the Credit Cardholders’ Bill of Rights would we profitable for VISA so he bought stock in order to benefit personally from the windfall.
Now, the uproar seems to be over the fact that Congresspeople and their families are using inside information on upcoming legislation to make stock decisions. Okay, that’s unfair, true. But there are maybe thousands of people competing with Congresspeople and their families to make better stock choices.
On the other hand, millions of people have been negatively affected by the legislation itself. First there are the millions of credit-worthy people whose access to credit was limited by the legislation. But then consider that limiting entrepreneurs’ access to credit has lasting, negative effects on the economy as a whole that are impossible to calculate.
So the solution isn’t to somehow find a way to keep regulators and their families from using their understanding of how their regulations will affect certain companies to make money in the stock market. That’s both impossible and insufficient. The solution is to prohibit regulators from passing legislation that will benefit some companies, hurt others, and raise the cost of doing business for everyone else.