Will "political intelligence" stay in the dark?

On Thursday morning, the House followed the Senate in passing a bill called the STOCK Actthat would prevent lawmakers and other government officials from engaging in insider trading based on the knowledge gained from doing their job.

There was a big difference between the House and Senate versions of the bill, however. The bill that came out of the Senate included a provision sponsored by Iowa Republican Chuck Grassley that would require practitioners of "political intelligence" to register in the same way that lobbyists do and make their activities public. That provision was stripped from the House version of the bill.

You probably haven't heard of political intelligence - but it's an increasingly common practice on Capitol Hill, one that has grown into an estimated $100 million industry employing more than 2,000 people. In essence, it amounts to political insiders selling the information they gather to Wall Street investors, who then use it to make investment decisions.

In October, the Wall Street Journal laid out one example of how it works: A former lobbyist who works for a political intelligence firm sidles up to a senator to chat about a bill to cap debit-card fees. The senator discusses a behind-the-scenes breakthrough in the legislation. The former lobbyist then takes the information about the breakthrough to hedge funds and private-equity firms interested in making trades and investments involving companies impacted by the legislation.

How is it legal for trades to be made based on non-public information? Because lawmakers and their staffs are not actually prohibited from discussing this information publicly - and indeed, they are generally encouraged to discuss pending legislation with interest groups and concerned constituents. The job of those in the "political influence" industry is to make sure they know about what is going to happen before anyone else does.

Grassley's amendment would make these people disclose their affiliations in the same way lobbyists do. Right now, they don't have to disclose that they are being paid to gather information - and can, for example, leave the impression that they are just seeking out information for their own use (or just having a conversation) when they talk to lawmakers or legislative directors.

"[M]embers of Congress and congressional staff have no way of knowing whether such meetings result in information being sold to firms that trade based on that information," Grassley said. "My amendment would shed sunshine on this kind of political intelligence gathering."

In a move that infuriated Grassley, House Majority Leader Eric Cantor stripped the amendment out of the House version of the bill, saying that more study of the issues involved was needed. He also said the issue was outside the scope of the bill and wondered if the amendment could have negative consequences.

"Does it bring into question the ability of a constituent to come up to us ask us the status of a particular piece of legislation?" Cantor asked of the amendment in remarks to reporters Thursday. "Does it put that individual in the position of having to then go register just as a citizen interested to know how to live his or her life?"

Melanie Sloan, the executive director of Citizens for Responsibility and Ethics in Washington, said in an interview with Hotsheet that the "political intelligence" industry and Wall Street have been engaging in aggressive lobbying to kill the Grassley provision, in part by spreading disinformation about the purpose of the bill.

"These political intelligence groups are hidden away in dark rooms, and that that's where they want to stay, because that's where they can be most effective," she said.

As CREW has noted, Cantor, whose largest contributor is the financial industry, has been the recipient of $23,500 and $15,000 in donations from Mark Gerson, chairman of Gerson Lehrman Group Inc., a leading political intelligence firm.

The differences in the two bills must now be removed before President Obama can sign it into law. While Grassley is pushing hard for his amendment to be reinstated, the House GOP leadership shows no signs of budging. And with lawmakers eager to pass the bill in the face of public outrage, the disclosure requirements for political intelligence practitioners may well remain on the cutting room floor.