If you knew what Sen. Durbin knew, would you do what he did?
Sen. Richard J. Durbin, Illinois Democrat and assistant majority leader, looked like such a great investor. On Sept. 19, he sold off $42,696 in mutual-fund shares, and quickly sold off another $73,000 during the rest of September. The stock market collapsed after that. Within two weeks, by Oct. 3, the Dow Jones Industrial Average had fallen by 9 percent. A month later, by Oct. 17, it had plummeted over 22 percent. On Tuesday this week, the average is still down about 25 percent from Sept. 19.
If Mr. Durbin ever leaves his day job as a Democratic politician, he should have a plum position waiting for him as a market timer. On second thought, maybe not. It turns out that on Sept. 18, Mr. Durbin participated in a closed-door meeting with then-Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Chairman Ben S. Bernanke. The Fed chairman and Treasury secretary briefed Mr. Durbin and other congressional leaders on the financial crisis and efforts to help financially troubled banks.
Mr. Durbin’s great sell-off started the day after this privileged briefing.
Mr. Durbin’s temptation to profit on inside information is a base human instinct that reminds why insider trading is wrong. There were Americans - possibly even some of Mr. Durbin’s constituents - who bought the shares that he was peddling. Mr. Durbin sold them shares he knew - but they had no reason to suspect - were going to fall in price because of the unique information he received as a public official.
This senator’s hypocrisy is particularly ripe because Mr. Durbin has been at the forefront of denouncing the greed of Wall Street bankers. In 2002, he condemned the lack of criminal penalties for corporate executives accused of insider trading: “I think it is odd that a shoplifting actress in Hollywood [Winona Ryder] is facing more time in jail than any officer in Enron.”
Just two weeks ago, Mr. Durbin chaired a Senate hearing on financial-market oversight declaring in full moral outrage: “After high-profile cases of fraud, questionable reporting and unprecedented price volatility, investors need assurances that we are going to have strong and capable ‘cops on the beat’ when it comes to our financial markets.”
Note to Mr. Durbin: Investors need assurances that their public servants are serving the public - not duping the public for personal gain.