Did you know that insider trading laws do NOT apply to members of Congress? It is completely legal for them to buy and sell stocks based on non-public information learned through their congressional activities.

Members of congress have daily access to non-public information. For example, say you serve on the health care committee which decides that Medicare is not going to pay for a certain type of drug. That’s market moving information. You can trade on this before it’s public knowledge and do so legally.

During the health care debate of 2009, members of congress were trading health care stocks and making money this way. During the financial crisis of 2008, members of congress got private notifications of the potentially apocalyptic outcomes. In the melt down, it was revealed that Spencer Bachus of Alabama, the Head of the Financial Services Committee in the House of Representatives today, shorted stocks after a meeting and profited handsomely from it. Here’s how Andrew Brietbart described it:

While Congressman Bachus was publicly trying to keep the economy from cratering, he was privately betting that it would, buying option funds that would go up in value if the market went down. He would make a variety of trades and profited at a time when most Americans were losing their shirts.

60 Minutes profiled insider trading in Congress. Watch it and you’ll be shocked and outraged.

Sen. Scott Brown, R-Mass., introduced the Stop Trading on Congressional Knowledge (STOCK) Act of 2011, which would prohibit members or employees of Congress, as well as executive branch employees, from using non-public information obtained through their public service for investing or any attempt at personal financial gain. But don’t expect this to go anywhere. Why would the rule makers take away such a profitable option from themselves?