The personal portfolios of the current House speaker and 33 others changed shortly after talks with administration officials, but rules are lenient on insider ethics

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In January 2008, President George W. Bush was scrambling to bolster the American economy. The subprime-mortgage industry was collapsing, and the Dow Jones industrial average had lost more than 2,000 points in less than three months.

House Minority Leader John Boehner became the Bush administration’s point person on Capitol Hill to negotiate a $150 billion stimulus package.

In the days that followed, Treasury Secretary Henry Paulson made frequent phone calls and visits to Boehner. Neither Paulson nor Boehner would publicly discuss the progress of their negotiations to shore up the nation’s financial portfolio.

On Jan. 23, Boehner, R-Ohio, met Paulson for breakfast. Boehner would later report the rearrangement of a portion of his own financial portfolio made on that same day. He sold between $50,000 and $100,000 from a more aggressive mutual fund and moved money into a safer investment.

The next day, the White House unveiled the stimulus package.

Boehner is one of 34 members of Congress who took steps during the financial crisis to recast their investment portfolios after phone calls or meetings with Paulson, his successor Timothy Geithner or Federal Reserve Chairman Ben Bernanke, according to a Washington Post examination of appointment calendars and congressional disclosure forms.

The lawmakers, many of whom held leadership positions and committee chairmanships in the House and Senate, changed portions of their portfolios a total of 166 times within two business days of speaking or meeting with the administration officials. The party affiliations of the lawmakers were about evenly divided between Democrats and Republicans, 19 to 15.

The financial moves by the members of Congress are permitted under congressional ethics rules, but some ethics experts said members should refrain from taking actions in their financial portfolios when they might know more than the public.

“They shouldn’t be making these trades when they know what they are going to do,” said Richard W. Painter, who was chief ethics lawyer for President George W. Bush. “And what they are going to do is then going to influence the market. If this was going on in the private sector or it was going on in the executive branch, I think the SEC (Securities and Exchange Commission) would be investigating.”

Questions about conflicts of interest and possible insider trading on Capitol Hill prompted Congress to pass the Stock Act this year. The act specifically bans lawmakers, their staffs and top executive-branch officials from knowingly using confidential information gleaned from their legislative roles to benefit themselves, their family members or friends.

The act does not prohibit lawmakers from trading stocks in companies whose representatives appear before them or from reworking their portfolios after briefings with senior administration officials. Top executive-branch officials are banned from investing in industries they oversee and can influence — for example, Fed chairmen are prohibited from investing in the financial sector.

Sale of Lehman CDs

In late 2006, Congress started crafting legislation to overhaul Fannie Mae and Freddie Mac, a major effort to stem a rising tide of defaults on risky loans given to homebuyers with poor credit.

As Congress worked to rein in the two government-sponsored lenders, Fannie and Freddie pushed back with aggressive lobbying campaigns, stalling the effort in early 2007.

Paulson started working the Hill, trying to break the deadlock and win support for the revisions. He called and met with a number of members of Congress, including Sen. Ben Nelson, D-Neb., on this and other reform efforts.

Paulson and Nelson spoke on Jan. 10. The next day, Nelson sold between $250,000 and $500,000 in Lehman Brothers certificates of deposit. (Congressional financial-disclosure forms list only approximate ranges.) Nelson also purchased between $100,000 and $200,000 in Treasury notes, a safer investment.

On Feb. 12, Paulson met at 4 p.m. with Nelson in the lawmaker’s office in the Hart Senate Office Building. That day, Nelson bought $50,000 to $100,000 in Treasury bills.

That year, Nelson had only one other call with Paulson and no other meetings, records show. He made 103 other trades during the year, eight of which exceeded $100,000.

Nelson declined to be interviewed. A spokesman said the senator discussed only policy matters related to disabled veterans during the call and meeting with the Treasury secretary and that the senator learned nothing that would have influenced his trades.

Under congressionally imposed ethics laws that cover Treasury secretaries, Paulson and Geithner would have been prohibited from making the same investments. Congress prohibits Treasury secretaries from investing in financial institutions or Treasury securities.

Paulson, through a spokeswoman, declined to discuss his conversations with members of Congress during the financial crisis.

Real-estate meltdown

Toward the end of the summer of 2007, the foundation of the nation’s real-estate market started to shake. On Aug. 6, the American Home Mortgage Investment Corp., the nation’s 10th-largest mortgage firm, filed for bankruptcy.

Three days later, Paulson was headed to work at the Treasury Department when he received word that the U.S. mortgage crisis and tightening credit markets were spreading to Europe, he would later write in his autobiography, “On the Brink: Inside the Race to Stop the Collapse of the Global Financial System.”

On Aug. 9, the Dow fell nearly 400 points, its second-biggest one-day drop in five years. The next day, the Fed issued a statement pledging to “provide reserves as necessary … to promote trading in the federal funds market.”

At 4:30 p.m. on Aug. 13, 2007, as the markets closed, Paulson called Sen. Kent Conrad, D-N.D., chairman of the Budget Committee, according to the Treasury secretary’s appointment calendar.

The next day, Conrad adjusted his family’s portfolio for the first time in four months. Conrad reported that a total of between $150,000 and $300,000 was shifted out of three mutual funds in his wife’s 401(k) retirement account. He moved $100,000 to $250,000 of that money into a lower-risk money-market fund within the retirement account.

Conrad said his conversation with Paulson had nothing to do with his trades the next day.

“There is absolutely no connection between the two,” Conrad said. “Our records show that Paulson called me about the debt-limit extension, and that had nothing to do with the reason for my making the trades.

“The decision that my wife and I made with our financial advisers to diversify into lower-risk investments had everything to do with what was happening that was on the front pages over every paper, including yours.”

Stimulus talks

By the beginning of 2008, the Bush administration had decided to take a more aggressive approach to confront the growing economic crisis. On Jan. 2, the president told Paulson to consult with members of Congress, investors and the nation’s business leaders to come up with a strategy.

On Jan. 18, Bush announced a proposed $145 billion stimulus package designed to give the economy a “shot in the arm.” Paulson reached out to Republican and Democratic lawmakers in an attempt to strike a compromise. Boehner, the House minority leader at the time, would be the Republican point man on the Bush proposal; then-Speaker Nancy Pelosi, D-Calif., would represent the Democrats.

In the days that followed, Paulson made frequent calls and visits to Capitol Hill, according to his appointment calendars. He called Boehner on Jan. 21 and again the following morning at 10:45, shortly after Paulson met with Bush to discuss the status of global financial markets. In public, Boehner and Pelosi disclosed little, telling reporters their negotiations were confidential.

On Jan. 23, Paulson had a breakfast meeting with Boehner and Pelosi. The two House leaders then held a brief news conference.

Later that day, Boehner, Pelosi and Paulson got together again, this time for a two-hour, closed-door meeting. When they emerged, they told reporters that they couldn’t discuss the details of their discussions.

Boehner would later report that two adjustments were made to his financial portfolio on that day: between $50,000 and $100,000 was transferred out of the more aggressive mutual fund. He also reported purchases of between $50,000 and $100,000 in a less-risky fund, spread over that day and four others throughout the year.

Pelosi, who frequently buys and sells in the market, made no trades around the time she spoke with Paulson, according to her financial-disclosure forms.

Boehner’s spokesman, Michael Steel, said the congressman’s trades are handled by an investment adviser. Steel declined to identify the adviser or disclose how often they discuss investment strategies. He said they did not discuss the mutual-fund moves made on Jan. 23.

“The speaker has no say whatsoever on day-to-day investment decisions,” Steel said.

Deal in sight

On Jan. 24, 2008, the day after Boehner’s trades, the White House formally announced that it had reached a tentative agreement with the House on the stimulus package, which had risen to $150 billion. The proposal, approved by the House, called for giving tax breaks to businesses and rebates to taxpayers.

When the proposal went to the Senate, lawmakers began to make revisions and additions. Paulson called Senate Minority Leader Mitch McConnell, R-Ky., three times on Jan. 28, and McConnell called Paulson once that day. On Jan. 29, Paulson called McConnell five more times.

The next day, Paulson again called McConnell five times, and McConnell called him three times. The bill had become bogged down in the Senate as lawmakers continued to spar over adding spending measures to the package.

The next day, Paulson called McConnell twice. McConnell would later report making four trades that day, each worth between $15,000 and $50,000, rearranging four mutual funds in his portfolio. He reported selling shares in a one international fund, buying shares in another and reconfiguring his investments in two domestic funds. He hadn’t made a trade since Nov. 20, 2007, and he would not make another until April 14, 2008.

McConnell declined requests for an interview. During the spring and summer of 2008, another sector of the economy began to wobble: the market for municipal bonds, which local and state governments sell to raise capital. Normally considered to be one of the safest investments on Wall Street, the muni market was falling victim to the economic crisis.

As chairman of the House Financial Services Committee, Rep. Barney Frank, D-Mass., had the power to hold congressional hearings and introduce legislation aimed at calming and reforming the bond market. In March, he held a congressional hearing titled “Municipal Bond Turmoil: Impact on Cities, Towns and States.” In June, when the bond market was still in turmoil, Frank introduced two overhaul bills. Bond experts said the market was running scared.

Fear of bond defaults

Frank told The Post rating agencies were applying tougher standards to municipal bonds than private-sector investments, resulting in less favorable ratings. And bond insurers were taking on riskier investments, causing them to accumulate historically high debt. Investors feared the insurers would begin defaulting on bonds.

Despite Frank’s efforts, both bills stalled and fears about the bond market continued.

On Friday, Oct. 17, Paulson called Frank after the markets had closed. Frank said that the discussions probably centered on the $700 billion Troubled Asset Relief Program, known as TARP, and how banks would qualify for funds, the details of which Paulson revealed the following Monday, Oct. 20.

“We had one fight over TARP, and it was over the use of funds,” Frank said. “I wanted some of them to help with foreclosures.”

That day, Frank instructed his broker to raise cash for him, and the broker liquidated nearly $93,000 in Massachusetts municipal bonds in three separate transactions. The investments represented nearly 10 percent of his financial portfolio, according to his financial-disclosure form. He said he moved the money into his campaign coffers because his support for TARP that year had placed him in a politically vulnerable position.

Frank said he worked in Congress to lower interest rates on municipal bonds, working against his own interests, and said his conversations with Paulson had nothing to do with his personal financial decisions.

“Were these things tied to the phone calls? No,” Frank said. “They didn’t tell you what was a good investment or a bad investment. They would tell you what was good or bad for the economy.”

Frank said he eventually was reimbursed by the campaign and reinvested in Massachusetts municipal bonds because bonds are safe and provide good tax benefits. The bond market survived the crisis without defaults.

“To the extent that people said, ‘Oh, you were protecting your investment,’ I was protecting the financial well-being of Massachusetts,” Frank said. “What the hell else am I supposed to do”