Stop the ticker: Congress plans to limit lawmakers on stock trading
Amid a steady drop of damaging headlines, pressure is mounting for Congress to pass legislation that would limit lawmakers’ ability to speculate in the stock market.
Commerce in Congress has long been criticized by government watchdogs, who say access to nonpublic information creates a temptation for lawmakers to prioritize their own finances over the public good.
But public anger has mounted since the first tremors of the pandemic, when some lawmakers were caught buying and selling millions of dollars worth of stocks after being warned of the coming virus disruptions. The onset of the pandemic sent markets plummeting and caught many Americans by surprise.
Now, with the November election fast approaching and members of both parties embracing reform, congressional leaders are jumping on the bandwagon, expressing their desire to toughen the rules. After a series of controversies over suspicious transactions and undisclosed transactions, few lawmakers are defending the status quo, raising hopes that a significant ethical package is at hand.
“It’s not going to solve all of America’s problems. But it’s substantive reform that three-quarters of the country supports,” said Sen. Jon Ossoff, who is sponsoring a bill that would require lawmakers and their spouses to sell stocks or place their assets in a trust without right of inspection. The Georgia Democrat beat Republican Senator David Perdue last year in a race that was largely based on Mr. Perdue’s pandemic-era stock trading.
There is reason to be skeptical. Past efforts to strengthen ethics rules have failed to live up to the lofty claims of lawmakers. And ultimately, the task of writing the ethics rules governing Congress is left to lawmakers themselves, creating a conflict that often results in easily circumvented restrictions.
But the progress is apparent. A series of bills have been introduced, some by lawmakers on opposite ends of the ideological spectrum. The senators are working on a compromise. And House Speaker Nancy Pelosi, whose husband is a prolific business owner, agrees with the legislative push, although she has advocated a more targeted approach.
Ms. Pelosi supports strengthening an existing law, the Stock Act, which requires lawmakers to disclose their sales and purchases of stocks. She also called for extending stock trading disclosure requirements to members of the judiciary, while toughening penalties for members of Congress who flout the rules.
“It’s complicated,” Ms Pelosi said last week. “What we’re trying to build is consensus.”
Her stance has shifted since December, when Ms Pelosi reacted to a question about lawmakers’ trades by saying there is a “free market” that members of Congress “should be able to participate in”.
Past ethics reforms show the challenge ahead.
The Share Act was signed into law in 2012. At the time, lawmakers and government watchdogs predicted that public disclosure would shame lawmakers into actively buying and selling stocks. This does not happen. A decade later, the trade continues apace and no one has been prosecuted under the law.
The same goes for the reforms enacted in the wake of the Jack Abramoff lobbying scandal. A 2007 law aimed at further forcing the disclosure of lobbying activities instead created a new class of “shadow lobbyists” who work to influence public policy but do not have to register as lobbyists or disclose their activities. .
“These two bills certainly didn’t solve the problems on their own,” said Craig Holman, registered lobbyist for the good government group Public Citizen. He said previous laws were important, but added that “there is room for improvement”.
Several lawmakers have been criticized for their stock portfolios.
Last year, the Associated Press reported that Democratic Rep. Tom Malinowski of New Jersey repeatedly failed to disclose deals worth up to $1 million in medical and technology companies that had a interest in the response to the virus. He now supports lawmakers’ efforts to limit trade.
The old senses. Perdue and Kelly Loeffler, both Republicans from Georgia, lost their runoff bids for the Senate in January after their own stock trading became a campaign issue. Both were investigated by the Department of Justice and ultimately cleared.
Mr. Perdue had undervalued between $1 million and $5 million in shares of a company of which he was previously a board member. After the markets collapsed, he bought it back and earned a windfall after its price skyrocketed.
Ms Loeffler and her husband, CEO and chairman of the parent company of the New York Stock Exchange, sold millions of dollars in shares following a virus briefing.
Republican Senator Richard Burr of North Carolina may have garnered the most attention for his trades. He resigned as chairman of the Senate Intelligence Committee after the FBI obtained a search warrant to seize a cellphone.
Mr. Burr and his wife sold for $1.6 million at the start of 2020, just before the market began to dive. The Justice Department investigated Mr. Burr’s actions, but did not press charges and dismissed the case. The Securities and Exchange Commission continues to investigate the matter.
Drafting legislation presents a challenge. Difficult questions remain, such as whether lawmakers who sell their assets would be liable to pay capital gains tax, whether the proposed ban would apply to spouses and children, and whether shares purchased before sit in Congress would be exempt. But supporters of the effort say the rules should be as strict as possible.
“I think the worst thing Democratic leaders could do would be to put in a little bit of hand effort,” Rep. Abigail Spanberger, D-Va, said. “That would be so outrageously insulting to the American people.”
Ms Spanberger is sponsoring a bill with Texas Republican Chip Roy that would require lawmakers to place assets like stocks in a blind trust.
The issue enjoys broad public support. Republicans and Democrats point to recent polls, which they say indicate that three-quarters of the electorate support the action.
“Too many Americans have lost faith in Congress as an institution,” said Sen. Steve Daines, R-Mont., who is sponsoring a bill with Sen. Elizabeth Warren, D-Mass., to ban exchanges of legislators. “Senator Warren and I disagree on many important issues, but we agree and have found common ground that we need to restore confidence in Congress.”
Mr. Holman, the government’s good lobbyist, said it was time Congress went further than the Stock Act.
“It really reduced the stock trading activity of members of Congress by two-thirds,” Mr. Holman said. “The problem is that there’s still a third of the members of Congress still trading stocks.”
This story was reported by the Associated Press. Associated Press writer Matthew Brown in Billings, Montana contributed to this report.