WASHINGTON – Amid the constant flow of bad headlines, pressure is mounting on Congress to pass a law that would limit the ability of lawmakers to speculate in the stock market.
Trade in Congress has long been criticized by government observers, who say access to non-public information tempts lawmakers to prioritize their own finances over the public good.
But public anger has intensified since the first shock of the pandemic, when some lawmakers were caught buying and selling shares for millions of dollars after a warning of a future disruption from the virus. The arrival of the pandemic shook the markets and caught many Americans by surprise.
Now that the November election is fast approaching and members of both parties are embarking on reforms, congressional leaders are stepping back, expressing a willingness to tighten rules. After a series of disputes over suspicious transactions and undisclosed transactions, several lawmakers are defending the status quo, raising hopes that a significant ethics package is within reach.
“It won’t solve all of America’s problems. But it is a major reform supported by three-quarters of the country’s population, “said Sen. John Osaf, who is sponsoring a bill that requires lawmakers and their spouses to sell shares or transfer such assets to a blind trust. A Democrat from Georgia last year defeated Republican Senator David Purdue in a race that was largely related to Purdue’s stock trading during the pandemic era.
There are grounds for skepticism. Past efforts to tighten ethical rules have not been in line with high-profile statements by lawmakers. Ultimately, the task of writing the ethical rules governing Congress rests with the legislators themselves, creating a conflict that often results in restrictions being easily avoided.
But progress is clear. A number of bills have been introduced, some of which have been introduced by legislators at opposite ends of the ideological spectrum. Senators are working on a compromise. And House Speaker Nancy Pelosi, whose husband is a prolific trader, supports the legislative push, although she advocates a more focused approach.
Pelosi supports the strengthening of the current law, the Stock Act, which requires lawmakers to disclose information about the sale and purchase of shares. She also called for expanding the requirements for disclosure of exchange trades to members of the judiciary and at the same time increase penalties for members of Congress who break the rules.
“It’s difficult,” Pelosi said last week. “What we’re trying to build is a consensus.”
Her position has evolved since December, when Pelosi responded to the issue of trafficking by lawmakers, saying there was a “free market” that members of Congress “Must be able to participate.”
Past ethics reforms demonstrate the challenge ahead.
The stock law was signed in 2012. At the time, lawmakers and state overseers predicted that public disclosure would embarrass lawmakers for actively buying and selling shares. This did not happen. Ten years later the trade continues rapidly and no one has been prosecuted under the law.
The same can be said about the reforms adopted after the lobbying scandal of Jack Abramov. The 2007 law, which aimed to force more disclosure of lobbying activities, instead created a new class of “shadow lobbyists” who work to influence public policy but are not required to register as lobbyists or disclose their activities.
“Both of these bills, of course, did not in themselves solve real problems,” said Craig Holman, a 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 MP Tom Malinowski from New Jersey repeatedly did not disclose the amount of transactions as much as $ 1 million in medical and technology companies who were interested in the virus response. He now supports efforts to reduce trade by lawmakers.
Former Senators Purdue and Kelly Loefler, both Republicans in Georgia, lost their bids for the second round of the Senate last year after their own stock trading became a campaign concern. Both were investigated by the Ministry of Justice and eventually cleared.
Perdue dropped shares worth $ 1 million to $ 5 million in a company where he was previously a board member. After the markets collapsed, he bought it back and made an unexpected profit after its price soared.
Löfler and her husband, CEO and chairman of the parent company of the New York Stock Exchange, bought and sold millions of dollars in stock after a briefing on the virus.
Republican Sen. Richard Baer of North Carolina has apparently drawn the most attention to his trade. He stepped down as chairman of the Senate Intelligence Committee after the FBI received a search warrant for cell phone confiscation.
According to court records, Baer and his wife sold $ 1.6 million in early 2020 just before the market began to plummet. The Department of Justice investigated Ber’s actions but did not file charges and closed the case. Securities and Exchange Commission continues to understand this issue.
Legislation is a challenge. Difficult questions remain, such as whether lawmakers selling their assets will be required to pay capital gains tax, whether the proposed ban will apply to spouses and children, and whether shares purchased before serving in Congress will be released. But supporters of the effort say the rules should be as strict as possible.
“I think the worst thing a democratic leadership could do is get your hands on it,” said Abigail Spanberger, D-Va. “It would be so outrageously insulting to the American people.”
Spanberger is sponsoring a bill with Texas Republican Chip Roy that requires lawmakers to place assets such as stocks in a blind trust.
The issue has widespread public support. Republicans and Democrats alike point to recent polls, which they say show that three-quarters of the electorate support the action.
“Too many Americans have lost faith in Congress as an institution,” said Sen. Steve Danes, of Montana, who is co-sponsoring a bill with Sen. Elizabeth Warren of Massachusetts to ban lawmakers from owning shares. “Sen. Warren and I disagree on many important issues, but we agree and find common ground that we need to restore faith in Congress. ”
Holman, a good government lobbyist, said it was time for Congress to go further than the Stocks Act.
“This has really reduced the trade activity of members of Congress by two-thirds,” Holman said. “The problem is that one-third of members of Congress are still trading stocks.”