In the past two years, we have been treated to a series of exposes of high government officials who have tried to enrich themselves by trading on what looks like inside information. Congress needs to put a stop to this.
The perpetrators range from senators and judges to members of the Federal Reserve Board. A new bipartisan movement is afoot in Congress to tighten the rules to avoid even the appearance of conflicts of interest. But reports say House Speaker Nancy Pelosi stands in the way, arguing that members of Congress should be entitled to play the market like anyone else.
Of course, members of Congress are not like anyone else. They often have inside information that would give them an unfair advantage over other investors. The pleas to clean up Washington and restore our trust in government need to be heard and acted upon.
This problem has been with us since the earliest days of the republic when Robert Morris — a founding father, our nascent nation’s first officer in charge of public finances (a job later called treasury secretary) and a member of the US Senate — set out with two friends and the benefit of inside information to corner the real estate market in the new city of Washington. (It ended badly.)
That episode led to one of the first congressional financial reform laws, the Bankruptcy Act of 1800. In the more than 200 years that followed, Congress has intermittently cracked down on the ability of public servants to enrich themselves and essentially allowed it to happen.
Although the most recent attempt to constrain market trades by members of Congress was passed in 2012, the past decade has seen the return of a more laissez faire attitude that has infected not only Congress but also the judiciary and the Fed.
In February 2020, at the earliest stages of the COVID-19 pandemic, health officials briefed the Senate on federal planning to meet the expected crisis. Almost immediately after those briefings, Sens. Richard Burr, RN.C., Dianne Feinstein, D-Cal., John Hoeven, RN.D., Jim Inhofe, R-Oklahoma, Kelly Loeffler, R-Ga., and David Perdue, R-Ga., all rushed out to sell stock in companies likely to suffer and to buy stock in companies likely to gain from the government’s plans. (Ms. Loeffler and Mr. Perdue were defeated for reelection, and Mr. Burr says he will retire this year.)
Meanwhile, another 54 legislators have violated the 2012 reform, according to an investigation by Business Insider.
An investigation by The Wall Street Journal found that an astonishing 131 federal judges heard cases between 2010 and 2018 involving companies in which they or a family member held stock. Sixty-one of them actually traded the stock in question while hearing the cases. That looks like a violation of both federal law and judicial ethics.
And last year, when it came out that the heads of the Federal Reserve banks of Boston and Dallas made personal stock trades while the Fed was managing its pandemic relief program, Fed Chairman Jerome Powell announced new conflict of interest rules. Then earlier this month it was reported that the No. 2 official of the Federal Reserve Board, Vice Chairman Richard Clarida, made a large stock purchase in February 2020 just before the announcement of the Fed’s pandemic rescue plan.
The Boston and Dallas officials resigned, and Mr. Clarida stepped down two weeks before his term was set to expire.
The stories are evidence of widespread abuse by members of Congress, federal judges and the Federal Reserve, all of whom are using information gained in their jobs to try to enrich themselves. That has to stop; Congress must act.