In secret meetings Two years ago this month, members of Congress were told what the rest of America will soon know: the deadly virus was spreading rapidly abroad and heading to the United States. Some lawmakers acted on the spot – not in the public’s interest, but in their own. They sold off stocks weeks before the markets crashed, when the scale of the threat posed by the novel coronavirus became widely known. The global pandemic was spreading, and these lawmakers were as concerned about the health of their portfolios as they were about the health of their constituents.
Congress thought it had already fixed what appeared to be insider trading by its members. In 2012, lawmakers voted overwhelmingly to enact a law known as the Stock Act, prohibiting themselves from using information they learned at work for personal financial benefit. The law requires existing members—along with their employees and government officials in other branches of government—to make more specific and timely disclosures about their financial transactions. Although the law helped the public detect conflicts of interest, it was not able to prevent them. “Members hear all kinds of news that may amount essentially to insider trading, but it is almost impossible to force insider trading and prove what happened when,” members of Congress told me.
The Department of Justice investigated several senators over the 2020 stock dumps, but has not filed any charges. However, allegations of pandemic exploitation had major political ramifications and helped Democrats win a narrow majority in the Senate last year. Among those who found their dealings under federal scrutiny were Georgia Republican senators David Purdue and Kelly Loeffler (both of whom denied wrongdoing), who lost in the special election last January. And the Democrat who defeated Purdue, Senator John Osoff, is now leading a new campaign to ban members from trading individual stocks altogether.
“There is widespread bipartisan disgust with the political class in America, and stock trading by members of Congress is horrible and insulting,” Ussoff told me last week.
The legislation he introduced with Senator Mark Kelly of Arizona would require members of Congress and their spouses and dependent children to either sell their individual shares or place them in a blind trust. (The bipartisan companion bill was previously unveiled in the House.)
It’s no surprise that the proposal is popular with a public that likes to cast a disdainful look at lawmakers: Nearly two-thirds of respondents, including majorities of both Democrats and Republicans, have supported the idea of banning members of Congress from trading stocks, according to a recent poll by Inc. Morning Consult. However, the bill is likely to be the least popular among the people who have to vote on it. If in recent years Congress has struggled with the country’s most complex challenges, its record of policing itself is arguably worse. Republicans made little effort to pass ethics legislation when they last ran Washington, and although House Democrats introduced a major anti-corruption bill as part of their initial push for voting rights last year, they quickly abandoned its key moral provisions in (so far) . Unsuccessful attempt to win Senate approval.
A proposed ban on stock trading by lawmakers has upended a projected ideological divide. One of the co-sponsors of the House procedure is Conservative Representative Chip Roy of Texas, a former senior aide to Senator Ted Cruz. The bill also won the support of two groups that typically advocate for unrestricted access to the free market, the hut-funded Americans for Prosperity and Freedom, which grew out of the Obama-era Tea Party. Instead, House Speaker Nancy Pelosi carried the libertarian flag, and her husband, Paul Pelosi, made millions from stock trades that became fodder for stalkers on social media platforms like Reddit and TikTok. “We are a free market economy. [Members] She looked more like Ayn Rand than a “socialist” in San Francisco, Pelosi told reporters earlier this month.
The last significant ethical piece of legislation explained to Congress was the STOCK Act a decade ago. However, this bill was only passed after party leaders watered down a tougher initial proposal, and within a year of its passage, Congress moved quietly to undo one of its key transparency provisions.
The need to regulate stock trading by lawmakers is clear to the bill’s supporters, who know very well what they are talking about on this particular issue. Members of Congress are kept informed of market movements in front of the general public on an almost daily basis. This is especially true in times of crisis, such as a major military build-up or the onset of a global pandemic, when the stock market is more volatile and lawmakers often receive classified briefings from senior government officials. They might not be able to discuss what they heard in public, but until the passing of the Stock Act, it wasn’t clear that making money from it was illegal. House and Senate votes are sometimes market-moving events themselves, and lawmakers are usually the first to know if a measure will pass or fail. One of the stock law authors, former Washington State Democrat Brian Bird, told me that in moments of black humor during a vote in the main hall, a colleague joked with him (and he confirmed he was already joking): “We could make some money from this vote, is not it? “
In 2012, stock law authors thought an outright ban on stock trading was “a bridge too far,” Bird told me. But the pandemic trade scandals have prompted new legislation and more recent disclosures, including a lengthy investigation by it. interested in trade, gave an extra impetus. The same goes for Pelosi’s row, which prompted the bill’s proponents to redouble their efforts. “I strongly disagree with her,” Representative Abigail Spanberger of Virginia told me. Spanberger, a Democrat, first introduced the legislation with Roy over a year and a half ago. “There are many professions where there are restrictions on what someone can do financially. This requirement is a perfectly reasonable requirement for those of us who choose to enter this profession.”
The proposals would allow members and their families to maintain control of investments in diversified mutual funds or index funds, US Treasuries, and bonds. Kelly told me that in addition to preventing insider trading by lawmakers, requiring members to roll back active control of individual stocks would ensure that they would not take votes on the legislation based on how it affected them financially.
Adding to pressure on Pelosi, House Minority Leader Kevin McCarthy has suggested that Republicans may implement an embargo if they regain a majority this fall. Pelosi last week softened her stance, telling reporters that although she remained personally opposed to the proposal, “if the members want to do it, I’m fine with it.”
Developments over the past month have created a dynamic reminiscent of other successful drivers of the new congressional ethics laws, Craig Holman, a lobbyist for Public Citizen and a longtime advocate of government reform, told me. “The prospects are very good,” he said. “Sometimes we have to embarrass Congress to do the right thing, and it works once the public gets involved.”
However, proponents of a stock trading ban in Parliament still have their way to go. Public support for a bill can mask broader private opposition, and the leaders of this latest effort are often members of Congress with relatively little experience. The stock act eventually passed by near-unanimous vote, but Byrd told me that during the years he was first introducing the bill to his colleagues, many were offended by the mere mention of impropriety. Others wanted their investments to remain private, and some didn’t want the added inconvenience of having to disclose it. “I naively thought this would be an obvious and right thing to do so when I raised it with people, they would reply, ‘Oh my God, I didn’t know that. We should fix it,” Bird laughed wistfully. “Well, the response was anything but.” After the stock act passed, Bird said he found himself in an elevator with a high-ranking Democrat aide who didn’t realize he was talking to the bill’s author. The employee complained: I have to go home and fill out my paperwork for the damn stock law.”
Kelly told me he didn’t have much sympathy for members who opposed ethical legislation because of the hassles of complying with it. “If you don’t want trouble, find something else to do,” he said. “There are a lot of people who can do the job.” His response summed up the challenges that Kelly and his allies faced. They are asking their colleagues to vote for a bill that does not require sacrifices by their constituents, but only themselves. “Honestly, I don’t mind if I hurt his feelings when I make this case,” Ussouf said. “My colleagues need to hear it, and I think they hear it.”