WASHINGTON — As a wild week on Wall Street served as a reminder of how quickly money can be made or lost in a volatile market, a growing number of lawmakers across the political spectrum are pushing for new restrictions on stock trading by members and members of Congress. families.
The impetus to suppress market play while in Congress has been building since the early days of the COVID-19 pandemic, when several senators offloaded stocks after a private briefing on the severity of the virus that caused the stock market to crash soon after. The effort has gained momentum in recent weeks, after an investigation published by news site Insider in December found that more than 50 lawmakers and dozens of their top aides had violated a law requiring them to immediately report stock trades.
The 2012 Stock Act also prohibits insider trading by lawmakers based on “material non-public information” that could affect the stock price. But government watchdog groups say it is difficult to prove the charge in court, and current law is not enough to hold members of Congress accountable.
“It’s a huge problem,” said Delaney Marscoe, senior legal advisor for ethics at the nonpartisan Campaign Legal Center. “Allowing members of Congress to trade individual stocks while essentially picking out winners and losers in the market every day through legislation and all the other business that they do is seriously damaging the confidence of the public.”
The law requires members of the House and Senate to report trades of stocks or other securities within 45 days, but missing that deadline — as at least 54 lawmakers have done in the past two years, Insider reports — results in fines starting at $200 Just. The investigation concluded that there were no public records to keep track of who had broken the law and whether they had paid a fine.
Representative Kim Shearer, a Democrat whose district stretches from Lake Chelan to the Tacoma suburbs, missed the deadline when she reported in November that her husband had bought between $500,000 and $1 million in Apple stock in July. When Insider asked about the purchase, Shearer spokeswoman Libby Carlson said in a statement that the congresswoman was “sincerely sorry” for the oversight and that the couple would set up a blind trust to manage their investments.
According to a tracker created by Insider, the only other stock-law violation among the Washington delegation was a belated report from an aide to Representative Dan Newhouse, R. Sunnyside. Of the four congressmen in Idaho, Insider found only a belated report from an aide to Republican Senator Jim Risch.
Northwest Washington Democratic Representative Susan Delbini drew attention in October when Insider reported that her husband, former Microsoft CEO Kurt Delbini, had sold between $5 million and $25 million in Microsoft stock when he retired from the tech giant. Representative DelBene reported the sale within 45 days, as required by law when trading is done by the spouse or broker, while the 30-day deadline applies to deals made by lawmakers themselves.
Given it’s enforcement as loosely as the stock law reporting requirements, Marsco said enforcing his ban on insider trading presents an even greater challenge.
Proving that the lawmaker acted on “non-public” information is difficult, Marsco said, because even if the stock trade was not based on classified intelligence, members of Congress employ teams of aides tasked with keeping them informed — a resource few Americans have.
After Senator Richard Burr sold most of his shares after a private briefing on the impending pandemic in early 2020, the North Carolina Republican — who had access to classified information as chairman of the Senate Intelligence Committee — said he “relyed solely on public news reports” to inform His decision to sell.
The Justice Department closed its Burr investigation on former President Donald Trump’s last day in office, but as of October 2021, the Securities and Exchange Commission was still investigating the senator.
The Justice Department has also closed investigations into the trades made in the early days of the pandemic by Democratic Senator Dianne Feinstein of California and Republican Senator Jim Inhofe of Oklahoma, as well as former Senators Kelly Loeffler and David Perdue, both Republicans of Georgia. They lost their Senate seats in the January 2021 run-off election.
Zack Smith, legal fellow at the conservative Heritage Foundation, said that even if a court does not find lawmakers guilty of insider trading, the perception that they are getting away with can do real damage to Congress’s legitimacy.
“Anytime a member of Congress appears to be trading material non-public information, it undermines confidence in the rule of law, and the confidence we can all have in our government institutions,” he said.
Former Representative Chris Collins, a Republican from New York, was sentenced to more than two years in prison after pleading guilty to insider trading in 2020, but was pardoned by Trump later that year after he served Collins — the first congressman to endorse Trump in 2016. Only two months from his sentence.
Former Representative Brian Bird, a Southwest Washington Democrat in the House of Representatives from 1999 to 2011, spent years defending the stock act — an acronym for “Stop Trading on Congressional Knowledge” — only to meet bipartisan resistance from other lawmakers, who trade the shares .
A review of financial disclosures conducted by the Center for Responsive Politics in 2020 found that the majority of lawmakers are millionaires. An analysis by Unusual Whales, an independent congressional stock trading tracker, found that out of a total of 535 members of Congress, 105 bought and sold a total of $290 million in stock in 2021.
Congress passed the Stock Act in 2012, after Byrd left the House, only after “60 Minutes” revealed that lawmakers had leveraged inside information to avoid the worst of the 2007-2008 financial crisis. Congress quietly relaxed the law a year later, but Marsco said that despite its flaws, the reporting requirements in the stock act laid an important foundation for transparency.
Now, regular lawmakers are pushing leaders of both parties to take these rules a step further, with some even calling for an outright ban on individual stock ownership by members of Congress. Several proposals emerged that drew support from moderates to troublemakers from both the left and the right.
A bill led by Senator Jeff Merkley, D-Oregon, would force lawmakers and top congressional staff to either stop trading shares or put them in a blind trust, Scherer has pledged. A similar bill in the House has the support of opposite ideological MPs: Alexandria Ocasio-Cortez, DN.Y. and Matt Gaetz, R-Florida.
Another bill led by Rep. Abigail Spannberger, D-Va., and Chip Roy, R-Tex. With the support of DelBene and fellow Washington Democrat Derek Kilmer, the blind trust clause will apply to lawmakers’ spouses and their dependent children.
A bill introduced by Georgian Senators John Osoff and Mark Kelly of Arizona, two new Democrats, would increase the fine for violating reporting requirements to equal the member’s full monthly salary. Senator Josh Hawley, Republican of Missouri, introduced a similar bill with somewhat more lenient enforcement rules.
In response to questions from The Spokesman-Review, most lawmakers representing Washington and Idaho said they support at least some of the proposals.
“We have been sent to People’s House to improve the lives of those we represent, not to generate personal wealth or enhance our portfolio,” Representative Kathy McMorris Rodgers said in a statement. The American people have made it clear that they believe the current law needs to be reconsidered, and I agree. It’s time for Congress to work on a bipartisan path toward making this important reform.”
Senator Patty Murray, D. Wash. Advertise on Twitter On January 18, she would co-sponsor Ossoff’s bill, calling it “a logical step to provide much-needed transparency.”
In a statement, Scherer said she is already setting up a blind trust fund for her own investments to “make sure the people I represent have no doubt that my priorities are theirs,” and supports calls for other lawmakers to do the same.
Three members of the entire Republican Party delegation in Idaho, Senator Mike Crabow and their Representatives Ross Fulcher and Mike Simpson, indicated they were open to the proposed changes, with Simpson saying in a statement that he would “support any efforts that advance the integrity of all lawmakers in Congress.”
“Transparency is a high priority for Rep. Fulcher and always has been,” spokeswoman Alexa Rogge said in a statement. “He’s looking at the details of the bill now before approving one proposal over another.”
“She will carefully review all other proposals and will continue to support measures that can help ensure Americans have confidence that members of Congress act in the public interest, not their own,” said Melanie Lahorn, a spokeswoman for Crabow, the top Republican on the Senate Finance Committee. statment.
Senator Jim Risch did not go away. In a statement, spokeswoman Marti Cuza said Rich “supports enforcement of existing laws that criminalize insider trading,” noting that he is not a sponsor of any of the proposals.
Kilmer, a Democrat from Gig Harbor, said in a statement that he supports “strong ethics to ensure the public has confidence in their elected representatives.”
“That’s why I support the Congressional Trust Act that bars legislators and their families from trading stocks,” he said. “Americans deserve to be trusted that their elected representatives do not use their office for personal financial gain, and instead focus on defending the interests of the people they represent.”
Representative Pramila Jayapal, a Democrat from Seattle, said in a statement that she “strongly opposes the holding and trading of shares by members of Congress” and indicated her support for multiple proposals to ban the practice.
Bellevue Democrat Adam Smith also supports preventing lawmakers from trading or owning individual stocks, spokesman Caleb Randall Bodman said in a statement.
Rep. Marilyn Strickland, D-Tacoma, said in a statement that she supports “preventing members of Congress and their spouses from actively trading in stocks” and was reviewing various proposals “to ensure they meet these criteria.”
Senator Maria Cantwell’s spokeswoman, Ansley Laetsis, Democrat of Washington, said in a statement, “This is an important policy area and we need strong bases to prevent conflicts of interest.”
Newhouse spokesmen, Rep. Jaime Herrera Butler, R. Battleground, and Rep. Rick Larsen, D. Everett, did not respond to questions.
The outlook for the legislation is unclear. While preventing lawmakers from trading stocks has strong support among voters—recent polls have found that between two-thirds and three-quarters of Americans like the idea—Democratic leaders control which bills get to vote.
House Speaker Nancy Pelosi, D-Calif., a billionaire and her husband, a prolific stock trader, rejected the idea in December. But soon after Republicans seized on her position as an election year vulnerability, Pelosi said Jan. 20 that she was open to stricter rules.
House Minority Leader Kevin McCarthy, of California, said he is considering a ban on all stock trading by lawmakers if Republicans retake the House in November elections.
On Monday, Democratic Representative Jared Golden of Maine led a group of 27 House Representatives in a letter calling for Pelosi and McCarthy to hold a vote on legislation banning stock trading in Congress. If that happens, lawmakers may find it difficult to publicly oppose such a popular measure.