Why members of Congress should trade their stock portfolios for a shred of credibility
Few issues in Congress transcend partisan polarization as reliably and consistently as members’ stock portfolios. Americans across the ideological spectrum overwhelmingly agree that their federal representatives should not be buying and selling securities given their obviously advantageous access to information that is not available to most investors. And judging by the persistence of robust market participation on Capitol Hill, members of Congress from both parties broadly concur that they relish leveraging that privilege to enrich themselves.
The post-watergate
Ethics in Government
Act and the Obamaera STOCK Act (Stop Trading on Congressional Knowledge), which required more frequent disclosure of congressional trading, have served mainly to underscore the extent of the problem without doing much to solve it. A recent review by Insider found that 59 lawmakers had violated the law, which generally incurs a piddling fine. Meanwhile, flurries of remarkably prescient buying and selling by lawmakers have taken place on the cusp of worldand market-shaking events such as the 2008 financial crisis, the 2020 emergence of the novel coronavirus and this year’s Russian invasion of Ukraine, all suggesting senators and representatives were making lucrative use of information gained by virtue of their positions.
An outbreak of prepandemic stock-dumping prompted the FBI and the Securities and Exchange Commission to open an investigation of four senators. Sen. Dianne Feinstein, D-calif., ultimately acknowledged failing to disclose a transaction by her late
husband and said she would pay a fine, though she maintained that his trades were unrelated to the emergence of COVID-19 or any information she may have had. Sen. Richard Burr, R-N.C., who came under more extensive scrutiny based on a broader sell-off by him and a relative, stepped down from the leadership of the Intelligence Committee. And scrutiny of former Sen. Kelly Loeffler, R-GA., may have helped hand the Senate to Democrats. But the federal government ultimately dropped all the probes without bringing charges.
The husband of another California
lawmaker, House Speaker Nancy Pelosi, is so prolific and successful as an investor as to have inspired a following on social media, where amateur investors follow the speaker’s disclosed trades. There’s evidence that the thousands of trades disclosed by members of Congress, and mimicked by those monitoring them, are influencing the broader market. Like Burr, who voted against reform, Pelosi made matters worse by opposing any restriction of such congressional profiteering last year, though she has since changed her position.
The cause of reforming congressional stock trading is almost as popular and bipartisan in theory as members’ pursuit of market riches is
in practice, with more than a fifth of lawmakers signed onto one of several current reform proposals. As the anemic previous efforts demonstrate, they have little hope of regaining credibility on the subject if they continue to allow members and their immediate families to own and trade individual stocks.
Requiring members of Congress to limit their investments to diversified funds that don’t invite self-dealing and conflicts of interest is not a lot to ask given their unfair advantages over the investing public and the power and responsibility with which they’re entrusted. The alternative is another reason to distrust a legislature that Americans already hold in unsustainably low esteem.