Congress can trade stocks or keep the public trust. Not both.
By Michelle Cottle
Most Americans believe that most politicians are corrupt. How depressing — not to mention how terrible for the health of democracy. After all, if the system is broken and everyone is a crook anyway, why not elect a reality TV grifter with a smashed ethical compass to be president?
Sensitive to this problem, Congress typically responds to scandals within its ranks with fits of reform fever. This is what we’re now seeing with bills — so many bills — aimed at restricting lawmakers from trading stock while in office.
The issue of how to prevent members of Congress from improperly profiting from their positions has long been a tricky one. Lawmakers have access to information unavailable to the general public and the power to shape policy in a direction that could prove personally lucrative. In 2012, Congress passed the Stock Act, which prohibits members from making trades based on their privileged information.
Progressives, such as Sen. Elizabeth Warren, have been arguing for years that much more needs to be done.
The issue grabbed renewed attention in the past two years after questions arose about whether certain lawmakers made stock trades based on their privileged knowledge about the COVID pandemic. Sen. Richard Burr, R- N.C., has earned himself extra close attention from the Securities and Exchange Commission for dumping a bunch of stocks in the hospitality industry in February 2020.
Last month, an investigation by Insider revealed that dozens of members of Congress had violated the reporting requirements on trading. The report also found that Congress tends to be lax about punishing violators and about making information on this matter public. (Policing its own has never been the institution’s strong suit.)
Just like that, congressional stock trading became a hot topic again. Lawmakers from both parties are rushing to offer up their solutions, some more stringent than others. Punchbowl News did a roundup last week of early contenders, with more expected:
Sen. Jeff Merkley of Oregon and Rep. Raja Krishnamoorthi of Illinois, both Democrats, are championing a bill that would bar lawmakers and senior staff members from trading individual stocks and require that they place all stocks in a blind trust.
Sen. Josh Hawley, R-Mo., would require lawmakers and their spouses to use a blind trust — and compel lawmakers to return any stock profits to the Treasury Department.
Democratic Sens. Jon Ossoff of Georgia and Mark Kelly of Arizona would extend the trust requirement even further, to include lawmakers’ dependent children, as would a bill by Rep. Abigail Spanberger, D-Va.
Details aside, it is hard to say whether this issue will receive serious consideration in either chamber. The Democratic majority already has a lot on its plate. It’s an election year. Partisan posturing will be in full bloom. And currently — and rather awkwardly — House Speaker Nancy Pelosi opposes major reform.
“The speaker believes that sunlight is the best disinfectant,” explained Drew Hammill, her deputy chief of staff, noting that she has asked Rep. Zoe Lofgren, who chairs the Committee on House Administration, to examine members’ “unacceptable noncompliance with the reporting requirements” and consider “the possibility of stiffening penalties.”
But on the matter of whether to restrict trading by lawmakers, the speaker is decidedly not on board. Asked about the issue last month, she slapped down the idea. “We are a free-market economy. They should be able to participate in that.”
This is indeed a free-market economy. It is also one that a growing number of Americans feel is not working for them. Combine that with the public’s aforementioned grim view of politicians, and you can see where Pelosi’s remark might be considered a wee bit out of touch.
House Democrats would do well to work on changing their chief’s mind. Not just because it is the right thing to do. But also because the party risks being outflanked by Republicans on the issue.
Make no mistake: GOP leaders know a political opening when they see one. Last week, the House minority leader, Kevin McCarthy, said that he would consider limiting or banning stock trading by members if his party wins control of the House in November.
See what he did there?
You can bet this issue will pop up again — and again — as the midterm elections heat up. Democrats need to put themselves in a position to own that debate.
Even lawmakers who hew to the straight and narrow understand that America is facing a crisis of faith in its political system and elected leaders. Lawmakers can obsess about making money once they leave office. Until then, they need to stay focused on the public interest — which includes taking steps to reassure the public that they aren’t all a bunch of corrupt, self-serving, money-grubbing, power-hungry crooks.