Move to Ban Stock Trades in Congress Gains Steam With Rare Bipartisan Unity
(Bloomberg) -- There’s a bull market for proposals to ban stock trading by members of Congress.
Progressive Democrats and conservative Republicans alike are pushing forward with new plans, or dusting off old ones, to impose broad restrictions on trading by lawmakers -- and, in some cases, their immediate family.
Among those who’ve joined the rush this week are Democratic Senators Jon Ossoff of Georgia and Mark Kelly of Arizona, Republican Senator Josh Hawley of Missouri and Democratic Representative Angie Craig of Minnesota. House GOP leader Kevin McCarthy said he’d consider a House rule banning individual stock trades if Republicans win control of the chamber in November’s midterm election.
The White House also has weighed in. National Economic Council Director Brian Deese said extending a “sensible” ban on stock trading by members of Congress could help “restore faith in our institutions.”
The White House hasn’t backed any single bill, but stood by Deese’s remarks.
“As Brian said this morning,” President Joe Biden “believes that all government agencies and officials, including independent agencies, should be held to the highest ethical standards, including the avoidance of any suggestion of conflicts of interest,” White House spokeswoman Emilie Simons said.
Deese’s comments puts him at odds with House Speaker Nancy Pelosi, who favors disclosure but opposes such a ban. On Thursday, she asked the Committee on House Administration to examine compliance with the current law and possibly stiffen penalties, her spokesman, Drew Hammill, said.
The efforts have gained momentum in part from Federal Reserve Vice Chair Richard Clarida’s decision to resign two weeks before his term expires. That followed new revelations about his stock trading on the eve of a major central bank announcement in early 2020.
Democratic Representative Abigail Spanberger of Virginia with Republican Representative Chip Roy of Texas introduced a bill last year to require that lawmakers place investment assets into a blind trust while in office. On Thursday, they tweeted out a welcome to those joining the effort.
“The perception of insider trading itself -- let alone the practice of it -- by lawmakers erodes public trust,” Spanberger, who has 19 co-sponsors of her bill, tweeted.
Current law prohibits members of Congress, and other government employees, from using nonpublic information gleaned in the course of their duties for personal benefit and requires disclosure of securities trades by members, spouses or dependent children of more than $1,000.
Critics have complained that the law is too easily skirted, the disclosure requirements too loosely enforced and the penalties too lenient.
Several senators came under scrutiny for trades made in the early days of the coronavirus pandemic, when they were getting closed briefings on the outbreak. Ultimately none were charged with breaking trading rules.
At the Fed, Chair Jerome Powell last October announced new investment guidelines including banning purchases or sales during periods of market stress as a result of another ethics scandal involving trading activities. A probe of trading by senior Fed officials is under way by the central bank’s inspector general.
The drive to tighten the law is not new. Democratic Senator Elizabeth Warren, along with Representative Pramila Jayapal, introduced legislation in 2018 to prohibit trading of individual stocks by members of Congress, cabinet secretaries, federal judges and other senior officials.
“For years I’ve worked to ban the owning and trading of stocks by members of Congress, and I’m glad that more of my colleagues now agree,” Warren said in a statement to Bloomberg. “Even before the pandemic, scandals with public officials’ trading stocks eroded public trust, and this crisis has shone a spotlight on how those in power can abuse the system in their favor.”
Democratic Senator Jeff Merkley of Oregon and other lawmakers, including Democrat Alexandria Ocasio-Cortez of New York and Republican Matt Gaetz of Florida, also had previously introduced a bipartisan measure to prohibit lawmakers from buying or selling individual stocks and other investments, and from serving on any corporate boards.
Past efforts have been stymied. Pelosi, whose husband, Paul Pelosi, made his fortune in real estate and venture capital, said at a news conference last month that lawmakers should be able to trade individual stocks “because this is a free market and people -- we are a free-market economy.”
Hammill said Pelosi views disclosure as the best remedy. “Insider trading is already a serious federal criminal and civil violation and the speaker strongly supports robust enforcement of the relevant statutes.”
The bill announced Wednesday by Ossoff and Kelly echoes Spanberger’s in requiring members of Congress -- along with their spouses and dependents -- to put their assets in a blind trust. Lawmakers who break the rules would be fined in the amount of their entire congressional salary.
Hawley said he will introduce a ban on members of Congress and their spouses from holding, acquiring, or selling stocks or equivalent economic interests during their tenure in office. Any holdings in diversified mutual funds, exchange-traded funds, or U.S. Treasury bonds would be exempt from the prohibition.
Congressional watchdog groups and others say that even if transactions are technically legal, they can create real or perceived conflicts of interest.
“There’s always that suspicion that members of Congress have inside information even if it’s not true,” Democratic Representative Richard Neal of Massachusetts said. “I also think that sometimes you’re bringing unnecessary scrutiny to your investments if it looks as though you’re rolling the dice every couple of days.”
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