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Don’t Buy Into Lawmakers’ Talk of a Stock Trading Ban Just Yet
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Don’t Buy Into Lawmakers’ Talk of a Stock Trading Ban Just Yet

Rhetoric is one thing, but agreeing on legislation is another.

Good Friday morning. It’s going to be a delightful 62 degrees here this afternoon, which means a certain area boy will be making a voyage to the park.

Stock Trading Debate Intensifies

We’ve written to you a couple of times in recent months about the building momentum on Capitol Hill to ban lawmaker stock trading. Proponents of stricter rules point to past instances of insider trading by members of Congress and a widespread failure among members and staff to follow reporting requirements. Their broader reasoning for action: Why should lawmakers—who are writing and debating bills that affect various companies and entire industries, and who have access to knowledge most people don’t—be able to buy and sell stocks?

The effort has support in both parties and among the general public, but it faces institutional headwinds. Members generally don’t like passing new restrictions on themselves. Supporters are also contending with a broad array of competing bills. They will have to rally around a central course of action that can become law, even as a larger conversation about government ethics might slow the momentum to act.

You may have heard this week that House Speaker Nancy Pelosi has thrown her support behind the push—and while she certainly took a step closer to accepting changes, her comments weren’t quite as definitive nor as encouraging as advocates had hoped.

Pelosi said during her weekly press conference on Wednesday that she wants the American public to believe their representatives have integrity, and if banning trades of individual stocks by members of Congress is “what the members want to do, then that’s what we will do.”

In December Pelosi had publicly rejected the idea of a stock trading ban. So during a call with reporters on Thursday, sponsors of bicameral legislation to prohibit individual stock trading in Congress heralded Pelosi’s shift as a testament to the fact that public attention can move the needle. 

“The speaker is very responsive and receptive to the caucus,” New York Rep. Alexandria Ocasio-Cortez said.

But Pelosi’s comments this week were only a slight departure from her comments in January, when she said, “I just don’t buy into it, but if members want to do that, I’m okay with that.” 

Pelosi has asked Rep. Zoe Lofgren, who chairs the House Administration Committee, to review the legislative options. And there are a lot on the table: Three bills related to the subject dropped on Wednesday alone. A couple of proposals have been around longer, and lawmakers see them as the primary conversation-starters.

One of them, Rep. Raja Krishnamoorthi’s Ban Conflicted Trading Act, would prohibit members and senior congressional staff from trading individual stocks. It also blocks lawmakers from serving on the boards of for-profit entities. (Original cosponsors of the bill include Ocasio-Cortez and Florida Man Rep. Matt Gaetz, if you wondered about the ideological overlap at play.) 

Sen. Jeff Merkley, a longtime proponent of banning lawmaker stock trading, introduced the companion measure in the Senate, where it so far has no Republican support.

Critics point out that the Ban Conflicted Trading Act would not apply to lawmakers’ spouses. Ethics experts argue spouses and dependent children might become loopholes in implementing a ban on stock trading. For an example, look no further than Pelosi: The speaker does not own stock, but her husband is a prolific investor who owns stock worth millions of dollars.

Ocasio-Cortez told reporters she supports including spouses in the ban, but colleagues didn’t think it feasible when drafting the legislation. She said she would like to get members on the record by having a House vote on an amendment to include spouses in the ban when a version of a stock bill eventually comes to the floor.

Krishnamoorthi also said he would entertain the idea, but “right now, the spotlight is on members.”

Rep. Abigail Spanberger, a Virginia Democrat, and Rep. Chip Roy, a Texas Republican, have brought forward a plan that would address that concern. Their bill would mandate that lawmakers, their spouses, and their dependent children place holdings into a blind trust during the member’s time in office. That bill, titled the TRUST in Congress Act, has more support from Republicans than the other proposal. Spanberger noted this week that the number of sponsors for her legislation has tripled in the past month. Georgia Democratic Sen. John Ossoff has introduced a similar measure in the Senate, although it has some slight differences.

Senators have been meeting to discuss how to move forward. Merkley said those conversations are continuing, but he emphasized his hope that the talks “don’t lose sight of the central premise of the immediate effort. That is, we have a deeply poisonous problem of members trading in individual stocks while they’re writing policy,” he said. “And that’s just unacceptable.”

His fear is a valid one. If there’s anything Congress is good at, it’s talking a bill to death. The more the scope of the measure expands, the more likely it will divide different coalitions. We’re big proponents of a more open congressional process here at The Dispatch, but that isn’t quite what this discussion stage is. For now, there is no guarantee of an open process in either chamber, which would mean allowing votes on amendments. Instead leadership—especially Pelosi—will have final say in what makes it to the floor. 

“I think there’s going to be just a lot of talking about all of the things that could be done, and that is where I would argue we have legislation that a lot of people already support, so we don’t necessarily need to talk for the next year,” Spanberger told reporters on Wednesday morning.

She worries the conversation will get too broad. Pelosi added to those concerns when she publicly called for a whole-of-government approach and questioned why Supreme Court justices do not have to make stock disclosures.

“Clouding it with including staff or including the judiciary—not to say that those areas maybe don’t need reforms as well—but, like, we’re the problem,” Spanberger said. “People are worried about their members of Congress.”

Lawmakers have given the issue heightened scrutiny after a recent Business Insider investigation found that dozens of members of Congress and nearly 200 Hill staff had violated reporting requirements since January 2020.

Opponents of banning individual stock trading by members say such a measure could hurt candidate recruitment. 

“It’s ridiculous,” Sen. Tommy Tuberville of Alabama, said this week. “I think it would really cut back on the amount of people that would want to come up here and serve.”

Tuberville was one of the most prominent violators of the law that mandates stock disclosures last year. As noted by Business Insider’s Bryan Metzger, who has followed this story closely:

 

https://twitter.com/metzgov/status/1491480655326322688

 

A spokesman for Tuberville told CNBC over the summer that the senator wasn’t aware of the transactions, saying they were handled by financial advisers.

Rep. Elaine Luria, a Virginia Democrat, had a more colorful response to the effort.

“The whole concept is bullshit,” Luria told Punchbowl News’ Max Cohen this week. “Why would you assume that members of Congress are going to be inherently bad or corrupt?”

As Metzger pointed out, Luria owns millions of dollars in stock in NVIDIA and Facebook. She traded hundreds of thousands of dollars in stock last year.

“It’s not easy to have an institution block itself from practices it can currently be engaged in,” Ocasio-Cortez said Thursday. But because of public attention, she argued, Americans have made it “too difficult to ignore.”

Of Note

Haley Wilt is a former associate editor for The Dispatch.