Time for a Ban on Congress Trading
Due to the pandemic and a lack of trust in the U.S. government, the ban on trading for the members of Congress has surfaced as one of the top issues within our borders. The proposal called the Ban Conflicted Trade Act has gained a lot of traction and backing from government officials, so it is just a matter of time before it is enforced. Proposed over a year ago, the bill “prohibits a Member of Congress from (1) purchasing or selling specified investments, (2) entering into a transaction that creates a net short position in a security, or (3) serving as an officer or member of any board of a for-profit entity” (“H.R.1579 - Ban Conflicted Trading Act,” 2021). This issue entered into the spotlight due to members of Congress making trades directly before and during the pandemic. This claim is backed by the multiple cases of suspect trading activities occurring at optimal times. For example, Senator Richard Burr went under investigation by the SEC after he sold $1.65 million off in stocks from his investment account on February 13, 2020 and was traced calling his sister and brother-in-law which resulted in his sister selling off her own stocks in her account later that day (Sneed, 2021). The investigation looked into whether Burr made these decisions according to non-public information, which would be a violation of the Stock Act of 2012 and of which Burr was one of only three senators to vote against. Although Burr’s investigation is still underway, it is a problem that should not arise in the first place as members of Congress should not have this temptation and the public should not have to worry their elected officials are committing insider trading instead of serving their interests.
The public has grown distrustful of our government as a whole, so this ban would be a step in the right direction of restoring this trust. It has been shown that elected officials do not take the laws in place seriously enough, as there are many loopholes, difficulties in implementing laws, and repeated failures to properly report financial trades without correct repercussions (Levinthal, 2022). The citizens of our nation don’t feel their elected officials work for them but instead act in their own self-interest without regard for rules or consequences. The push for the trading ban is more than just imposing rules to keep members of Congressin line, but also changing the dynamic of government and its ability to get away with corruption and self-dealing (“Members of Congress Should Not Be Trading Stocks, Ever.” 2022). At a time of low faith in the government (due to the COVID-19 virus, voting scandals, etc.), it is logical to pass legislation that puts members of Congress on the same level as the average citizen. Only 15% of American families hold individual stocks, so placing this ban would place Congress on the same level as 85% of Americans (who they are elected to represent) who invest in mutual funds and other investment vehicles (“Members of Congress Should Not Be Trading Stocks, Ever.” 2022).
Members of Congress have access to a constant stream of information that directly affects companies in the stock market, information of which the average citizen has no knowledge of. This gives them a clearly different and more privileged trading situation whether they choose to use this non-public information or not. The opposition against the ban states that it is the elected officials’ duty to not use or share this information in order to increase their wealth or others around them. In December of 2021, Nancy Pelosi stated, “We are a free-market economy, they should be able to participate in that” (“Members of Congress Should Not Be Trading Stocks, Ever.” 2022). Although this is true, U.S. citizens have been witnessing members of Congress earning above average returns for decades and blame this on non-public information. When elected officials trade stocks on information gained in their private meetings, they don’t just break the law but decrease public trust of the Congress and in the government as a whole. Taking an oath of office puts elected officials at a higher standard of conduct, so banning them from trading stocks works to ensure that there are no conflicts of interest and that officials act according to their citizens’ interest rather than their own pockets.
With 74% of American citizens supporting the ban trading in Congress on some level, Pelosi soon changed her opinion on the matter and stated she would be open to the ban but stressed it wasn’t necessary because she trusted her colleagues. These remarks came a day after former President Trump advocated for the ban and singled out Pelosi for her reluctance to even talk about the proposed ban (Goodkind, 2022). Although Pelosi does not trade stock herself, her husband, Paul Pelosi, is an accredited Investment Banker who has made millions off trading stocks. Aspiring traders even watch his trades, when they become public, and copy his investments. Sites such as “congresstrading.com”, Quiver Quantitative, and even TikTok videos contain his investment history and how to invest like the Pelosis’ (Goodkind 2022). This portrays a clear conflict of interest as Nancy frequently deals with the tech world regulations in Congress while her husband makes millions trading shares of these big tech stocks. While there is no evidence showing any insider trading, this conflict of interest nevertheless weakens an ever-falling trust of the government in the public’s eye. Although nothing may be going on, it is difficult for average citizens earning below average returns to see the Pelosis making exceptional returns off of calls and long positions on tech stocks, such as recent calls on Google and Amazon, of which Nancy is in charge of in terms of legislation in Congress. Nancy Pelosi did not comment on whether representatives’ family members should also be included in this ban, which would ultimately unfairly result in her husband being out of a job at no fault of his own (Goodkind 2022).
There are many cases where the integrity of elected officials have been questioned in terms of using nonpublic information for their own personal profit. From 2015-2021, Senator Perdue faced lots of public scrutiny after making 2,596 trades during just his first term in office (Seddiq 2020). This made up almost a third of all trades by senators over the same period. Although charges for his suspicious stock activity at the beginning of the pandemic were dropped, this is a great example of how Congress members may abuse power and upset the public. Citizens do not want to see their elected officials making thousands of stock trades in order to increase their own personal wealth while in office. They took an oath to serve the people they represent and making such stock trades is consuming their time and efforts otherwise better spent towards serving the people they represent. Representative Mike Kelly is under investigation for giving nonpublic information to his wife in order to profit financially. Mike pushed for the Department of Commerce to rescue a company in financial trouble, which his wife bought shares of, and then sold the stock after it had gained almost 400% once the news of the rescue was publicly known (Payne 2021). These allegations are still under investigation as they are very difficult to prove. Another example of such questionable cases is when a nominee to lead the Department of Health and Human Services bought shares in a medical device company last year. Only less than a week later, legislation was introduced in the House that would help the company (Shabad 2017).
The law in place now, the Stock Act of 2012, has many loopholes and isn’t enforced strongly enough to keep elected officials in line and restore trust in the government. An investigation identified that 57 members of Congress recently have failed to properly report their financial trades, which is mandated by the Stock Act (Leonard et al. 2021). The efforts to ban stock trading among members of Congress have been going on for more than 11 years now, and have recently begun to gained widespread support due to the issue being shoved into the spotlight. Senator Jon Tester put this situation into words perfectly:
“Members of Congress are elected to serve the American people by creating good-paying jobs, lowering costs for working families, and cutting taxes—not to use their position to line their own pockets. The bottom line is no one serving in Congress should be actively buying or selling individual stocks, period. I’m backing this legislation to make sure that elected officials are doing their constitutional duty and are held accountable when they put their own interests before the public trust.”
Our country is severely divided along political lines and by party, so the fact this ban has strong support among Democrats, Republicans, and Independents demonstrates its importance to the public and displays their loss of faith in their government. Passing the Ban Conflicted Trading Act would be a crucial step in restoring all parties' trust in Congress and the government overall.
Work Cited
“Congress Trading Database and Forum.” Congress' Stock Trades, https://www.congresstrading.com/.
The Editorial Board. “Members of Congress Should Not Be Trading Stocks, Ever.” The New York Times, The New York Times, 18 Feb. 2022, https://www.nytimes.com/2022/02/18/opinion/congress-stock-trading-ban.html.
Goodkind, Nicole. “Nancy Pelosi Says She's Open to Banning Stock Trading among Congress Members after Trump Criticism.” Fortune, Fortune, 21 Jan. 2022, https://fortune.com/2022/01/21/one-day-after-trump-said-nancy-pelosi-should-be-banned-from-stock-trading-she-said-shes-open-to-it/.
“H.R.1579 - Ban Conflicted Trading Act.” Congress.Gov, 3 Mar. 2021, https://www.congress.gov/bill/117th-congress/house-bill/1579?r=62.
“House of Representatives Trading.” Quiver Quant, https://www.quiverquant.com/sources/housetrading.
Leonard, Kimberly, et al. “At Least 182 High-Ranking Congressional Staffers Have Violated a Federal Conflict-of-Interest Law with Overdue Disclosure of Their Personal Stock Trades.” Business Insider, Business Insider, 13 Dec. 2021, https://www.businessinsider.com/congress-staff-violated-stock-act-conflicts-of-interest-possible-2021-12.
Levin, Mike. “Opinion: It's Time to Ban Congress Members from Trading Stocks.” CNN, Cable News Network, 21 Feb. 2022, https://www.cnn.com/2022/02/21/perspectives/ban-conflicted-trading-act-congress-stocks/index.html.
Levinthal, Dave. “57 Members of Congress Have Violated a Law Designed to Stop Insider Trading and Prevent Conflicts-of-Interest.” Business Insider, Business Insider, 15 Feb. 2022, https://www.businessinsider.com/congress-stock-act-violations-senate-house-trading-2021-9.
Payne, Kendric, and Brendan Quinn. “Insider Trading Rules Should Be Enforced against Kelly and Others.” Campaign Legal Center, 22 Oct. 2021, https://campaignlegal.org/update/insider-trading-rules-should-be-enforced-against-kelly-and-others.
Seddiq, Oma. “Republican Sen. David Perdue's Stock Portfolio Shows He'd Occasionally Make at Least 20 Trades in One Day, per a New York Times Investigation.” Business Insider, Business Insider, 2 Dec. 2020, https://www.businessinsider.com/gop-senator-david-perdue-stock-trades-in-one-day-nyt-2020-12.
Shabad, Rebecca. “HHS Nominee Tom Price Faces Insider Trading Accusations.” CBS News, CBS Interactive, 17 Jan. 2017, https://www.cbsnews.com/news/hhs-nominee-tom-price-faces-accusations-of-engaging-in-insider-trading/.
Sneed, Tierney. “SEC Is Still Investigating Sen. Richard Burr for Insider Trading, Court Filings Say.” CNN, Cable News Network, 28 Oct. 2021, https://www.cnn.com/2021/10/28/politics/burr-sec-investigation-stock-trades/index.html.
“Tester Backs Legislation to Ban Stock Trading in Congress.” Jon Tester | U.S. Senator for Montana, 7 Feb. 2022, https://www.tester.senate.gov/?p=press_release&id=8885.
