WASHINGTON — There’s a new push to bar members of Congress from trading stocks, fostered in part by Congress’ continued low approval rating and the embarrassment to the institution provoked by fabulist freshman Rep. George Santos.
Several bills that would ban lawmakers from owning individual stocks have been introduced this month, including one sponsored by Rep. Angie Craig, D-2nd District. But the path to reform is not assured. Previous efforts to impose restrictions on lawmakers’ stock trading have failed and skeptics say this one will, too.
The previous Congress failed to approve any legislation that aimed at preventing conflicts of interest, or perceived conflicts of interest, among lawmakers, even though there was bipartisan support for several bills that would limit or prohibit stock trading.
The calls for reform were fueled by a number of incidents, including revelations that several senators made fortuitous trades before the American people were fully aware of the severity of the COVID-19 pandemic that was about to upend economies around the world.
This year, the bill that stands the best chance of success was introduced in the House by Reps. Abigail Spanberger, D-Va., and Chip Roy, R-Texas.
Called The TRUST in Congress Act, the legislation would require members of Congress as well as their family members to put their investments into a qualified blind trusts during their time in Congress.
In this Congress so far, only one House member, Rep. Dean Phillips, D-3rd District, has put assets in a qualified blind trust. It took Phillips several years to move his considerable assets into that trust.
That may be a problem for many lawmakers. Even Phillips has acknowledged that setting up a blind trust is “tedious, expensive and time-consuming” and that many of his colleagues aren’t wealthy enough for this to be practical or reasonable.
Craig has taken a different approach. Her bill would prohibit members of Congress from trading individual stocks, while allowing them to invest in mutual funds and bonds, much like legislation Craig introduced in the prior Congress.
But this time Craig went much further. The Halt Unchecked Member Benefits with Lobbying Elimination (HUMBLE) Act would also prohibit lawmakers from lobbying Congress after leaving office; require lawmakers and their staff to fly coach for trips that are paid from an office account and strip former members of Congress of many perks – including access to the House chamber.
Craig said she is “realistic” her ambitious bill would likely be broken down into “individual chunks.”
“But I wanted to make the strongest statement possible about the things I have seen that are wrong in Congress,” Craig said.
She said Minnesotans “have lost confidence in Congress.”
Other Americans have, too. In various polls, including Gallup’s, Congress’ approval rating has hovered at about 22% for more than a year.
Craig also said the seating on two committees of Santos, a Republican representing a Long Island, N.Y., district, also provoked ill will among the public towards Congress. Santos has misrepresented nearly all aspects of his life, including his employment, education and family history, and is under investigation for alleged campaign finance violations. On Tuesday, Santos announced he would recuse himself from his committee assignments.
Yet Craig indicated it may be a heavy lift for Congress to adopt reforms. And she said it’s not just GOP members who would vote against change.
“I’m not naïve,” she said. “There are people in the Democratic Party who don’t want this type of legislation to succeed.
Kendrick Payne, general counsel for the Campaign Legal Center, is more optimistic because House Speaker Kevin McCarthy, R-Calif., said he supported some version of a stock trading ban.
“That gives me some hope there could be some momentum for change this year,” Payne said.
Current law is more bark than bite
The 2012 STOCK Act currently governs lawmaker transactions and public disclosure. It requires members of Congress to disclose the purchase or sale of stocks valued at more than $1,000 within 45 days of any transaction, but dozens of lawmakers have been found to violate this deadline.
While lawmakers who violate the STOCK Act face a fine, the penalty is usually small – $200 is the standard amount – or waived by House or Senate ethics officials.
The STOCK Act was approved by Congress on the heels of several trading scandals, including an insider trading investigation of former Rep. Spencer Bachus (R-Ala.) who was a frequent trader of financial stocks while overseeing the nation’s banking and financial services. The options allowed Bachus to buy or sell stocks at certain prices in the future — betting that the value of those stocks would rise or fall.
The STOCK Act was approved by Congress shortly after an ethics committee found Bachus guilty of insider trading.
More than 10 years later, Payne said “we’re just one scandal away” from an overhaul of the act.
In a story published this past September, The New York Times determined at least 97 financial assets that intersected with their congressional work or reported similar transactions by their spouse or a dependent child.
That story reignited an effort to ban stock trading by lawmakers, but legislation failed to pass the House after former House Speaker Nancy Pelosi insisted it apply to executive branch officials and the Supreme Court, too.
Pelosi, D-Calif., who does not trade individual stocks, has often been criticized for the trades made by her husband, Paul Pelosi. For instance, Paul Pelosi sold 30,000 shares of Google stock last month, just weeks before the Justice Department filed a lawsuit against the company over alleged antitrust violations.
And last year, Paul Pelosi, who heads a San Francisco-based investment and venture capital firm, came under fire for buying up to $5 million worth of shares in computer chipmaker Nvidia about a month before Congress approved the CHIPS Act, which included a $52 billion subsidy for domestic computer chip production.
Nancy Pelosi has denied that her husband has traded stocks based on information he’s gleaned from her.
Nevertheless, Sen. Josh Hawley, R-Mo., has trolled the former speaker by introducing a bill in the Senate this month that would limit lawmaker stock trades, the Preventing Elected Leaders from Owning Securities and Investments (PELOSI) Act.
While Democrats are likely to reject Hawley’s bill, Payne said a bipartisan effort stands a chance of approval.
“The problem is not going away,” he said. “Members of Congress will just have to face it.”