WASHINGTON – Members of the U.S. House and U.S. Senate were required by law to file their annual financial disclosure reports last week, showing wide disparities in wealth and also raising the question: Should lawmakers be allowed to trade stocks?
A bipartisan rush earlier this year to limit stock trading by members of Congress has stalled. Rep. Dean Phillips, D- 3rd District, said he’s disappointed the effort has been met with resistance from his colleagues, but he believes that eventually there will be new guardrails on lawmakers’ investment on Wall Street.
“Nothing happens quickly in Congress,” Phillips said.
The bipartisan support to limit stock trading was 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.
As a result of questionable trades by members of Congress, Phillips said, “People have lost trust in public servants.”
Dozens of lawmakers introduced bills overhauling or updating the 2012 STOCK Act that currently governs lawmaker transactions and public disclosure. Proposals include everything from boosting transparency of lawmakers’ financial disclosures to outright bans on trading stocks by members of Congress and — in some cases — their immediate family.
The STOCK Act 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.
Phillips, by far the wealthiest member of Minnesota’s congressional delegation and one of the wealthiest members of Congress, is one of about a dozen lawmakers who chose to tackle the problem by putting his assets into a qualified blind trust. That means a money manager buys and sells his stocks and other assets without his direction.
Phillips, Reps. Ilhan Omar, D-5th District, Angie Craig, D-2nd District and Betty McCollum, D-4th District, are co-sponsors of the TRUST in Congress Act, a bill that would require members of Congress and their family to establish qualified blind trusts for their assets.
“Members of Congress should be focused on their jobs, not focused on their investment portfolios,” Phillips said.
Yet Phillips acknowledges 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. He thinks that colleagues who are not wealthy should invest in mutual or index funds instead, avoiding all trading in individual stocks.
“The challenge is to get this right,” Phillips said. “This does not have to be a one-size-fits-all solution.”
Craig prefers lawmakers hold no equities at all. She sold all of her individual stock holdings before assuming office in 2019.
“Members of Congress have access to a lot of information,” Craig said. “Even the appearance of impropriety by a member of Congress diminishes the credibility of all members of Congress.”
Phillips, however, said he does not agree with Craig that there should be a total ban on stock trading in Congress.
“I agree with her on a lot of things, but not this,” he said.
Meanwhile, Sen. Amy Klobuchar, D-Minn., has signed on to a Senate bill that would force members of Congress to sell all stocks, non-Treasury bonds, options contracts and derivatives they own within six months of the bill’s enactment or after taking office. Lawmakers, could under the bill, transfer their holdings into a blind trust and can still make investments in most retirement accounts.
Like the legislation in the House, the Senate bill that would curb stock trading has languished.
A delegation wealth gap
Every year, members of Congress must report their holdings and liabilities, but only a broad view of their assets and debts are made public. The value of certain assets, like their main residences, are not required to be disclosed.
Klobuchar and Sen. Tina Smith, D-Minn., met the May 16 deadline to file their financial disclosure reports. In the House, Reps. Pete Stauber, R-8th, Omar and Phillips have all asked for extensions, which gives them an additional 90 days to file reports. The clerk of the House has not made other reports that may have been filed by the deadline available for public viewing yet.
But information available from previous years show wide differences in wealth among members of the Minnesota congressional delegation. According to his 2020 report, Phillips, a business magnate and liquor heir, has assets worth tens of millions of dollars.
While Craig does not own individual stocks, she reported at least $5 million worth of holdings in mutual funds, bonds and other investments. Craig also listed bank accounts worth between $600,000 and $1.25 million. And, according to her 2020 financial disclosure report, the former St. Jude Medical executive also reported owning a condo in the Mexican resort town of Playa del Carmen valued at between $250,000 and $500,000.
Other Minnesota lawmakers appear to be of more modest means — with sizable mortgages, student loans and other debts.
In 2020, Omar reported few assets, a student loan in the amount of between $15,000 and $50,000 and a Chase Bank credit card debt of between $10,000 and $15,000.
Rep. Michelle Fischbach, R-7th District, also reported owing on between $60,000 and $115,000 on a student loan.
Meanwhile, McCollum reported a mortgage on her St. Paul home worth between $100,000 and $250,000 and another on her Washington, D.C., home worth between $250,000 and $500,000.
Rep. Tom Emmer, R-6th District, said he has a mortgage worth between $200,000 and $500,000.
In her 2021 report, Smith reported owing on a mortgage taken out the year before valued at between $500,000 and $1 million.
Meanwhile Stauber, whose family owns a hockey store in Duluth, reporter holding personal guarantees on business loans worth between $1.2 and $5.5 million.
In her 2021 financial disclosure report, Klobuchar reported earning $13,478 in royalties from her book, “Taking on Monopoly Power from the Gilded Age to the Digital Age.” She also listed a number of retirement accounts and mutual fund, mostly in her husband’s name.
The base salary for a member of Congress is $174,000 a year, an amount that hasn’t changed since 2009.