The trading of stocks has become a contentious issue on Capitol Hill in recent weeks, one has divided parties and formed unusual allies across the political aisle.
It’s a topic that has picked up traction with both Republicans and Democrats as of late, particularly in the wake of remarks from House Speaker Nancy Pelosi, D-Calif., who in mid-December resisted the suggestion that lawmakers and their spouses should be banned from selling or buying stocks.
“This is a free market, we are a free market economy, they should be able to participate in that,” Pelosi said at the time.
The longtime Democrat has since faced opposition – including from members of her own party – on the issue, especially after an investigation from Business Insider found dozens of lawmakers and senior staffers have repeatedly violated an anti-insider trading law known as the STOCK Act over the past several years.
The Stop Trading on Congressional Knowledge Act, or STOCK Act, was signed into law by then-president Barack Obama in 2012. The act aims, in part, to “prohibit Members of Congress and employees of Congress from using nonpublic information derived from their official positions for personal benefit,” and passed both the House and the Senate on a widely bipartisan basis.
The bill itself does not ban members of Congress from trading stocks, but requires certain government officials – like lawmakers, the president and vice president, and other executive and legislative employees – to report any stock trades within 45 days of the transaction.
But the law is largely without teeth. There have been numerous reports of lawmakers violating the STOCK Act, with little to no repercussion. The typical fine for a lawmaker who violates a provision of the act is around $200, according to the Campaign Legal Center, a nonpartisan government advocacy firm that aims to promote accountability and ethics in Congress.
“[The STOCK Act] has some safeguards that are very important, but they're not super well enforced,” Delaney Marsco, the CLC's senior legal counsel for ethics, told Spectrum News. “Members, of course, are very wealthy people and a lot of times the violations are failure to disclose millions of dollars in stock. What's $200 to someone who has a million dollars in stocks?”
Under mounting political pressure, Pelosi has, in recent weeks, voiced support for stiffer penalties for those who violate the STOCK Act.
A spokesperson for her office told Insider: "The speaker believes that sunlight is the best disinfectant and has asked Committee on House Administration Chair Zoe Lofgren to examine the issue of Members' unacceptable noncompliance with the reporting requirements in the STOCK Act.”
Some members of Congress do not believe the STOCK Act goes far enough, regardless of the potential penalties – a sentiment that stretches across the political aisle.
A bipartisan group of 27 House lawmakers wrote a letter on Monday to Pelosi and Minority Leader Kevin McCarthy, R-Calif., urging them to "swiftly" put forward legislation that would ban lawmakers from owning or trading stock.
"This glaring problem will not go away until it is fixed and Congress should not delay when we have the power to fix it," the letter, signed by 25 Democrats and two Republicans, reads, adding: "There is no reason that members of Congress need to be allowed to tradestocks when we should be focused on doing our jobs and serving our constituents.
"Perhaps this means some of our colleagues will miss out on lucrative investment opportunities," the letter adds. "We don't care. We came to Congress to serve our country, not turn a quick buck."
In a recent statement to Punchbowl News, Minority Leader McCarthy said he would consider legislation that would ban all members of Congress from trading stocks should Republicans take control of the House of Representatives come the midterms.
"I cannot imagine being a speaker of the House with the power of what can come before committee, you name them and what can come to the floor and trading millions of dollars worth of options,” McCarthy told NPR in a separate interview this month, noting that he does not trade independent stocks. “I just don't think the American people think that's right."
A number of lawmakers from both parties have already proposed bills to ban stock trading in Congress, although the bills vary in scope: some bans would extend to spouses of lawmakers, some to children and dependents, while still others would bar senior congressional staff from stock market trades.
One dates back to last January, when Reps. Abigail Spanberger, D-Va., and Chip Roy, R-Texas, introduced the Transparent Representation Upholding Service and Trust in Congress Act – or TRUST in Congress Act, for short. The bill, whose 21 other cosponsors are made up of five Republicans and 16 Democrats, would require lawmakers, their spouses and dependent children to place certain assets into blind trusts, among other provisions.
A separate bill was introduced to the House just two months later by Rep. Raja Krishnamoorthi, D-Ill., with similar bipartisan support: its 25 cosponsors range from vocal progressive Rep. Alexandria Ocasio-Cortez, D-N.Y., to the ultra-conservative Rep. Matt Gaetz, R-Fla.
The Ban Conflicted Trading Act would not, like the TRUST in Congress Act, extend to family members of lawmakers. Instead, it would ban members of Congress and certain employees from the purchase or sale of any futures, or from entering into a transaction that would create a “net short position in any security.”
At least two such bills were introduced in the Senate just last week by Sen. Jon Ossoff, D-Ga., and Sen. Josh Hawley, R-Mo., although the language differs slightly between the two proposals.
Ossoff’s Ban Congressional Stock Trading Act, which was co-sponsored by Sen. Mark Kelly, D-Ariz., would ban both members of Congress and their families from buying or selling stocks while the former is in office, and would require all lawmakers and family members to put their stock portfolios in a blind trust (something Ossoff himself did upon being elected to the U.S. Senate last year).
Those who violate the law would be subject to a fine in the amount of their entire Congressional salary.
“Members of Congress should not be playing the stock market while we make federal policy and have extraordinary access to confidential information,” Ossoff said in part.
Sen. Hawley’s Banning Insider Trading in Congress Act would ban all members of Congress and their spouses – but not other family members – from holding or trading individual stocks. Lawmakers would be given six months after assuming office to either divest or place their holdings into a blind trust; those who failed to comply would “lose the ability to deduct the losses of those investments on their income taxes,” and could be subject to additional fines from the ethics committee.
“Wall Street and Big Tech work hand-in-hand with elected officials to enrich each other at the expense of the country,” Hawley wrote in part. “Here’s something we can do: ban all members of Congress from trading stocks and force those who do to pay their proceeds back to the American people.”
Ossoff’s decision to include spouses and dependents in his bill aims to “increase the level of both transparency and accountability for members of Congress while they serve,” a source familiar with the move told Spectrum News, adding that the trust “extends to their families as well.”
While Ossoff’s bill does not include regulations for senior congressional staff, the senator remains open to suggestions from lawmakers of both parties, the source added. Spectrum News has reached out to Hawley’s office for comment.
Some experts say it’s “very common” to include both spouses and dependents in regulations to prevent insider trading – but that it would not be the most important aspect of a potential bill.
“The restriction on trading individual stocks is crucial,” Marsco told Spectrum News. “Conflicts of interest come up when members of Congress can kind of play the stock market and gain an advantage from a committee hearing or a piece of legislation. We don't see those conflicts of interest as much with things like mutual funds or exchange traded funds, types of financial vehicles that are widely diversified or widely held.”
Public support for proposed legislation tends to speed along passage, and numerous polls have shown that Americans are largely united in supporting more restrictions against lawmakers operating on the stock market.
One study, conducted by the conservative advocacy group Convention of States Action, found that 76% of respondents believe members of Congress and their spouses have an unfair advantage on the stock market, and should be banned from such transactions while in office. A separate poll from Morning Consult/Politico found that 63% of respondents believe lawmakers should be banned from stock trading.
While Congress enacts, on average, less than 10% of proposed legislation in any given session, some see promise with the influx of new bills being introduced.
“It's very rare to see bipartisan agreement on any sort of concept these days … and so it's very encouraging to see that members of Congress on both sides of the aisle are interested in this and excited about this,” Marsco told Spectrum News.
The passage of any bill is largely up to party leadership, meaning either Pelosi or Senate Majority Leader Chuck Schumer, D-N.Y., would need to take action on the issue.
By late this week, Pelosi seemed somewhat swayed by the growing sentiment among lawmakers, but stressed that she does “come down, always, in favor of trusting our members.”
“I said to the House Administration Committee, review all the bills that are coming in and see which ones – where the support is in our caucus,” she said at a weekly press conference on Thursday, later adding: “I just don’t buy into it, but if members want to do that, I'm ok with that.”
Sen. Schumer, who demurred when asked about McCarthy’s comments on stock trading bans for Congress, told reporters Tuesday: “I haven’t seen what McCarthy said, but I don’t own any stocks and I think that’s the right thing to do.”
Schumer’s office has not yet responded to Spectrum News’ request for comment.
So far, the White House has opted to stay out of the congressional stock exchange debate – although President Joe Biden would likely happily sign any such bill should it ever reach his desk.
“The president didn't trade individual stocks when he was a senator. That is how we approach things,” White House press secretary Jen Psaki said during a press briefing on Tuesday. “He also believes that everyone should be held to the highest standard, but he'll let members of the leadership in Congress and members of Congress determine what the goal should be.”