A Fraudulent Ethical Debate Over Congressional Stock Trading

Representative Elaine Luria, a Democrat from Virginia, speaks to members of the press outside the Capitol, Oct. 21, 2021.


Sarah Silbiger/Bloomberg News

For a lesson in the dangers of exposing Washington’s frauds, see the case of Representative Elaine Luria. This week, the Virginia Democrat has taken a toll on the Beltway’s moral smoothing over lawmakers’ stock trading and is taking it from all sides.

As for heresies, Mrs. Luria’s was gentle and she spoke common sense. Asked by Punchbowl News about proposals to ban lawmakers from trading stocks, the Navy veteran replied that “the whole concept is bullish…”. She noted that Congress is already bound by disclosure rules (she could also have mentioned insider trading laws) and that there is no evidence that members are “inherently evil or corrupt.” It is thus “very firmly opposed to any legislation of this kind”.

But there’s no fury like that of an unmasked snake oil salesman, and Ms Luria’s analysis has sparked bipartisan outrage. The media got to work on stories about his “millions of dollars” in stock. Progressive activists rained down anti-capitalist contempt on Twitter.

A potential Republican contender, State Sen. Jen Kiggans, has criticized Ms. Luria for putting her “financial interests” first and has joined the growing, unthinking wing of the GOP that supports trade restrictions.

In a saner world, more members would report the fraud that Washington is currently talking about as fraud. Midterm campaigns have a way of inspiring debates about ethics, because both sides know the public despises the Washington swamp, and both think it’s easy to promise “reform.” Anti-trading bills race through Congress, each more complex than the last, as Speaker Nancy Pelosi and Minority Leader Kevin McCarthy vie for the fantastic heights. Never mind that no previous “reform” has ever restored public confidence.

Yet the current discussion is dumber than most ethical fights, because it carries the risk of long-term damage to Congress. For starters, the only reason Congress is embarrassed about Congress’s underhanded and hidden personal dealings is because there’s nothing underhanded or hidden about it. Under a 2012 law, members must report stock trades within 30 days (or in some cases 45 days). This reporting requirement could benefit from better enforcement, as penalties for violations are low. Yet it has provided Joe Public with the tool it needs to make judgments about a representative’s financial ethics and to impose a remedy if necessary via an election.

The only thing that has changed is that supporters are increasingly weaponizing this transparency for political gain, just as they have weaponized other disclosures, by hurling baseless accusations of insider trading at each other. The 2020 allegations against people like former Senator Kelly Loeffler and Senator Jim Inhofe were particularly absurd, given that their assets were managed by outside financial advisers, who sold them – along with all of humanity – while a pandemic was unfolding. Congress unleashed a fury, even though there is no evidence that members suddenly, en masse, disappeared Ivan Boesky.

Nor is there any real evidence that Congress is getting “insider information.” The idea that savvy members are acting on super hot advice is at odds with a Congress that otherwise seems to be the last to know anything. It should be noted that the only member convicted in recent years of securities fraud – New York Rep. Chris Collins – got his tip because of his seat on the board of a pharmaceutical company, not a job in Congress. Are there any members of the government who, as part of their official duties, obtain highly privileged information about drug trials, corporate investigations, federal lease announcements, land sales, which may all change the markets? You bet. They are called federal bureaucrats, many of whom have no real disclosure obligations.

The real risk is that a ban on stock trading, or even its severe reduction, would deprive Congress of people who can improve Congress. The Founding Fathers had a vision of the “citizen legislator” – an average American who would give government a few years of his wisdom and experience and then come back to life. Think of former senator Tom Coburn, the obstetrician who spent time in the House and Senate educating his colleagues on health care policy, then retired.

Today’s Congress is full of trust babies, wealthy lawyers and celebrities. Some conservatives are having fun calling Nancy Pelosi a multi-millionaire as they swipe trade and inventory restrictions. But a new ban would not make the Pelosis of Congress any less wealthy. All it will do is make it harder for Americans with significant experience but modest means — or a younger age — to consider a race. The prospect of political life is already daunting. Add the penalty of having to throw away the prospects of a nest egg, a children’s college education, or a comfortable retirement. It would also serve to banish quality congressional staffers, who are already fleeing Capitol Hill for more lucrative jobs, creating a brain drain. Subjecting Congress to more restrictive rules than in any other profession is not a way to attract talent.

All of this is beside the more fundamental point that the Conservatives are supposed to promote free markets and financial success. It is possible to embrace both while promising zero tolerance for any members who break existing rules and laws. It’s certainly more productive than taking cheap shots at truth-telling Democrats in power.

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