Reviews | Congress could finally ban members from trading individual stocks
A recent New York Times analysis found that at least 97 current members of Congress or their families bought or sold stocks, bonds or other financial assets that overlapped with the work of lawmakers. An ongoing Insider investigation found that 72 members failed to report trades as required by the Shares Act of 2012 – not surprising given that the penalty for such failures is typically $200 only. Examples abound of behavior that bears at least the appearance of corruption, from Sen. Richard Burr (RN.C.) dumping more than $1 million in stocks a week before the 2020 coronavirus market crash to husband of Ms. Pelosi pouring tens of millions of dollars into top tech companies regularly scrutinized by the body his wife leads; to the four children of Sen. Bill Hagerty (R-Tenn.) all becoming minority owners of a Major League Soccer team even as MLS pushed for an immigration proposal.
These examples show why it is important that any ban on Congressional stock trading apply to spouses and children. The inclusion of senior congressional executives also makes sense, because top aides can have access to the same market-moving secrets as their bosses, and, even if they aren’t the ones voting on bills, this they are often the ones who write them. .
The question of what officials should do with the shares they already own is trickier, but Ms Lofgren’s proposal could go in the right direction: Lawmakers should either divest or create a blind trust – which could be made even more blindsided with a mandate that its manager gradually sell off the original assets.
While allowing officials to invest in diversified assets, such as mutual funds and exchange-traded funds, still leaves some room for malfeasance, a ban on trading individual stocks would eliminate the simplest modes and more blatant exploitation of his position. It’s a big change, and it’s probably the best Congress can do today. Tighter and more tailored restrictions on disclosure would also help.
The success of the bill is not guaranteed. Opposition could form around certain parts of the plan proposed by Ms. Lofgren; in particular, the extension of a stock trading ban to the judiciary. This should not prevent the passage of the rest of the legislation. Good government is as important in the courts as it is in Congress, but lawmakers’ priority should be cleaning up their own law.