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Should Members of Congress Be Banned from Trading Stocks?

February 15, 2022 by Danny Hastings


Last month, Senators Jon Ossoff, D-Ga., and Mark Kelly, D-Ariz., introduced the Ban Congressional Stock Trading Act, a reform bill which would require members of Congress to divest their stock market investments or face fines totaling the entire amount of their congressional salary.1

According to an August 2021 Gallup poll, approximately 56 percent of U.S. adults own stock.2 Stocks, also called equities, are bought in units called “shares” and represent partial ownership of a company.3 Investors who own shares hope for a return on their investment; if the company they invest in succeeds, their stock price rises and increases in worth. Investors may receive dividend payments, which are earnings that the company issues to its stockholders.4 At least 220 members of Congress—more than 40 percent of senators and representatives—own stock, which has raised concerns about corruption and conflicts of interest.

The Ban Congressional Stock Trading Act would “require all members of Congress, their spouses, and dependent children to place their stock portfolios into a blind trust.”5 A blind trust is a method of divesting assets in which stockholders pass their investments on to an independent third party which then makes financial decisions on their behalf, insulating the stockholders from day-to-day decision-making and trading.

A decade ago, Congress passed and President Barack Obama signed into law the Stop Trading on Congressional Knowledge (STOCK) Act, which aimed to prevent insider trading. Due to the nature of their job, members of Congress often have access to sensitive information from closed-door meetings and briefings about markets, upcoming regulations, and a multitude of government issues. They’re also the ones in charge of creating federal policy. The STOCK Act prohibits members of Congress from buying or selling stock on the basis of any privileged information they receive. It also requires them to publicly disclose their trades on searchable, online databases within 45 days.6

Although the STOCK Act was an example of Congress taking the initiative to reform itself, the results have not been as effective as hoped. The average fine for failing to report trades on time is a mere $200, and according to an investigative series by Business Insider, 55 members of Congress—Democrats and Republicans alike—were late in disclosing their stock trades.7 Some were late by only a few days; others were late by months.8

READ MORE: “These Are the 50 Top Stocks that Members of Congress Own”

In January 2020, before the general public was aware of the severity of the COVID-19 pandemic, Senator Kelly Loeffler, R-Ga., sold millions of dollars of stock in companies that were poised to be hit hard by the pandemic, right before they dropped in value.9 She then purchased stock “in a company that makes COVID-19 protective garments.”10 Around the same time, financial decisions by Senators David Perdue, R-Ga., Richard Burr, R-N.C., and Dianne Feinstein, D-Calif., also received scrutiny for what looked like insider trading. They have all denied any wrongdoing, and investigations by the U.S. Department of Justice have since concluded without any recommended charges.11

While there has been talk on Capitol Hill about doing more to rein in the buying and selling of stocks by senators and representatives, leadership in the Democrat-controlled House of Representatives and Senate initially pushed back against the idea. “We are a free-market economy,” said Speaker of the House Nancy Pelosi, D-Calif., who owns and trades stock along with members of her immediate family, adding that members of Congress “should be able to participate in this.”12 Just last week, Senate Majority Leader Chuck Schumer, D-N.Y., signaled his support for discussing details of the proposal, warming up to it after facing bipartisan pressure from his fellow lawmakers.13

But it’s not just bipartisan support among those in Congress. According to the conservative-leaning Convention of States Action, 76 percent of Americans agree that members of Congress have an “unfair advantage” in the stock market and should not be allowed to trade stocks while in office.14 Those who support the Ban Congressional Stock Trading Act believe that elected officials need to rebuild trust with the American people, increase transparency, and show that they will put the best interests of their constituents before any personal profit.

Those who oppose this bill believe that members of Congress should be free to participate in the stock market like anyone else, regardless of their position or title. They note that the STOCK Act is already on the books and should be better enforced to prevent even the appearance of corruption.

Discussion Questions

  1. Do you believe elected officials should be held to higher standards and face more scrutiny than those who don’t hold public office? If so, in what ways?
  2. Should members of Congress be expected to give up some of their freedoms in order to serve in their positions?
  3. Do you have trust in your elected officials to put the interests of the people before their own? Why or why not?
  4. Are there any other ethics reforms that you think could build trust and increase transparency in Congress?

As always, we encourage you to join the discussion with your comments or questions below!

 

Sources

Featured Image Credit: POLITICO illustration/Getty and iStock
[1] Website of Senator Jon Ossoff: https://www.ossoff.senate.gov/press-releases/sens-ossoff-kelly-introduce-bill-banning-stock-trading-by-members-of-congress/
[2] Gallup: https://news.gallup.com/poll/266807/percentage-americans-owns-stock.aspx
[3] U.S. Securities and Exchange Commission: https://www.investor.gov/introduction-investing/investing-basics/investment-products/stocks
[4] Ibid.
[5] Website of Senator Jon Ossoff: https://www.ossoff.senate.gov/press-releases/sens-ossoff-kelly-introduce-bill-banning-stock-trading-by-members-of-congress/
[6] New York Times: https://www.nytimes.com/2022/01/24/briefing/congress-stock-investments-profits.html
[7] Business Insider: https://www.businessinsider.com/congress-stock-act-violations-senate-house-trading-2021-9#sen-rand-paul-a-republican-from-kentucky-4
[8] Ibid.
[9]  Vox: https://www.vox.com/policy-and-politics/2020/4/1/21202900/kelly-loeffler-stock-sales-coronavirus-pandemic
[10] Atlanta Journal-Constitution: https://www.ajc.com/news/state–regional-govt–politics/loeffler-reports-more-stock-sales-amid-insider-trading-allegations/YFPDT3pChO873nuzNKa44K/
[11] Washington Post: https://www.washingtonpost.com/local/legal-issues/justice-dept-ends-coronavirus-insider-trading-investigations-into-us-sens-loeffler-inhofe-and-feinstein/2020/05/26/5e59b9a4-9f8b-11ea-b5c9-570a91917d8d_story.html
[12] New York Times: https://www.nytimes.com/2022/01/24/briefing/congress-stock-investments-profits.html
[13] Business Insider: https://www.businessinsider.com/senate-schumer-vote-banning-lawmakers-trading-stocks-ossoff-2022-2
[14] The Hill: https://thehill.com/homenews/news/588630-76-percent-of-voters-support-banning-lawmakers-from-trading-stocks-poll?rl=1

 

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