Members of Congress have access to non-public information and the ability to influence legislation, giving them an advantage in the stock market over the rest of us. It’s no wonder Senators Richard Burr and Kelly Loeffler’s multiple stock trades in early 2020, including of companies likely to be impacted by the escalating coronavirus pandemic, inspired so much outrage. Recent reporting that Burr spoke with his brother in law in February 2020, who then called his stock broker one minute later and dumped tens of thousands of dollars worth of stock, has renewed anger and sparked additional calls for reform and accountability. It’s disturbing to think that any elected official’s focus could be on their own profits, rather than their constituents’ needs.
So far, it’s unclear whether members of Congress share the same concern. For example, just 22 members of the House and four senators are currently sponsoring or co-sponsoring the Ban Conflicted Trading Act, which would ban members of Congress from trading stocks while in office.
Perhaps that’s because trading stocks while in Congress seems to be pretty profitable—one analysis of trades between 2004 and 2010 found that politicians beat the market by 20 percent. Getting elected to Congress seems like a pretty decent investment strategy!
Congress has tried to address this problem in the past. The STOCK Act was passed in 2012 in order to combat insider trading by members of Congress and congressional staffers, and it requires that members disclose trades and other transactions of stocks, bonds and similar securities within 45 days. But in recent months, literally dozens of members of Congress from both parties have made headlines with delayed filings—ranging from Senator Cynthia Lummis being a few days late in reporting one investment, to Rep. Diana Harshbarger reporting more than 700 stock trades totaling up to $10.9 million weeks or even months late.
Clearly, the current rules are not enough. Not only can members of Congress still actively trade stocks, which raises conflict of interest issues—many of them are not even consistently complying with very basic transparency laws and reporting their transactions in a timely manner. In order to avoid questions about stock trading and potential conflicts, disclosure is not enough: members of Congress should not be buying and trading stocks while in office at all.
Congress isn’t the only branch of government or institution where stock trading has come under scrutiny lately, although Congress has seemingly been quicker to respond to those scandals than their own. A Wall Street Journal article exposing dozens of federal judges for trading stocks of litigants in cases before them, which is a clear violation of judicial ethics rules, and is widespread enough to make it clear that reform is needed. Congress has responded by holding a hearing on judicial ethics, and appears poised to consider more systemic reforms.
Just recently, it was reported that two Federal Reserve regional bank heads actively traded stocks and securities in 2020, including real estate securities, which are substantially affected by Federal Reserve activity. The Fed responded by tightening rules for top officials, including a ban on owning individual stocks and bonds and stronger restrictions on other trading activities. Senator Sherrod Brown has already introduced the Ban Conflicted Trading at the Fed Act, which would make many of these changes permanent and introduce financial penalties for violations.
Change is possible. Supporting the Ban Conflicted Trading Act should be an obvious choice for every member of Congress who cares about ethics and integrity more than their own profits. Americans shouldn’t have to be concerned about members of Congress being more focused on their stock portfolio than on the country’s problems and their constituents’ best interests. Unfortunately, until this bill is passed, Americans will have to wonder: are our representatives making decisions in our best interest or to benefit their own bottom lines?