WASHINGTON – As a wild week on Wall Street served as a reminder of how quickly money can be gained or lost in a volatile market, a growing number of lawmakers across the political spectrum are pushing for new restrictions on stock trading by members of Congress and their families.
Momentum to crack down on playing the market while in Congress has been building since the early days of the COVID-19 pandemic, when several senators unloaded stocks after private briefings on the severity of the virus that caused a stock market crash soon after. The effort has picked up steam in recent weeks, after an investigation published by the news website Insider in December found more than 50 lawmakers and scores of their top aides have violated a law that requires them to promptly report stock trades.
The STOCK Act of 2012 also prohibits insider trading by lawmakers based on “material, nonpublic information” that could affect the price of a stock. But government watchdog groups say the charge is hard to prove in court and existing law doesn’t do enough to hold members of Congress accountable.
“It’s a huge problem,” said Delaney Marsco, senior legal counsel for ethics at the nonpartisan Campaign Legal Center. “Permitting members of Congress to trade individual stocks while they essentially pick winners and losers in the market every day through legislation and all the other work they do is very damaging to the public’s trust.”
The law requires members of the House and Senate to report trades of stocks or other securities within 45 days, but missing that deadline – as at least 54 lawmakers did over the past two years, Insider reported – results in fines starting at just $200. No public records exist to track who has violated the law and whether they have paid a fine, the investigation found.
Rep. Kim Schrier, a Democrat whose district stretches from Lake Chelan to the Tacoma suburbs, missed that deadline when she reported in November her husband had bought between $500,000 and $1 million in Apple stock in July. When Insider asked about the purchase, Schrier spokeswoman Libby Carlson said in a statement the congresswoman was “sincerely sorry” for the oversight and the couple would set up a blind trust to manage their investments.
According to a tracker set up by Insider, the only other STOCK Act violation among the Washington delegation was a late report by an aide to Rep. Dan Newhouse, R-Sunnyside. Among Idaho’s four members of Congress, Insider found only a late report by an aide to GOP Sen. Jim Risch.
Northwest Washington Democratic Rep. Suzan DelBene drew attention in October when Insider reported her husband, former Microsoft executive Kurt DelBene, had sold between $5 million and $25 million in Microsoft stock when he retired from the tech giant. Rep. DelBene reported the sale within 45 days, as required by the law when a trade is made by a spouse or broker, while a 30-day deadline applies for trades lawmakers make themselves.
As loosely enforced as the STOCK Act’s reporting requirement is, Marsco said enforcing its prohibition on insider trading is an even bigger challenge.
Proving that a lawmaker acted on “nonpublic” information is difficult, Marsco said, because even if a stock trade isn’t based on classified intelligence, members of Congress employ teams of aides tasked with keeping them informed – a resource few Americans have.
After Sen. Richard Burr sold most of his stocks following a private briefing on the impending pandemic in early 2020, the North Carolina Republican – who had access to classified information as chairman of the Senate Intelligence Committee – said he had “relied solely on public news reports” to inform his decision to sell.
The Justice Department closed its investigation into Burr on former President Donald Trump’s final day in office, but as of October the Securities and Exchange Commission was still investigating the senator.
The Justice Department has also closed investigations into trades made in the early days of the pandemic by Democratic Sen. Dianne Feinstein of California and GOP Sen. Jim Inhofe of Oklahoma, as well as former Sens. Kelly Loeffler and David Perdue, two Georgia Republicans who lost their Senate seats in a January 2021 runoff election.
Zack Smith, a legal fellow at the conservative Heritage Foundation, said that even if a court doesn’t find lawmakers guilty of insider trading, the perception that they are getting away with it can do real harm to the legitimacy of Congress.
“Any time it looks like a member of Congress is trading on material, nonpublic information,” he said, “it undermines confidence in the rule of law, confidence that we all can have in our institutions of government.”
Former Rep. Chris Collins, a New York Republican, was sentenced to over two years in prison after pleading guilty to insider trading in 2020, but Trump pardoned him later that year after Collins – the first member of Congress to endorse Trump in 2016 – served just two months of his sentence.
Former Rep. Brian Baird, a Democrat who represented southwest Washington in the House from 1999 to 2011, spent years championing the STOCK Act – the acronym stands for “Stop Trading on Congressional Knowledge” – only to meet bipartisan resistance from other lawmakers, many of whom trade stocks.
A review of financial disclosures by the Center for Responsive Politics in 2020 found a majority of lawmakers are millionaires. An analysis by Unusual Whales, an independent tracker of congressional stock trading, found that of the 535 total members of Congress, 105 bought and sold a total of $290 million in equities in 2021.
Congress passed the STOCK Act in 2012, after Baird had left the House, only after a “60 Minutes” exposé revealed lawmakers had capitalized on inside information to avoid the worst of the 2007-2008 financial crisis. Congress quietly watered down the law a year later, but Marsco said despite its imperfections, the STOCK Act’s reporting requirements laid an important foundation for transparency.
Now, rank-and-file lawmakers are pushing leaders of both parties to take those rules a step further, with some even calling for an outright ban on members of Congress owning individual stocks. Several proposals have emerged, drawing support from moderates to firebrands on both the left and right.
A bill led by Sen. Jeff Merkley, D-Ore., would force lawmakers and senior congressional staff to either stop trading stocks or put them into a blind trust, as Schrier has pledged to do. An identical bill in the House has the support of ideologically opposite Reps. Alexandria Ocasio Cortez, D-N.Y., and Matt Gaetz, R-Fla.
Another bill led by Reps. Abigail Spanberger, D-Va., and Chip Roy, R-Tex. – also backed by DelBene and fellow Washington Democratic Rep. Derek Kilmer – would apply the blind trust requirement to lawmakers’ spouses and dependent children.
A bill introduced by Sens. Jon Ossoff of Georgia and Mark Kelly of Arizona, two Democrats, would increase the fine for violating reporting requirements to equal a member’s full monthly salary. Sen. Josh Hawley, R-Mo., has introduced a similar bill with somewhat more lenient enforcement rules.
In response to questions from The Spokesman-Review, most lawmakers representing Washington and Idaho said they support at least some of the proposals.
“We were sent to the People’s House to improve the lives of those we represent, not to generate personal wealth or bolster our stock portfolio,” Rep. Cathy McMorris Rodgers, R-Spokane, said in a statement. “The American people have made it clear they believe the current law needs to be revisited, and I agree. It’s time for Congress to work on a bipartisan path towards making this important reform.”
Sen. Patty Murray, D-Wash., announced on Twitter on Jan. 18 she would cosponsor Ossoff’s bill, calling it “a common sense step to provide much needed transparency.”
In a statement, Schrier said she is already setting up a blind trust for her own investments “to ensure the people I represent have no question that my priorities are for them,” and supports requiring other lawmakers to do the same.
Three members of Idaho’s all-GOP delegation, Sen. Mike Crapo and Reps. Russ Fulcher and Mike Simpson, signaled they are open to the proposed changes, with Simpson saying in a statement he will “support any efforts that will reinforce the integrity of all lawmakers in Congress.”
“Transparency is a big priority for Rep. Fulcher and always has been,” spokeswoman Alexah Rogge said in a statement. “He is looking through the bill specifics right now before endorsing one proposal over another.”
Crapo, the top Republican on the Senate Finance Committee, “will carefully review all other proposals and continue to support measures that can help ensure Americans trust members of Congress are working in the public interest, not their own,” spokeswoman Melanie Lawhorn said in a statement.
Sen. Jim Risch didn’t go so far. In a statement, spokeswoman Marty Cozza said Risch “supports the enforcement of existing laws that criminalize insider trading,” noting he is not a cosponsor of any of the proposals.
Kilmer, a Democrat from Gig Harbor, said in a statement he supports “strong ethics rules to ensure the public’s trust in their elected representatives.”
“That’s why I support the TRUST in Congress Act to bar lawmakers and their families from trading stocks,” he said. “Americans deserve to have confidence that their elected representatives are not using their positions for personal financial gain and are instead focused on championing the interests of the people they represent.”
Rep. Pramila Jayapal, D-Seattle, said in a statement she is “staunchly opposed to Members of Congress owning and trading stocks” and signaled support for multiple proposals to ban the practice.
Bellevue Democratic Rep. Adam Smith also supports barring lawmakers from trading or owning individual stocks, spokesman Caleb Randall-Bodman said in a statement.
Rep. Marilyn Strickland, D-Tacoma, said in a statement she supports “prohibiting Members of Congress and their spouses from actively trading stocks” and was reviewing the various proposals “to ensure they meet this criteria.”
A spokeswoman for Sen. Maria Cantwell, Ansley Lacitis, said the Washington Democrat was reviewing the proposals, adding in a statement, “This is an important policy area and we need to have strong rules in place to prevent conflicts of interest.”
Spokespeople for Newhouse, Rep. Jaime Herrera Beutler, R-Battle Ground, and Rep. Rick Larsen, D-Everett, did not respond to questions.
The outlook for the legislation is unclear. While barring legislators from trading stocks has strong support among voters – recent surveys have found between two-thirds and three-quarters of Americans like the idea – Democratic leaders control which bills come to the floor for a vote.
House Speaker Nancy Pelosi, D-Calif., a multimillionaire whose husband is a prolific stock trader, rejected the idea in December. But soon after Republicans seized on her stance as an election-year vulnerability, Pelosi said Jan. 20 she was open to stricter rules.
House Minority Leader Kevin McCarthy, R-Calif., has said he’s considering a ban on all stock trades by lawmakers if Republicans retake the House in the November election.
On Monday, Democratic Rep. Jared Golden of Maine led a bipartisan group of 27 House lawmakers in a letter calling on Pelosi and McCarthy to hold a vote on legislation to ban congressional stock trading. If that happens, legislators may find it hard to publicly oppose such a popular measure.