Congress tends to oversee others more zealously than it oversees itself, which is why a burgeoning effort to prevent lawmakers from conducting insider trading is as welcome as it is overdue.
House Speaker Nancy Pelosi (D-Calif.) announced last week that she believes a floor vote is possible this month on legislation that would ban members of Congress and their family members from dealing in individual stocks while those lawmakers are in office. Plenty of representatives have already introduced similar bills, but Democratic leaders have set their sights on a compromise proposal likely to emerge soon from negotiations led by Rep. Zoe Lofgren (D-Calif.). Her recommendations are expected to include restrictions that would apply to senior officials in all three branches, limiting the financial activities they can engage in as well as enhancing the penalties they face for failing to disclose what they do buy and sell.
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A recent New York Times analysis found that at least 97 current members of Congress or their families bought or sold stock, bonds or other financial assets that overlapped with the lawmakers’ work. A continuing Insider investigation has discovered that 72 members have neglected to report trades as required by the 2012 Stock Act — which isn’t surprising, given the penalty for such lapses is usually a mere $200. Examples abound of behavior that at the least bears the appearance of corruption, from Sen. Richard Burr (R-N.C.) dumping more than $1 million worth of shares a week before the 2020 coronavirus market crash to Ms. Pelosi’s husband pouring tens of millions of dollars into high-profile technology 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 lobbied on an immigration proposal.
Those examples show why it’s important that any congressional stock-trading ban apply to spouses and children. The inclusion of senior congressional staff makes sense, too, because top aides can have access to the same market-moving secrets as their bosses, and, even though they’re not the ones voting on bills, they’re often the ones writing them.
The question of what officials should do with stocks they already own is trickier, but Ms. Lofgren’s proposal might point in the right direction: Lawmakers should either divest or start a blind trust — which could be made blinder still with a mandate that its manager gradually sell off the original assets.
While allowing officials to invest in diversified assets, such as mutual and exchange-traded funds, still leaves some room for malfeasance, a prohibition on trading individual stocks would eliminate the easiest and most egregious modes of exploiting one’s position. That’s a big change, and it’s likely the best Congress can do today. Tougher and more tailored strictures regarding disclosure would also help.
The bill’s success is not guaranteed. Opposition could form around certain parts of the plan Ms. Lofgren proposes; in particular, the expansion of a stock-trading ban to the judicial branch. That shouldn’t get in the way of passing the rest of the legislation. Good government is as important in the courts as in Congress, but the priority for legislators should be cleaning up their own act.
House Speaker Nancy Pelosi (D-Calif.) announced last week that she believes a floor vote is possible this month on legislation that would ban members of Congress and their family members from dealing in individual stocks while those lawmakers are in office. Plenty of representatives have already introduced similar bills, but Democratic leaders have set their sights on a compromise proposal likely to emerge soon from negotiations led by Rep. Zoe Lofgren (D-Calif.). Her recommendations are expected to include restrictions that would apply to senior officials in all three branches, limiting the financial activities they can engage in as well as enhancing the penalties they face for failing to disclose what they do buy and sell.
Sign up for a weekly roundup of thought-provoking ideas and debates
A recent New York Times analysis found that at least 97 current members of Congress or their families bought or sold stock, bonds or other financial assets that overlapped with the lawmakers’ work. A continuing Insider investigation has discovered that 72 members have neglected to report trades as required by the 2012 Stock Act — which isn’t surprising, given the penalty for such lapses is usually a mere $200. Examples abound of behavior that at the least bears the appearance of corruption, from Sen. Richard Burr (R-N.C.) dumping more than $1 million worth of shares a week before the 2020 coronavirus market crash to Ms. Pelosi’s husband pouring tens of millions of dollars into high-profile technology 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 lobbied on an immigration proposal.
Those examples show why it’s important that any congressional stock-trading ban apply to spouses and children. The inclusion of senior congressional staff makes sense, too, because top aides can have access to the same market-moving secrets as their bosses, and, even though they’re not the ones voting on bills, they’re often the ones writing them.
The question of what officials should do with stocks they already own is trickier, but Ms. Lofgren’s proposal might point in the right direction: Lawmakers should either divest or start a blind trust — which could be made blinder still with a mandate that its manager gradually sell off the original assets.
While allowing officials to invest in diversified assets, such as mutual and exchange-traded funds, still leaves some room for malfeasance, a prohibition on trading individual stocks would eliminate the easiest and most egregious modes of exploiting one’s position. That’s a big change, and it’s likely the best Congress can do today. Tougher and more tailored strictures regarding disclosure would also help.
The bill’s success is not guaranteed. Opposition could form around certain parts of the plan Ms. Lofgren proposes; in particular, the expansion of a stock-trading ban to the judicial branch. That shouldn’t get in the way of passing the rest of the legislation. Good government is as important in the courts as in Congress, but the priority for legislators should be cleaning up their own act.