Renewed Effort to Ban Stock Trading by Congress Members Gains Bipartisan Support

the staff of the Ridgewood blog

Washington DC, on Wednesday, a bipartisan group of senators reignited efforts to ban members of Congress from trading stocks. “Congress should not be here to make a buck,” said Sen. Josh Hawley, R-Mo., at a Capitol Hill press conference. “There is no reason why members of Congress ought to be profiting off of the information that only they get.”

This proposal marks the latest chapter in a years-long saga to pass regulations limiting lawmakers’ ability to buy and sell stocks. Notably, it’s the first such proposal to get formal consideration by a Senate committee—the Homeland Security & Governmental Affairs Committee, which will review it on July 24.

Ethics experts argue that legislators have access to privileged information, which can give them an unfair advantage in the stock market.

During the 2023 “Banking Kerfuffle”  at least 9 lawmakers from both parties sold banking stocks during the financial turmoil in March, disclosures that are already renewing calls for an outright ban of Congressional stock trading.

Notable traders include Rep. Josh Gottheimer (D-NJ), who sold Silicon Valley Bank stock after that bank had signaled deep trouble and one day before regulators seized the lender. There is also Rep. Jared Moskowitz (D-FL). An account linked to the freshman Congressman sold shares of Seacoast Banking Corporation (SBCF) just days before that stock tanked.

Gottheimer and Moskowitz denied any impropriety and the transactions appear to be perfectly allowed within current law. Nevertheless, advocates of a ban say these trades further undermine the public’s faith in Congress.

Key Provisions of the Proposal

The latest amendment to an existing stock trading ban bill includes several stringent measures:

• Immediate Ban: Members of Congress, the president, and the vice president would be immediately forbidden from purchasing stocks and other covered investments.
• Divestment Deadline: Lawmakers would have 90 days to sell their stocks.
• Family Inclusion: Beginning March 2027, the prohibition would extend to lawmakers’ spouses and dependent children. The president, vice president, and all members of Congress would also need to divest from covered investments by that date.
• Penalties: Violations of the divestment mandate would result in a fine equal to the greater of either the lawmaker’s monthly salary or 10% of the value of each covered asset in violation.

Bipartisan Support

Sens. Josh Hawley, Jon Ossoff, D-Ga., Jeff Merkley, D-Ore., and Gary Peters, D-Mich., negotiated and announced the new details of the proposal.

The push to bar members of Congress from trading stocks has been a challenging battle since at least the beginning of the Biden administration. Sen. Ossoff first introduced a ban in 2021 and set an example by putting his own stock portfolio in a blind trust.

Historical Context and Momentum

The effort gained significant momentum after disclosures revealed that several senators made very profitable trades in the early days of the COVID-19 pandemic. During this time, members of Congress were receiving classified briefings about the potential economic disaster the virus could cause. While the FBI launched insider trading investigations into three senators, the probes ended without any charges.

The campaign for a ban gained further traction ahead of the 2022 midterm elections, after former Democratic House Speaker Nancy Pelosi dropped her opposition to it. Pelosi’s husband, Paul Pelosi, is a multimillionaire investor known for making large and profitable stock trades. Previously, Speaker Pelosi had dismissed the trading ban as a misguided effort to prevent lawmakers from participating in the “free market economy.”

Conclusion

The renewed effort to ban stock trading by Congress members represents a significant step towards addressing ethical concerns about lawmakers’ financial activities. With bipartisan support and a detailed proposal in place, the initiative aims to enhance transparency and trust in the legislative process. As the bill moves forward, its potential impact on the financial conduct of public officials remains a topic of keen interest and debate.

 

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