BUSINESS INSIDER, BRYAN METZGER
On the heels of the first House hearing on reforming the rules around stock ownership in Congress, a bipartisan group of lawmakers will pressure the Committee on House Administration to move forward on an outright ban on stock trading by members of Congress, a source with knowledge of the effort told Insider.
Democratic Reps. Jared Golden of Maine and Abigail Spanberger of Virginia will send a letter on Wednesday to the committee’s leadership asking for a formal markup of “strong legislation to ban members of Congress from directly owning or trading stocks while in office.”
The letter’s other 17 co-signers include two Republicans, Reps. Matt Gaetz of Florida and Brian Fitzpatrick of Pennsylvania, along with progressive and moderate Democrats. Golden led a letter in January including many of the same lawmakers who called for House leadership to “swiftly” bring a stock trading ban bill to the floor.
“Americans across the political spectrum support banning members of Congress from trading stocks,” reads the duo’s letter, which was addressed to Democratic Chair Zoe Lofgren of California and Republican Ranking Member Rodney Davis of Illinois.
“If we seek to write off their concerns with a toothless gimmick, they will see through it and continue to mistrust their elected officials,” they added.
Committee spokesperson Peter Whippy told Insider that “clearly, reforms are needed to strengthen confidence that public officials act in the public interest, not their private financial interests” but said that the committee was awaiting answers to additional questions posed to expert witnesses.
“At least 20 bills have been introduced that address some of these issues,” said Whippy. “Those responses will help inform the Committee’s next steps.”
Last week, the Democratic proponents of a stock trading ban held a joint press conference celebrating the hearing while making clear that they hope to move forward with a single piece of legislation in the near future.
And while the Administration Committee’s top Democrats frequently expressed skepticism about prohibiting members from individual stock dealings, the committee’s Republicans openly panned the idea as infringing on the “rights and freedoms of members.”
Here’s what the group of 19 lawmakers hope to see in an eventual bill.
Including spouses and dependent children
Insider previously reported that the question of whether to include spouses was a point of tension among proponents of a stock trading ban.
Since then, more members have warmed to the idea, and Insider first reported that the sponsors of the Ban Conflicted Trading Act will offer an amendment to their own bill that would widen the ban to include spouses and dependent children, along with increasing fines and tightening blind trust requirements.
Previously, their bill only applied to lawmakers and congressional staff.
“Married couples routinely manage their assets together, and a member of Congress could escape a stock trading ban by just giving tips to their spouse,” read the letter.
Some lawmakers — most notably House Speaker Nancy Pelosi — have spouses who trade prolifically.
“Similarly, such a ban should extend to members’ dependent children,” they added. “They will have plenty of time to play with stocks when they’re financially independent.”
Forcing stock divestment or use of a blind trust
With questions emerging about the viability of blind trusts, stock ban advocates point out that members may also simply sell off their stock holdings — and argue that members are obligated to do so if they don’t want to use a blind trust.
The group argues there should be “no exceptions” for stocks that members owned before serving in Congress. And they point out that if lawmakers aren’t also banned from holding — rather than simply trading — stocks, they would “still have an incentive to see those stocks growing in value.”
The Ban Conflicted Trading Act, lead by Democratic Rep. Raja Krishnamoorthi of Illinois in the House and Democratic Sen. Jeff Merkley of Oregon in the Senate, would allow members to hold onto individual stocks for the duration of their service in Congress.
The TRUST in Congress Act, cosponsored by Spanberger and Republican Rep. Chip Roy of Texas, would require lawmakers set up a blind trust or divest their stock holdings to prevent insider trading.
Republican Rep. Bob Gibbs of Ohio, who’s put forward his own bill in an attempt to head off a stock trading ban by increasing fines and tightening compliance windows, told Insider this month that he would “have to resign” if lawmakers were banned from stock trading because he “couldn’t afford” the fees to set up and maintain a blind trust.
But Spanberger pointed out that the potentially expensive mechanism, which is also the centerpiece of the Senate companion bill put forward by Democratic Sens. Jon Ossoff and Mark Kelly, isn’t mandated by their bill, and lawmakers can simply sell off their individual stock holdings.
“Don’t act as though the blind trust is the only option. It’s not,” quipped Spanberger when Insider spoke with her after the hearing. “The option exists for you to divest. Which frankly, is certainly the easiest, but maybe not someone’s preference.”
Heavier fines for violations
One key finding of Insider’s “Conflicted Congress” project, which found that dozens of members of Congress and nearly 200 senior congressional staffers have failed to promptly disclose their stock transactions under the Stop Trading on Congressional Knowledge (STOCK) Act, was that the law has largely become toothless.
Members and staff face a meager $200 fine the first time they violate the STOCK Act, and enforcement of that fine is inconsistent and potentially easy to evade. Further, there’s no public record of whether or not the fine was actually paid.
“The enforcement of the financial-disclosure requirements is virtually nonexistent,” a former investigative counsel in the House’s independent Office of Congressional Ethics told Insider in December.
“It’s not enough to just have rules on paper,” the lawmakers wrote in their letter. “They must be backed up by effective enforcement, including significant fines to deter and punish violations.”
Even if lawmakers are not successful in enacting an outright ban on stock trading, there are signs that higher fines could be in the offing.
Pelosi asked the committee in January to consider higher penalties, and Lofgren expressed openness to the idea at last week’s hearing.