BUSINESS INSIDER, BRYAN METZGER
In the wake of House Speaker Nancy Pelosi’s rejection of a ban on lawmakers and their spouses from trading stocks, momentum is building for proposals to ban the practice.
“We are a free-market economy. They should be able to participate in that,” Pelosi said when asked by Insider about the idea at a December press conference.
With increased scrutiny of Pelosi’s husband’s frequent stock trades, a spate of recent pandemic-related insider trading scandals, and Insider’s own “Conflicted Congress” investigation — which found that 55 members of Congress have violated the anti-insider trading STOCK Act — several proposals have arisen to ban the practice.
On Tuesday, Punchbowl News reported that House Minority Leader Kevin McCarthy was interested in a ban.
Both the Ban Conflicted Trading Act and the TRUST in Congress Act have bipartisan support, and would prevent members of Congress from trading stocks while in office either by forcing them to hold existing investments for the duration of their terms or by putting such assets into a blind trust.
Members could still hold certain investments like index and mutual funds, participating in the free market that way.
And Sen. Jon Ossoff — who’s placed his own assets into a blind trust and defeated former Sen. David Perdue last year amid the Georgia Republican’s own stock-trading scandal — is reportedly seeking a Republican co-sponsor for a bill that’s broadly similar to the TRUST in Congress Act, serving as a potential Senate companion to the blind trust-focused bill.
And all of those proposals follow Sen. Elizabeth Warren’s Anti-Corruption and Public Integrity Act, a broader suite of ethics reforms that would’ve included a stock-trading ban, which she first introduced in 2018 and plans to reintroduce this year, her office confirmed to Insider.
Meanwhile, polling from across the political spectrum shows the idea is popular among the American public, and members of Congress are increasingly pushing back on Pelosi’s position.
‘I did not have a positive reaction to those comments’
Following Pelosi’s rejection of a hypothetical stock-trading ban, Rep. Abigail Spanberger of Virginia was one of the first Democrats to contradict her.
“I did not have a positive reaction to those comments,” Spanberger told Insider in a phone interview, pointing out that members of Congress have access to privileged information otherwise unavailable to the public.
Her bill, the TRUST in Congress Act, boasts 10 Democratic cosponsors — ranging from moderates like herself to progressives like Rep. Mondaire Jones of New York — and 5 Republican cosponsors, including House Freedom Caucus Chair Rep. Scott Perry of Pennsylvania and Rep. Chip Roy of Texas.
The bill was first introduced following a slew of pandemic-related insider trading scandals in 2020, emerging from a rare bipartisan friendship between Spanberger and Roy based on their shared connection as alumni of the University of Virginia.
“He and I were talking and we were both disgusted,” said Spanberger. “I don’t know who’s selling stocks at the beginning of a global pandemic in the first place, let alone doing so with information.”
The TRUST in Congress Act, which has been endorsed by a wide swath of good-government advocacy groups, would force members of Congress — as well as their spouses and dependent children — to place financial investments like stocks into a so-called blind trust in which an independent financial expert directs investments without the owner’s knowledge.
Roy pointed to Paul Pelosi’s stock-trading as an example. “Honestly, everything she owns ought to be in an index, broadly traded fund, or completely and fully blind. I mean, when I say blind, I mean, legally, it is in a box and she gets the reports back,” he said.
Pelosi’s office has noted that the Speaker herself does not own any stock. However, spouses are included in the anti-insider trading STOCK Act because they frequently have access to privileged information.
Some critics of the blind trust idea contend that it’s not strict enough. Democratic Missouri Senate candidate and anti-monopoly expert Lucas Kunce called the idea a “dog and pony show solution” in an interview with Insider last month. Kunce pointed to how Sen. Joe Manchin’s use of a blind trust likely hasn’t prevented the West Virginia lawmaker from potentially making decisions that further his own financial investment in the coal industry.
And Sen. Warren’s previous proposal would ban members outright from holding any stock at all while in office.
But Spanberger’s focus is also on the perception of self-dealing by members, which she sees as part of a broader crisis in the public’s trust in institutions.
“When I first started campaigning, a lot of people, be it on the campaign finance side of things, just expressed so much doubt in their legislators,” she said. “Which I found to be dispiriting, disappointing, and frankly…pretty dangerous to democracy.”
‘Many spouses are in the financial services industry’
The Ban Conflicted Trading Act — supported by a smattering of progressive “Squad” members along with Republican Rep. Matt Gaetz of Florida — is broadly similar to Roy and Spanberger’s proposal. Both require members of Congress to either use a blind trust or simply agree not to trade stocks for the during of their terms.
“I understand that some traders, all they do is they follow the disclosures of members of Congress,” said Rep. Raja Krishnamoorthi, the lead sponsor of the bill in the House, told Insider, referring to a newly popular practice among social media users, especially on TikTok. “So they mimic their trades, and apparently some of them have become very wealthy doing just that.”
The BCTA also applies to senior congressional staff — dozens of whom have also violated the STOCK Act — while the TRUST in Congress Act does not. “You know, many times senior congressional staff on committees have access to even more information than certain members of Congress,” said Krishnamoorthi.
But the other bill excludes staffers.
“At the end of the day, remember it is Congress who votes on this crap,” said Roy, explaining the focus on lawmakers. Both he and Spanberger said they would be amenable to apply the same requirements to staffers as well, but wanted to keep the focus narrow. “I could fire my chief of staff tomorrow if she did something unethical, but it is not the same for the people who hired me with their vote,” said Spanberger.
And Krishnamoorthi’s bill does not include spouses and dependent children, which some have identified as a “loophole” in the proposal’s goal of preventing trading on privileged information. “We also have to realize that many spouses are in the
financial services industry,” he remarked, clarifying that he’s not opposed to the idea.
But when asked about her own bill’s inclusion of family members, Spanberger didn’t mince words.
“It’s a bit of a farce to say, oh, I’m not conflicted, but you know, ignore the fact that my husband just bought a million dollars in Clorox stock at the beginning of a global pandemic,” she quipped. “It’s almost an insult to the American people to pretend like excluding a spouse is an appropriate thing.”
The fate of the bills remains unclear
Despite sweeping public approval of the idea, the largest hurdles to any bill to stop stock-trading may originate primarily from members themselves. Even those who are leading the charge have encountered difficulties adapting.
According to Insider’s exclusive, searchable database of members’ personal assets, Roy still owns up to $15,000 in Kinder Morgan, an oil and gas pipeline operator. But in 2020, he sent a letter to the company after they contaminated the water supply of two of his constituents. “I was trying to help some of my constituents kind of push back on Kinder. I’m pro-pipeline, but I want pipelines to be safe and put in the right place,” he said.
At that point, he consulted congressional ethics officials about whether he should sell that stock. The officials told Roy that selling the stock before criticizing the company, and potentially driving down its stock value, could appear corrupt.
The Texas Republican said he planned to move his assets over to broadly traded funds and index funds within the year. “Another reason why the TRUST in Congress Act or moving in that direction would be good is that this one was, for me, tough,” he said.
Spanberger noted that Rep. Dean Phillips of Minnesota was motivated to create a blind trust after signing on to the TRUST in Congress Act as a Democratic cosponsor.
And despite Pelosi’s opposition, Roy expressed hope that the proposal would continue to garner momentum over the course of the next year, given the looming election season.
“I wish and hope that Republicans will embrace some of those reforms for the health and the good of the institution and the republic, irrespective of the politics of taking the House back,” he said. “We’re heading into election season, where people have to start promising what they’re going to do in 2023. Now’s the time to sort of do that.”