NEW YORK TIMES, BLAKE HOUNSHELL, KATE KELLY

Representative Abigail Spanberger of Virginia, one of the more vulnerable Democrats in the House this year, blasted her party’s leaders on Friday for declining to allow a vote on a bill to bar lawmakers in Congress or their family members from trading individual stocks.

Representative Zoe Lofgren of California released a more expansive version of Spanberger’s proposal, known as the Combating Financial Conflicts of Interest in Government Act, on Tuesday, but it quickly generated accusations of bad faith against House leaders. No version of the legislation will receive a floor vote before the midterm elections in either the House or the Senate, to the chagrin of Spanberger and other champions of the proposed ban.

Spanberger, a longtime critic of Speaker Nancy Pelosi, added in her statement that the delay was a “failure of House leadership.”

On Thursday, two outside groups from the left and right, the Project on Government Oversight and the National Taxpayers Union, criticized the bill Democrats released this week as “crafted largely in secret” and said it contained a “significant loophole” that would allow lawmakers to evade meaningful oversight. While Democrats are sponsoring this bill, some Republican lawmakers also support a ban on stock trades, while others have raised concerns about a Senate bill to end them.

Norm Eisen, a former ethics lawyer in the Obama White House, called Lofgren’s new bill an “excellent start,” but said he found Congress’s failure to act thus far “befuddling” and that “it spoke to a level of disconnectedness to the American people.”

A lack of trust

Ethics watchdogs and academic experts have long warned that stock trading by public servants has a corrosive effect on Americans’ confidence in their government. Seventy-six percent of Americans said they disapproved of Congress in the latest Gallup poll on the subject, typical of past findings. And in 2018, researchers at Stanford University found that one key reason Americans had a dim view of federal lawmakers was a perception that they were corrupt and beholden to the wealthy.

Not for nothing did Donald Trump run against the “swamp” in 2016; he understood that Americans’ distaste for Washington was a fact of political life, regardless of what he did about it once in office. (Side point: It’s a historical myth that Washington is uniquely swampy, hydrologically speaking.)

And since Trump, many political outsiders have run on his playbook of stoking voters’ cynicism. This year alone, some of the top Republican candidates are running against a Washington they present as a wretched hive of scum and villainy: J.D. Vance in Ohio, Blake Masters in Arizona and Don Bolduc in New Hampshire, to name just three.

Allegations of insider trading may also have played a role in altering the balance of the Senate in recent years. Two Republican senators, Richard Burr of North Carolina and Kelly Loeffler of Georgia, were accused of profiteering from the coronavirus pandemic. (The Justice Department investigated Burr but did not file charges.)

Loeffler lost her seat to a Democrat, Raphael Warnock, in 2020. And Burr, a moderate, is retiring. His old seat is one of Democrats’ few pickup opportunities this year.

The New York Times’s investigative reporter Kate Kelly, along with our colleagues Adam Playford and Alicia Parlapiano, recently examined thousands of publicly reported trades by 97 members of Congress or their immediate family members.

Drawing on data from a three-year period, they discovered more than 3,700 trades that posed what they described as “potential conflicts between their public responsibilities and private finances.” Read their investigation here.

To get her insights, I asked Kelly four questions about the flap over stock trading. Here is our conversation, edited lightly for length and clarity:

There’s already a law on the books, the 2012 STOCK Act, that bars insider trading by members of Congress. So why do some lawmakers think it needs an update?

The STOCK Act reaffirmed that lawmakers aren’t allowed to insider-trade — nobody in the U.S. is — and it mandated that they disclose periodic transactions they and their immediate family made in stocks, bonds and other financial assets that were valued at $1,000 or more within 45 days. But the law did nothing to dissuade those lawmakers and family members from trading assets that could be influenced by their work in Congress.

Let’s say you’re investigating a catastrophic manufacturing glitch in an American-made car and you sell shares of the auto company involved a couple of days before your committee issues a negative report that makes the stock plunge. That’s inappropriate and should be against the law, according to many lawmakers. There are other, grayer areas, and insider-trading cases against members are pretty rare. But the mere fact that Americans see conflicts of interest in congressional trading is problem enough, is the feeling.

From talking to lawmakers about this topic, I get the sense that many resent the implication that they’re using their positions to make money on the side. How much of what you uncovered is merely the appearance of corruption, as opposed to the real thing?

It’s entirely the former, though we can’t rule out the latter — we just didn’t uncover enough evidence to show that any particular case was insider trading. The rarity of civil or criminal investigations into these cases makes it hard to know what’s really going on, whether it’s essentially routine transactions based on market research and common knowledge or a trade that was inspired by information learned in Congress.

There are some arguments against these restrictions that I think are understandable. Let’s say you have a spouse whose career is in investing; Paul Pelosi, the husband of Speaker Pelosi, is an infamous example, but Archie Smith, the husband of Senator Tina Smith, is another. Should that person have to give up their profession because their spouse is in public service? If you’re in the House, you only have job security for two years. That could be a tough one. But members of Congress make more than three times what the average American worker makes, and under most of the proposed stock-trading bans, they’d be allowed to continue investing in the market in some way. So the argument that they are being punished financially isn’t a very good look.

The Justice Department investigated Senator Richard Burr for selling stocks after a closed-door briefing on the incipient coronavirus pandemic, yet he was never charged. Is it just really hard to prove that a member of Congress broke the law, even when the publicly known facts seem so damning?

Why Burr wasn’t prosecuted, and what’s happening with the Securities and Exchange Commission’s civil investigation into him, remains a mystery. Broadly speaking, I think these are hard cases to prove. A solid insider-trading case involves not only the attainment or distribution of nonpublic information, followed by a transaction that is driven by that information; it also shows that the information at issue is what is called “material,” meaning a reasonable person would consider it significant. Sometimes you can meet one test and not the other.

Speaker Nancy Pelosi has walked a fine line on stock trading. Her husband, Paul, is a wealthy investor, and she represents a district in San Francisco that is filled with top technology companies. She had to be dragged into supporting these changes and yet now seems to want to slow the process down. What’s going on?

Your speculation is as good as mine. Some think she was never serious about this effort and was delighted that Representative Steny Hoyer put the brakes on it this week. If that’s true, it’s remarkable that she allowed Lofgren, a close ally who runs the House Administration Committee, to spend eight months crafting such a detailed piece of legislation, only to let it be quashed right away. (Lofgren herself seemed resigned when we asked about it.) Jeff Merkley, who is the Senate leader’s version of Lofgren in this scenario, told me he’s optimistic that this can get done in the lame-duck session, pointing out that in the last Congress, 44 percent of the bills passed were passed in those final months. We’ll see.