New York Times: Members of Congress Should Not be Trading Stocks, Ever

NEW YORK TIMES, EDITORIAL BOARD

Americans are in a sour mood with their elected officials. Blame the pandemic or inflation or Trumpism or stress or structural problems like inequality, but people do not feel that the system, much less its leaders, are working for them. The nation is experiencing a crisis of confidence that is eating away at its strength and unity.

Addressing this problem calls for long-term vision and commitment — things politicians aren’t always known for. But a straightforward idea gaining traction on Capitol Hill could reassure a frustrated and exhausted public that lawmakers at least recognize this trust deficit: a ban on stock trading by members of Congress and their spouses.

This idea got a fresh jolt in the early days of the pandemic after some lawmakers faced awkward questions about whether they used nonpublic information to make lucrative stock trades just as the severity of the threat posed by the coronavirus was becoming clear.

A report in December by Insider was more definitive. It revealed that in 2020 and 2021, dozens of lawmakers failed to abide by rules requiring them to promptly disclose stock trades above a certain threshold. The investigation also found that Congress does a poor job of enforcing accountability and transparency measures.

In response to the uproar, there has been a push by both parties, in both houses of Congress, to establish stronger guardrails on congressional stock ownership. Multiple lawmakers have introduced bills pushing variations of a ban on trading individual stocks, some tougher and more expansive than others. The House minority leader, Kevin McCarthy, reportedly told donors in January that if, as expected, Republicans win back the House in the midterm elections this fall, they would work to pass legislation that would limit lawmakers’ ability to trade stocks.

In a high-stakes election year, with lawmakers eager to show voters that they feel their rage, now is the moment to drive home this popular, common-sense reform. Americans have lost faith in Congress. Restoring trust in this institution requires concrete, bipartisan change.

It has been a decade since Congress last made a significant effort at policing itself in this area. The Stock Act of 2012, among other measures, made it illegal for lawmakers to trade based on access to nonpublic information. The reforms were well intentioned but inadequate. In practice, there are too many legal shades of gray. A clearer, brighter line needs to be drawn.

For all of the Democratic Party’s talk about restoring public faith in government, its leaders in the House have been, until recently, resistant to talk of a trading ban for members. “We are a free-market economy,” Speaker Nancy Pelosi said in December. “They should be able to participate in that.”

The majority leader, Steny Hoyer, has been similarly weak, suggesting that a ban is unnecessary. While Mr. Hoyer owns no stock, he has said that “members ought not to be in a different situation that they would otherwise be if they weren’t members of Congress.”

This rationale does not pass the sniff test. Members of Congress have access to a steady stream of information that regular Americans do not. They already exist in a different, more privileged situation.

The common argument that a trading ban would pose a hardship for lawmakers is no more compelling. Most of the proposals under consideration do not call for members of Congress to sell all their stock holdings. They would merely prohibit lawmakers from trading stocks in individual companies. Assets could still be held in vehicles such as index funds or blind trusts.

It also bears noting that only a sliver of American families, about 15 percent, directly hold stock in individual companies, as opposed to indirectly through mutual funds and the like. A stock trading ban would put lawmakers more in sync with the 85 percent of Americans who own no individual stock, rather than align their interests with the 15 percent who do.

A ban on congressional trading enjoys a bipartisan appeal that is rare in this polarized age. A January poll found that 63 percent of American voters are at least somewhat in favor of such a move — with strong backing among Democrats, Republicans and independents alike.

With the support for reform growing, Ms. Pelosi adjusted course this month, saying she was open to a ban and announcing that the House Administration Committee would look into the situation. The committee chairwoman, Zoe Lofgren of California, has said her team is analyzing the existing bills and would put together a broad-based consensus proposal.

The speaker’s public shift was vital to keeping the push alive, but there is a difference between grudging acceptance and vigorous support. Proponents of reform need to keep the pressure on to ensure that this effort does not get slow-walked or bogged down in the devilish details. Ms. Pelosi, for instance, insisted that reform legislation should apply not only to Congress but also to the judiciary, including the Supreme Court. “It has to be governmentwide,” she asserted.

The judicial branch certainly could use some ethical shoring up. An investigation last year by The Wall Street Journal found that from 2010 to 2018, 131 federal judges “unlawfully ruled in cases involving companies in which they or their families held shares.” People involved in close to 800 lawsuits have since been notified that their cases are eligible to be reopened because of these conflicts.

There are proposals floating around that would address all three branches. Two Democrats, Senator Kirsten Gillibrand of New York and Representative Katie Porter of California, recently reintroduced a bill that would tighten reporting requirements across the board, as well as bar trading of individual stocks by members of Congress, the president and vice president, Supreme Court justices and top officials with the Federal Reserve — which suffered its own trading scandals last year.

But trying to extend a governmentwide ban, while worthy on the merits, would introduce needless and potentially counterproductive complexity right now. There are, most specifically, concerns that an attempt by Congress to impose its will on the judiciary would set off a debilitating debate over the separation of powers. “That is literally a different conversation and one that is so hard to wrap your arms around that you’ve tanked the movement,” as Representative Abigail Spanberger, a Virginia Democrat who co-wrote one of the leading reform bills, lamented to The Times.

Lawmakers’ top priority — arguably, their first duty — should be to clean up their own branch of government. They are, as elected officials, directly accountable to their voters, and many of the people to whom they owe their jobs and salaries have grave doubts about their ethical guidelines and rules of fair play.

In a series of recent Times Opinion focus groups, voters across the political spectrum described their frustrations and even anger at the political class and the system, seeing elected officials in both parties as acting in self-interest without rules or consequences. “They all just go to their barbecues and cocktail parties and laugh,” said one independent voter. “They just want the power. They couldn’t care less about us.” Some Democratic voters expressed interest in term limits, curbs on lobbyist influence on lawmakers and new rules on money in politics.

The push for a trading ban is about more than imposing rules to keep lawmakers on the straight and narrow. It is about changing the widespread perception of public service as a playground for corruption and self-dealing. It is about restoring Americans’ faith in their government. For Congress, there may be no worthier cause.