New York Times: Stock Trading Ban for Lawmakers Gains Momentum on Capitol Hill


An effort to strictly control stock ownership by members of Congress is gathering momentum on Capitol Hill for the first time in a decade, fueled by politically vulnerable lawmakers who recognize the potency of signaling to voters that they will act on the perceived corruption in Washington.

The issue of banning the ownership and trading of individual stocks by lawmakers is complex. It raises questions of just what other kinds of personal investments or economic liabilities could be perceived as conflicts of interest, and how far the prohibitions should extend. Speaker Nancy Pelosi of California and Steny H. Hoyer of Maryland, the House majority leader, initially expressed opposition, and even now, it is not clear how far Ms. Pelosi will go to ensure passage of strong legislation.

But with pressure mounting from rank-and-file members in both parties and both chambers of Congress, the top two Democrats on Wednesday signaled an openness to action.

Senator Chuck Schumer of New York, the majority leader, took to the Senate floor to embrace a stock ownership ban and encourage Democrats to reach out to Republicans to reach agreement quickly.

Ms. Pelosi was less effusive, telling reporters at her weekly news conference that she would accept such a ban, but with a complicating twist. She said she wanted any stock limitations, including a toughening of existing disclosure rules on stock ownership and trading that now apply to members of Congress and the executive branch, to also apply to the judicial branch of government, especially the Supreme Court.

The judiciary branch does have ethics rules that oblige some disclosure, in some cases more quickly and more often than the congressional branch. But an investigation last month by The Wall Street Journal found hundreds of instances in which federal judges presided over cases involving companies in which they or their family members owned stock.

“It has to be governmentwide,” she said, adding, “the judiciary has no reporting. The Supreme Court has no disclosure. It has no reporting of stock transactions, and it makes important decisions every day.”

Multiple proposals for a trading ban already exist in the House and Senate, including a new bill unveiled this week by Senators Elizabeth Warren, Democrat of Massachusetts, and Steve Daines, Republican of Montana. One proposal by Senator Kirsten Gillibrand, Democrat of New York, and Representative Katie Porter, Democrat of California, reintroduced on Wednesday, would ban individual stock trading and extend financial disclosure rules to both the judiciary and the Federal Reserve Board.

The speaker’s caveats angered some of the strongest proponents of fast action to ban congressional stock ownership, who saw them as a veiled attempt to ground the effort. For all the merits of applying disclosure rules to the judiciary, they argued, such legislation would spark debate on the constitutional separation of powers and the rights of Congress to dictate to the judicial branch.

“That is literally a different conversation, and one that is so hard to wrap your arms around that you’ve tanked the movement,” said Representative Abigail Spanberger, Democrat of Virginia and a co-author of bipartisan stock-ban legislation that has been gaining momentum.

She added, “I haven’t heard from a single constituent, ‘I’m really worried about the Supreme Court ruling in such a way for their personal gain.’ That’s not a thing.”

The drive to ban congressional stock trading was touched off in 2020 by a spate of revelations that senators from both parties had traded health care stocks after closed-door briefings on the then-nascent coronavirus pandemic.

It has gathered momentum in recent weeks as Democrats from conservative-leaning districts, eager to demonstrate independence from Ms. Pelosi and other party leaders, have taken up the issue to appeal to a growing populist sentiment among their constituents. Proponents readily admit that voters perceive Congress as corrupt.

“The idea that we’re coming in and buying, selling, buying, calling in puts, it’s a bipartisan problem,” said Representative Chip Roy, Republican of Texas, who co-wrote the stock-ban legislation with Ms. Spanberger in 2020.

Lawmakers saw the power of the issue in the 2020 elections, when it propelled the Senate victories of two Georgia Democrats, Jon Ossoff and Raphael Warnock, who castigated their incumbent Republican rivals for their stock trades.

The sophisticated and lucrative trades of Ms. Pelosi’s wealthy husband, Paul Pelosi, have also attracted attention, after investors on TikTok and other platforms took to reviewing her stock disclosures and mimicking his investments.

Mr. Schumer said on Wednesday, “I believe this is an important issue that Congress should address, and it is something that has clearly raised interest on both sides of the aisle over the last few weeks.”

Ms. Pelosi’s embrace was hardly unequivocal. She said she had tasked the House Administration Committee, which has jurisdiction over the chamber’s operations, to produce new stock-trading legislation, and that she assumed “they will have it pretty soon.”

She also called for stricter penalties on lawmakers who flout existing rules on reporting stock ownership and trading under a 2012 law called the Stop Trading on Congressional Knowledge (STOCK) Act.

“What we’re trying to build is consensus,” she said.

The worry among proponents of action is that the committee, led by Representative Zoe Lofgren of California, a close Pelosi confidante, will bottle up the effort. So far, Ms. Lofgren has said little other than that she is reviewing the issue and the merits and shortcomings of the existing stock prohibition bills. She has not scheduled any hearings or a public drafting of committee legislation.

“I look forward to working with members and stakeholders to determine whether new strategies to enhance transparency and accountability and to create public confidence in the United States Congress can be devised,” Ms. Lofgren said in a statement.

Representative Tom Malinowski, Democrat of New Jersey, said that regardless of how tepid Ms. Pelosi’s language may have been, she had provided a jolt to the effort to ban stock trading. Mr. Malinowski faced accusations last year that he had failed to properly disclose hundreds of thousands of dollars in trades, which is sure to dog him as he faces a tough re-election race this fall. Since his ethics run-in, he has become a vocal proponent of mandating that all investment holdings be placed in a blind trust.

“The speaker listens to her caucus, as she should,” he said, noting her change in words, if not in tone, reflected the direction of her party. “Did her initial public opposition actually add to the momentum? I think it elevated the debate, let’s put it that way.”

Striking such an agreement could prove tricky. Existing bills differ on whether spouses and family members should also be prohibited from owning and trading individual stocks, whether capital gains taxes on forced stock sales should be deferred, and whether the prohibition should apply to other assets like businesses.

And some Democratic leaders have raised questions about a slippery slope. Insider trading is already illegal, and the STOCK Act bars members of Congress from trading on any “nonpublic information derived from” their position. That law also mandates disclosure of most stock trades, although Ms. Pelosi noted that it had not been an effective deterrent.

If Congress is going to go further and bar individual stock ownership outright, critics argue, then what about real estate holdings? Should a lawmaker with student loans be allowed to weigh in on legislation on loan forgiveness?

“My answer to that is, let’s apply common sense,” Mr. Malinowski said. “Most people can distinguish having investments in stock market from owning a house or having student loan or having to abide by the speed limit.”

Ms. Spanberger conceded that some of her colleagues had suggested that a ban on stock ownership could dissuade capable people from running for Congress. But she expressed little sympathy.

“There are a lot of jobs and millions of Americans out there,” she said. “If this is too much of a limitation, you’ve just demonstrated what your priorities are, and you shouldn’t be in Congress.”

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