Wall Street Journal: Trading Ban for Congress Starts to Gain Traction

WALL STREET JOURNAL, SIOBHAN HUGHES

House Speaker Nancy Pelosi said she expected Democrats to soon reach consensus on restricting stock trading by members of Congress and called for new rules for federal judges, as competing proposals looked to win bipartisan support from lawmakers.

“It’s complicated, but members will figure it out,” she said. “I assume they’ll have it pretty soon,” the California Democrat said, referring to the House Administration Committee tasked with reviewing the proposals. She urged any legislation to require financial disclosures from the judiciary, including Supreme Court justices. “It has to be government-wide,” she said.

Republican leaders have shown interest in new rules, even though some rank-and-file GOP lawmakers have balked. Rep. Kevin McCarthy of California, the GOP leader, is considering backing new limits on lawmaker stock ownership, according to an aide. Sen. Mitch McConnell of Kentucky, the chamber’s GOP leader, who said he holds his investments in a mutual fund and advises colleagues to do the same, said he would need to examine the issue.

The comments by Mrs. Pelosi show how quickly momentum has grown for new rules. In mid-December, she rejected further regulations, saying that “we’re a free-market economy,” in reference to lawmakers’ trades. Last month, Mrs. Pelosi shifted her position, saying “I’m OK with that” if lawmakers wanted to tighten restrictions on trading.

The developments come amid greater scrutiny of trading by top government figures. Late last year, the Federal Reserve imposed restrictions on senior officials in a bid to address a stock-trading controversy that prompted the resignation of two bank presidents.

Also, a Wall Street Journal investigative series found more than 100 federal judges violated federal law by hearing lawsuits involving companies in which they reported owning stock.

That was on top of scrutiny of stock trades by lawmakers as they attended closed-door briefings in early 2020 about the threat of the coronavirus pandemic. Investigators later closed probes without action.

The issue featured in a pair of Senate races in Georgia, where Democratic challengers criticized Republican incumbents over their trading. Sen. Jon Ossoff (D., Ga.), who won his seat in that race, said Wednesday that “we’ve changed the conversation on this issue in Congress.”

Currently, lawmakers are barred from trading on nonpublic information derived from their position and must publicly file and disclose any financial transaction involving stocks, bonds, commodities futures and other securities within 45 days. Lawmakers and their immediate families bought $267.4 million of assets and sold $363.5 million last year, according to Capitol Trades, with both figures down from the prior year. The value of trading in stock options roughly doubled in 2021, to $25.9 million from $12.8 million a year earlier.

Administration Committee Chairman Zoe Lofgren (D., Calif.) has begun evaluating different bills to review the merits of different approaches, an aide said. Senate Majority Leader Chuck Schumer (D., N.Y.) said he asked Democratic colleagues to unify around a single bill.

One bill, led by Reps. Abigail Spanberger (D., Va.) and Chip Roy (R., Texas), would require lawmakers, their spouses and dependents to put stocks, futures and derivatives into blind trusts, which are managed by outside advisers. Another, led by Rep. Raja Krishnamoorthi (D., Ill.), would ban lawmakers and senior staffers, but not spouses, from trading in stocks and other investments.

“The American public thinks that members of Congress are self dealing, and the American public deserves to trust us more,” Ms. Spanberger said, while raising concerns that the bill could be delayed by negotiations over its scope. “Should we be talking about the judicial branch? Should we be talking about staff?” she said. “We are the ones who are elected.”

As one gauge of the growing support, Ms. Spanberger’s measure has 46 sponsors, including more than a half-dozen Republicans. Mr. Krishnamoorthi’s has 50 sponsors, including three Republicans. In the Senate, Mr. Ossoff unveiled a companion bill to require lawmakers to put stock into blind trusts, while Sens. Elizabeth Warren (D., Mass.) and Steve Daines (R., Mont.) are advancing a measure to ban trades, including by spouses of senators and House lawmakers.

One of the issues involves how to regulate spouses who trade stocks. Several lawmakers, including Mrs. Pelosi, have spouses who regularly buy and sell investments. Mrs. Pelosi is one of the wealthiest members of Congress and for 2021 disclosed dozens of trades made by her husband in shares of Apple Inc., Salesforce.com Inc. and Amazon.com Inc., among others.

Several Democratic lawmakers argued the trading by spouses must be included in any new law. “If you were using classified information you had access to or privileged information and you yourself weren’t trading, but your spouse was going back and forth?” said Rep. Elissa Slotkin (D., Mich.), who is a sponsor of both House bills. “It just contributes to a perception that Congress can enrich themselves off these jobs.”

Not all lawmakers are on board with the idea of further regulating trades. “I think there’s a free market out there, and I’ve never seen any instances myself of insider trading,” Rep. Doug Lamborn (R., Colo.) said. “I don’t think that’s very likely because we do so much out in the open.”

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