Amid a steady drip of damaging headlines, pressure is building for Congress to pass legislation that would curtail lawmakers' ability to speculate on the stock market.
Trading in Congress has long been criticized by government watchdogs, who say the access to nonpublic information creates a temptation for lawmakers to prioritize their own finances over the public good.
But public anger has mounted since the first tremors of the pandemic, when some lawmakers were caught buying and selling millions of dollars worth of stock after being warned about the coming disruption from the virus. The pandemic’s arrival tanked markets and caught many Americans by surprise.
Now, with the November election fast approaching and members of both parties embracing reform, congressional leaders are getting on the bandwagon, expressing their willingness to toughen the rules. After a spate of controversies over suspiciously timed trades and undisclosed transactions, few lawmakers are defending the status quo, raising hopes that a significant ethics package is within reach.
“This isn’t going to solve all of America's problems. But it’s a substantive reform that three-fourths of the country supports,” said Sen. Jon Ossoff, who is sponsoring a bill that would require lawmakers and their spouses to sell off stocks or place their assets in a blind trust. The Georgia Democrat beat Republican Sen. David Perdue last year in a race that turned largely on Perdue’s pandemic-era stock trading.
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There's reason for skepticism. Past efforts to tighten ethics rules have fallen short of lawmakers' lofty declarations. And in the end, the task of writing ethics rules governing Congress is left to the lawmakers themselves, creating a conflict that often results in easily evaded restrictions.
But progress is apparent. A raft of bills have been introduced, some by lawmakers at opposite ends of the ideological spectrum. Senators are working on a compromise. And House Speaker Nancy Pelosi, whose husband is a prolific trader, is on board with the legislative push, though she has advocated a more targeted approach.
Pelosi supports strengthening an existing law, the Stock Act, which requires lawmakers to disclose their stock sales and purchases. She has also called for extending stock trading disclosure requirements to members of the judiciary while stiffening penalties for members of Congress who flout the rules.
"It’s complicated," Pelosi said last week. “What we're trying to build is consensus.”
Her stance has evolved since December, when Pelosi reacted to a question about lawmaker trades by saying there is a “free market” that members of Congress“should be able to participate in.”
Past ethics reforms demonstrate the challenge ahead.
The Stock Act was signed into law in 2012. At the time, lawmakers and government watchdogs predicted that public disclosure would shame lawmakers out of actively buying and selling stock. That hasn't happened. A decade later, trading continues apace and no one has been prosecuted under the law.
The same could be said for reforms enacted in the wake of the Jack Abramoff lobbying scandal. A 2007 law that was intended to force more disclosure of lobbying activity instead created a new class of “shadow lobbyists” who work to influence public policy but don't have to register as a lobbyist or disclose their activities.
“Both those bills certainly did not solve the actual problems themselves,” said Craig Holman, a registered lobbyist for the good government group Public Citizen. He said the earlier laws were important, but added that “there is room for improvement.”
Several lawmakers have come under fire for their stock portfolios.
Last year, The Associated Press reported that Democratic Rep. Tom Malinowski of New Jersey repeatedly failed to disclose trades worth as much as $1 million in medical and tech companies that had a stake in the virus response. He now supports efforts to curtail lawmakers' trading.
Former Sens. Perdue and Kelly Loeffler, both Georgia Republicans, lost their runoff bids for the Senate in January after their own stock trades became a campaign issue. Both were investigated by the Justice Department and ultimately cleared.
Perdue had dumped between $1 million and $5 million worth of stock in a company where he was formerly a board member. After markets crashed, he bought it back and earned a windfall after its price skyrocketed.
Loeffler and her husband, the CEO and chairman of the parent company of the New York Stock Exchange, dumped millions of dollars in stock following a briefing on the virus.
Republican Sen. Richard Burr of North Carolina drew perhaps the most scrutiny for his trades. He stepped aside as chairman of the Senate Intelligence Committee after the FBI obtained a search warrant to seize a cellphone.
Burr and his wife sold $1.6 million in early 2020, just before the market began to dive. The Justice Department investigated Burr’s actions, but did not file charges and closed the case. The Securities and Exchange Commission continues to probe the matter.
Drafting the legislation presents a challenge. Difficult questions remain, such as whether lawmakers who sell their assets would be required to pay capital gains tax, whether the proposed ban would apply to spouses and children and whether stocks purchased before serving in Congress would be exempt. But supporters of the effort say the rules need to be as tight as possible.
“I think that the worse possible thing that Democratic leadership could do would be to put forth a bit of a hand-wave effort,” said Rep. Abigail Spanberger, D-Va. "That would be so outrageously insulting to the American people.”
Spanberger is sponsoring a bill with Texas Republican Chip Roy that would require lawmakers to place assets like stock in a blind trust.
The issue has broad support from the public. Republicans and Democrats alike point to recent polling, which they say indicated as much as three-quarters of the electorate supports action.
“Too many Americans have lost faith in Congress as an institution,” said Sen. Steve Daines, R-Mont., who is sponsoring a bill with Sen. Elizabeth Warren, D-Mass., to ban lawmaker trades. “Sen. Warren and I disagree on many important issues, but we agree and have found common ground that we have to restore faith in Congress."
Holman, the good government lobbyist, said it's time for Congress to go further than the Stock Act.
“It really did reduce stock trading activity by members of Congress by two-thirds,” Holman said. “The problem is there's still one-third of members of Congress who are still out there trading stocks.”
Associated Press writer Matthew Brown in Billings, Mont., contributed to this report.