On January 24, 27 United States lawmakers from both the Republican and Democratic parties sent a letter to the speakers of Congress calling for a ban on members of Congress owning and trading individual stocks. Three bills have been proposed to ban individual trade of stocks by politicians: one bill in the House of Representatives, two bills in the Senate. The letter and the bills come amid an upsurge in public opinion in favor of banning stock trading.
In the past few years, evidence has surfaced pointing to numerous instances wherein US public officials used their positions of power to obtain privileged information to guide their stock trades. In early 2020, after US senators attended a private briefing on the seriousness of the emerging coronavirus, several senators rapidly sold millions in stock holdings. Notably, Senators Richard Burr of North Carolina and Kelly Loeffler of Georgia sold stock in companies and industries that would tank once the pandemic spread. These actions indicate a certain knowledge of the severity of the pandemic, yet at that time Burr and Loeffler joined Trump in encouraging a lack of early preparedness that has cost and continues to cost the lives of the people of the US.
As Intel chairman, @SenatorBurr got private briefings about Coronavirus weeks ago.
Burr knew how bad it would be. He told the truth to his wealthy donors, while assuring the public that we were fine.
THEN he sold off $1.6 million in stock before the fall.
He needs to resign. https://t.co/IAITMbJ3R5
— Alexandria Ocasio-Cortez (@AOC) March 19, 2020
These actions angered the US public and cost Loeffler and fellow Georgia Senator David Perdue their reelections. While in office, Perdue traded as much as 20 times per day. These trades at times included companies that directly benefited from his policies, such as cybersecurity company FireEye which landed a contract of over $30 million while Perdue sat on the Senate cybersecurity subcommittee.
Progressive politicians have proposed this new legislation against stock trading by members of congress arguing that the current regulations are insufficient. The Stop Trading on Congressional Knowledge (STOCK) Act of 2012 was signed into law as evidence came in that members of Congress were using their privileged positions for their own gain in the stock market. The Act prohibits Congress members from trading based on insider information, but not from trading individual stocks per say. The law did result in a notable reduction in trading in Congress, however, many members have since violated the disclosure requirements of the law.
To date, despite the Department of Justice (DOJ) opening investigations against several members of Congress, they have yet to prosecute any under the STOCK act. After an investigation of four senators who sold their stocks after the COVID briefing, the DOJ closed the investigation without charges. A report by Business Insider revealed that dozens of members of Congress and staffers have violated the disclosure requirements of the act.
Powerful politicians such as House Speaker Nancy Pelosi have argued against a stock trading ban, arguing that politicians should be able to trade because “we are a free market economy”. Notably, Pelosi’s husband is an avid stock trader, and with her spouse’s assets combined, Pelosi is one of the wealthiest members of Congress.
"We're a free-market economy. They should be able to participate in that." — Pelosi's rationale for why spouses of members of Congress should be able to trade individuals stocks is not very convincing pic.twitter.com/NuOw0VznVm
— Aaron Rupar (@atrupar) December 15, 2021
However, as support grows for a stock trading ban, Pelosi has shifted. “If members want to do that, I’m OK with that,” she commented last week, implying that with broad enough support, she could possibly be swayed.