By Damon Effingham, Director of Federal Reform
Earlier this year, RepresentUs highlighted the clear conflict of interest when members of Congress are allowed to buy and sell stocks while in office. Since then, there has been significant bipartisan momentum behind changing this practice and banning members of Congress from trading stocks altogether.
While the STOCK Act, passed in 2012, was intended to ensure transparency from members of Congress when trading stocks, after nearly a decade there is ample evidence that this bill is routinely violated by members of Congress from both parties. And even when transparency rules are followed, there are concerns that legislators’ actions might be dictated by their portfolio holdings.
A Law with Few Consequences
According to reporting from Business Insider, 57 members of Congress violated the STOCK Act in 2021 alone. This list includes high profile members such as Sens. Diane Feinstein (D-CA) and Rand Paul (R-KY), and Reps. Dan Crenshaw (R-TX) and Debbie Wasserman Schultz (D-FL). One of the reasons that so many members of Congress violate the STOCK Act so frequently is that the penalties for breaking the law are so low.
The STOCK Act requires that members of Congress “publicly disclose a trade 30 to 45 days after it occurs, depending on when they learned about it,” yet they aren’t required to disclose the exact dollar amount of the trade. Even with these weak requirements, the fine is a mere $200 for a first-time infraction. Although fines are supposed to increase with each additional violation, further reporting from Business Insider has discovered that they are rarely enforced. Fines for violating the STOCK Act are also not public record, while fines for other House mandates, such as COVID-19 mask enforcement, are made public.
Congress Profits While the Public is in the Dark
The ultimate result is that the public has no knowledge of what personal financial interests their elected representatives may have when they vote on laws with massive financial implications. The conflict of interest here is quite clear. Members of Congress are privy to infinitely more information on important financial matters than the public, and yet are still free to buy and sell stocks as they choose. This issue received national publicity when several members of Congress allegedly sold millions of dollars worth of stocks shortly after a briefing on COVID-19 shortly before the country went on lockdown in early 2020.
An additional conflict is that members of Congress often vote on issues that impact their stock holdings. Just last week, the U.S. committed to sending thousands of Javelin and Stinger missiles to Ukraine in their fight against the Russian invasion. 18 members of Congress are personally invested in the companies who manufacture these weapons. Here at RepresentUs, we’ve documented how members of Congress on both sides of the aisle continue to hold significant amounts of stocks in defense contracting companies, while these same defense contractors received $2.2 trillion in government contracts from 2001-2021.
Time for a Change
After months of public pressure, the tide may be turning. There is a significant bipartisan push to end these clear conflicts of interest by banning Congressional stock trading. The Committee on House Administration is planning to hold a hearing on various proposals to accomplish that, with testimony expected from nonprofits, anti-corruption organizations, and the Congressional Research Service.
At least 10 bills have been introduced in the House or Senate with bipartisan support to end the practice of Congressional stock trading. That list includes the Bipartisan Ban on Congressional Stock Ownership Act, which was introduced by several members of both parties, including Reps. Pramila Jayapal (D-WA) and Matt Rosendale (R-MT), and Sens. Steve Daines (R-MT) and Elizabeth Warren (D-MA).
Another bill, the TRUST in Congress Act, is co-sponsored by a bipartisan group of 56 representatives, including Reps. Chip Roy (R-TX) and Mondaire Jones (D-NY).
The momentum is quickly building to end the corrupt practice of politicians buying and selling stock, highlighting the power that public action can accomplish. However, the fight is not yet won, which means that we all must continue to pressure our elected officials to act and support these bills.
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