Throughout American history we’ve seen unique moments transform our country for the better. We are at another such moment in our history. Right now, there is bipartisan support for banning members of Congress from owning and trading stocks. Support is growing across the country, and the public is demanding more financial transparency from its elected officials.
That bipartisan support stems from concerning episodes like the one in early 2020 when several United States senators sold a bunch of stocks before the American people were fully aware of the severity of the COVID-19 pandemic that was about to wreak havoc on economies across the globe. Those fortuitous trades likely enabled the senators to avoid losses that would have been more significant if they had acted later.
Americans of all stripes and political affiliations feel that congressional stock trading isn’t acceptable. A bipartisan poll by the Campaign Legal Center found that 67 percent of all voters favor banning members of Congress from trading stock in specific companies altogether. Other polls have also captured strong support for a congressional stock trading ban.
Congress looks increasingly likely to do something about this issue. Lawmakers from both parties are rallying around efforts to ban stock trading and ownership. Senate Minority Leader Mitch McConnell (R-Ky.) already advises senators to invest in mutual funds instead of individual stocks to avoid any appearance of impropriety, House Republican Leader Kevin McCarthy (R-Calif.) is considering banning members from trading individual stocks if his party wins control of the House in the midterm elections, and Speaker Nancy Pelosi (D-Calif.) has committed to holding a vote on legislation this year. Mr. Bookbinder’s organization, Citizens for Responsibility and Ethics in Washington (CREW), has identified four elements that must be included in order for legislation to be effective.
First, the legislation must include a comprehensive ban on trading or owning individual stocks. While many good proposals offer the option for lawmakers to put their assets into blind trusts, where a third party manages their investments on their behalf to eliminate the opportunity for insider trading, that is not a sufficient solution to eliminate conflicts of interest. Lawmakers can pile known assets into the trust, and then make decisions that affect those assets.
Second, the legislation should include a strong enforcement mechanism and a steep financial penalty to truly deter bad behavior.
Third, the legislation should penalize all violations without requiring proof of the lawmaker’s intent so that the law serves as an effective deterrent.
And fourth, the legislation needs to prohibit lawmakers’ spouses and dependent children from owning or trading individual stocks as well. It would be too easy for lawmakers to simply transfer their assets to a family member to get around the rules.
These four elements should be pillars of any legislation that comes up for a vote.
There are currently several strong proposals to address each of these elements before Congress. The Bipartisan Ban on Congressional Stock Ownership Act, introduced by Sens. Elizabeth Warren (D-Mass.) and Steve Daines (R-Mont.) and Reps. Pramila Jayapal (D-Wash.) and Matt Rosendale (R-Mont.), prohibits individual stock ownership, period. Sen. Jon Ossoff’s (D-Ga.) and Sen. Mark Kelly’s (D-Ariz.) Ban Congressional Stock Trading Act covers members’ spouses and dependent children. Both proposals have strong penalties: $50 thousand and the member’s entire monthly salary, respectively.
Rep. Andy Kim recently introduced his own legislation that would prohibit ownership of individual stocks by members of all three branches of the federal government – including Congress, the president, vice president, and the Supreme Court. His legislation meets all four of CREW’s criteria.
CREW’s Senior Vice President and Chief Counsel Donald Sherman testified recently at a hearing before the Committee on House Administration in support of several of the proposed bills. At the end of this process, our hope is that the legislation that moves forward addresses these important issues.
The constraints being considered for lawmakers and their families will not require enormous sacrifices. Members will still be able to invest in diversified assets like mutual funds, just like most Americans do. Owning and trading assets like those will permit members and their families to realize the same gains as hard working Americans without creating conflicts of interest. And if that’s too much to ask, maybe this isn’t the job for them.
We’re encouraged by the growing consensus that lawmakers should not be in a position to profit off of their service to the American people. We look forward to working with Americans and lawmakers from all sides of the political spectrum to turn this consensus into enforceable law.
Kim represents the 3rd District of New Jersey. Noah Bookbinder is the president of Citizens for Responsibility and Ethics in Washington (CREW) and a former federal corruption prosecutor. He previously served as chief counsel for criminal justice for the Senate Judiciary Committee. Follow him on Twitter: @NoahBookbinder.