In March of this year, at least nine lawmakers from both parties sold banking stocks during the financial turmoil, prompting renewed calls for an outright ban of Congressional stock trading. Notable traders included Rep. Josh Gottheimer (D-NJ) who sold Silicon Valley Bank stock after the bank had signaled deep trouble and just one day before regulators seized the lender. There was also Rep. Jared Moskowitz (D-FL), whose account linked to the freshman Congressman sold shares of Seacoast Banking Corporation (SBCF) just days before that stock tanked.
Despite denying any impropriety and the transactions appearing to be perfectly allowed within current law, advocates of a ban say these trades further undermine the public's faith in Congress. The transactions have already spurred a demand for hearings on the issue.
"I'm not at all surprised," said Rep. Abigail Spanberger (D-VA) of the disclosures. She is the author of a letter calling for a public discussion of the trades. She added that it has become a familiar routine for a major news event to be followed by revelations of "buying or selling by members of Congress in a way that looks as though it's connected."
Spanberger is the co-author, along with Rep. Chip Roy (R-TX), of a bill that would require members of Congress as well as their family members to put their investments into a qualified blind trust. They have introduced their legislation in each of the last three sessions of Congress without success so far. One of the notable sponsors of her bill is Gottheimer, the lawmaker who disclosed his sale of Silicon Valley Bank stock. He has also disclosed a sale of Charles Schwab (SCHW) stock and a purchase of shares in Morgan Stanley (MS) during the turmoil.
A representative for Gottheimer pointed to a 2022 statement where the lawmaker said he was in the process of setting up a blind trust and had already turned over investment decisions to a third party. A representative for Moskowitz did not respond to a request for comment, but the lawmaker told The New York Times that the Seacoast trade took place in an account set up for his children and had been suggested by a financial adviser. He also maintains that the sale happened before a congressional briefing on the turmoil that he has previously discussed attending.
There are at least four bills that have been introduced this Congress that would levy a ban on lawmaker trading, including one unveiled last week called the Ending Trading and Holdings in Congressional Stocks (ETHICS) Act, led by Sen. Jeff Merkley (D-OR). Merkley said that the reaction to last week's unveiling has shown "broad, growing momentum" adding that "without action, we will only continue to hear of situations where lawmakers voted on bills while holding or trading stocks that could be affected." The current rules governing the trading of stocks by lawmakers were put in place when then-President Obama signed the STOCK Act of 2012. That legislation clarified that insider trading laws applied to lawmakers and also instituted the 45-day disclosure rule.
Calls for an outright ban have intensified in the years since after a series of scandals. The most infamous incident came in 2020 when then-Sens. Kelly Loeffler (R-GA) and Sen. Richard Burr (R-NC) sold an array of stocks after a private briefing on COVID-19 but before the larger public was fully aware of the coming pandemic. Burr faced a Justice Department investigation that eventually ended without charges and retired earlier this year while Loeffler lost her 2020 bid for election.
Some have even launched ETFs that currently allow traders to invest like their lawmakers in a bid to bring attention to the issue. Congress seemed to be on the verge of taking action late last year before talks fell apart largely over the potential for conflicts of interest among lawmakers with significant investments in certain industries. The proposed bill would have required lawmakers to disclose their stock trades within 15 days and would have banned lawmakers from owning individual stocks altogether.
Opponents of a ban argue that lawmakers should be allowed to invest their personal wealth as they see fit and that banning individual stock ownership could discourage successful individuals from running for office. They also point out that lawmakers are required to disclose their stock trades, which increases transparency and allows for public scrutiny.
However, advocates of a ban argue that even the appearance of impropriety can undermine the public's faith in government institutions. They point out that lawmakers have access to insider information and could potentially use that information to their personal advantage, even if they are not technically breaking any laws. They also argue that lawmakers should be focused on serving the public interest, not their own personal financial gain.
It remains to be seen whether Congress will take action to ban individual stock ownership by lawmakers. However, the recent disclosures of trades during the financial turmoil have once again brought the issue to the forefront of public debate. As lawmakers continue to grapple with the best way to address this issue, the public will be watching closely to see whether they prioritize transparency and accountability or personal financial gain.
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