Fixing the Cracks in the Foundation
Congressional Stock Trading Must End
By Zach Brown
Crisis has a way of not only creating problems, but also exposing the ones that we already had. You’ve probably already seen the news stories, headlines, and think pieces detailing the recent discovery of problematic congressional stock trading all in the midst of a national health pandemic. While the coronavirus may have exposed the flaws in the system when it comes to congressional stock trading, these cracks in the foundation were here long before we had ever heard of the term “social distancing.”
So, what’s the issue with congressional stock trading? Well, as a part of their duties, members of Congress are given unprecedented amounts of confidential information about, and routinely exercise oversight over, companies and organizations, which include publicly traded corporations. Unchecked, members could then use this information to profit in the stock market, linking personal gain and legislative action in ways that directly harm the legitimacy of our government. We already observed this phenomenon recently when Senators Richard Burr (R-N.C.) and Kelly Loeffler (R-Ga.) were caught dumping stocks right before COVID-19 forced the stock market to crash. (Whata coincidence, right?). Fortunately, in this particular situation the investigation for answers is already sending shockwaves through Congress.
Lawmakers have attempted to tackle this problem in the past to mixed results. In 2012, the STOCK Act was passed, banning insider trading by members of Congress and congressional staff who use information gained from their official capacities. The STOCK Act also added guidance to make congressional stock trading more transparent (but we’ll get to that later). On a positive note, the STOCK Act has made a significant impact on the amount of stock trading that congressional members take part in. A 2017 Public Citizen report showed that the number of trading transactions by members of Congress decreased by 50 percent from 2012 to 2015 and 68 percent from 2009 to 2015.
While this is a notable improvement, the STOCK Act has proven to only put a band aid on an issue practically begging for surgery. Our 2017 report goes on to detail that while the total number of transactions has decreased, members of Congress stillactively engage in stock trading involving businesses that they directly oversee through their congressional duties. This and the current scandals show that more must be done.
Now let’s address the elephant in the room: trades still seem to be happening based on insider information. The harm from this conduct is clear—the public loses trust in our government when members of Congress are personally financially benefitting from their role. But the natural solution is just as obvious, straightforward, and relatively simple: members of Congress should not be allowed to trade stocks. That way we can be positive they are not using their role to enrich themselves. We’ve all heard politicians repeat phrases like “I’m just here to serve,” “I do it for the people,” and “I’m not in this for me.” And while this kind of rhetoric sounds true given this level of repetition,it’s about time we force them to truly mean it. If members of Congress are still concerned with their personal wealth while conducting their duties, this casts doubt true motives of the people to whom we have given so much power and oversight ability. The recent revelations that Congressional members have been actively investing in remote-work technology, telemedicine companies, and pharmaceutical companies seeking to develop vaccines raises nothing but questions about motives. Just “doing it for the people”? Yeah, right!
Although an outright ban on Congressional stock trades is the best solution, we at the very least (read: bare minimum) need to increase the transparency of Congress’ stock trading. Remember the STOCK Act transparency guidance I mentioned earlier? While the original STOCK Act created a plan for a “searchable, sortable, and downloadable” database of congressional stock trading, the current system is hardly sortable, searchable, or downloadable. It’s 2020 and we must demand better than PDF snapshots thrown online haphazardly on a clunky website. Congressional insider trading may be tough to prove, but let’s not also make it impossible to detect. Legislation is needed that requires that Congress remodel the stock trading online database into one that is truly searchable, sortable, and downloadable.
However, don’t forget this transparency overhaul is only our second-best option. The most direct way to stop our leaders from sticking their hands in the cookie jar of the stock market is to simply remove it from the table. But if we can’t do that, let’s at least make sure the metaphorical security camera on them is no longer on the fritz— and let’s make the “video” HD so the public can finally see what’s going on.