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Ban Congressional Stock Trading – Period

Posted on Tuesday, February 8, 2022
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by AMAC, Robert B. Charles
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40 Comments
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stock market

How do public servants, especially those in Congress (of both parties), start poor and end rich – even while in office? The questions nags, and it should.

Average Americans – even those with equities and retirement accounts inequities – have no special access to information. Every member of Congress does. The time is now to stop pretending members of Congress do not trade on that information. 

The time is now to ban all stock trades by all members of Congress in both chambers while they are serving, and for some period thereafter. Just as senior executive branch officials have a chilling period after office, and cannot profit from their knowledge in the office, members of Congress should be banned.

This issue has been one of the great untold stories of Congressional “behind the curtain” activities, like how unspent campaign funds are used, or going overseas and returning o-dark-hundred with booty, or countless other privileges and practices, seldom seen or reported.

A time of reckoning is here. As Americans struggle to pay bills with runaway inflation, massive energy costs, new security concerns, taxes, and business restrictions, less efficiency, Congress keeps profiting.

Enough! Old laws aiming to quiet the public ruckus over “insider trading” – often thinly shielded – have been of no use. The perception, if not the reality, is that Congress profits from knowing what we do not.

In 2012, Congress tried to get ahead of this issue, but to little effect. They passed the so-called “STOCK Act,” another tiring acronym, for the “Stop Trading on Congressional Knowledge Act.” Who pays for this gibberish? Oh yeah, the American taxpayer.

So, this act was supposed to stop the practice of using what members learn from a daily flow of documents, briefing, hearings, mark-ups, letters, interfaces with business and private donors, those seeking favors, and those giving them seeking a return – to line members’ pockets.

As happens in the bigger world, those who are ethical and honest did not trade on insider information, filed properly, and followed the rules. Those who would not in another venue did not here. Without naming names, the bottom line was – this well-intentioned act did little to stop the practice.

So, how serious is the practice? Since those who trade on what they learn from their official positions do not volunteer that, “oh yes, they did that,” we must draw inferences from public facts. Like Plato assessing reality from shadows on the cave wall, we must look at what we know, reason from there.

What do we know? We know, according to a recent Epoch Times summary, “lawmakers on Capitol Hill bought and sold an estimated $355 million worth of stocks in 2021.”  This data point comes from stock transaction disclosure data, which only records – it should be said – what is disclosed. See, US Lawmakers Bought and Sold Over $350 Million Worth of Stocks in 2021.

According to the same report, “US representatives and senators or their immediate family members bought about $180 million and sold around $175 million worth of company shares in 2021.”  Notably, Republicans and Democrats traded big last year, top trader a Republican with $35 million in stock sales, $31 million in buys; top Democrat was not far behind, with “total transacted volume of about $53 million,” including $19 million in sales, $34 million in buys.

Over the years, some members and their spouses have profited handily in the market, for whatever reason. By way of example, Nancy Pelosi, who has been in Congress 35 years, last year recorded a $12 million dollar volume in trades.

The real question is not who did what when, or whether there is proper reporting of all that was done – but something bigger, or deeper, or more obvious. 

The real question is why any members of Congress are allowed to trade stocks while in public service, or immediately afterward, since they are all deluged regularly with stock-sensitive information, and even if not using that information improperly, the public perception is one of potential insider trading. See, e.g., 55 members of Congress have violated a law designed to stop insider trading and prevent conflicts-of-interest.

So, what is the right answer? As more than two dozen members of the House recently suggested, the right answer is a total ban on stock trading by members of Congress, period. If that is too much to ask of a public servant, then they should stay in the private sector. A bipartisan effort is finally underway. See, e.g.Sens. Ossoff, Kelly Introduce Bill Banning Stock Trading by Members of Congress.

Public service is about service to the public, not about getting rich off information to which the public does not have access, made possible by their official position. Is that so hard to see, too much to ask? The imperative should be just this – Ban congressional stock trading. Simple. 

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Stephen Russell
Stephen Russell
2 years ago

OR invest the way we do: No Insider Info
House & Senate

Boz
Boz
2 years ago

Agreed. No one should go to Congress and leave a millionaire. Term limits! Send common people, bakers, farmers, tire shop owners, go for 6 years, do the job, then GO HOME! No lifetime pension, no lifetime healthcare.

ops
ops
2 years ago

Why would they kill the cash cow?

PaulE
PaulE
2 years ago

Well RBC, this is essentially similar to an article posted earlier today, but the basics of it are the same. So, here’s my response to that one, that is also applicable here:

Virtually every other federal government employee has to file annual or semi-annual disclosures of all financial assets (stocks, bonds, options, futures contracts, real estate, etc.) held and are barred from participating in management decisions or activities, such as contracts or vendor selection, that would either directly or indirectly benefit themselves, their families or even give the remote appearance of a potential conflict of interest. Everything you were involved with was measured against the standard of avoiding even a remote potential of any conflict of interest at ALL costs. This is the standard that I had to abide by when I worked in the federal government, and it was rigidly enforced. I’m sure you as well in the State Department had to do the exact same thing.

The ONLY members of the federal government that are exempt from this standard are the members of Congress. They wrote the legislation years ago in such a way to ensure they had a loophole to allow them to trade financial assets. They have to file the same forms as all federal employees, but they are free to pretty much trade whatever they want, even though they have inside knowledge of all major government contracts that will be awarded, know how future legislation, that they themselves write by the way, will influence not only individual stocks, bonds and options, but whole sectors of the economy their legislation will touch. They not only know what will happen, but they control when it will happen and who will benefit and who will lose. In short, members of Congress being able to either trade securities themselves or more usually through their family members, relatives or their so-called investment advisors is nothing more than a massive conflict of interest, because all they are doing is insider trading.

When you look at how Paul Pelosi made some of his most lucrative trades in the last few years, they are off of options trading. You generally ONLY buy options, which are the right to buy (call options) or sell (put options) a specific stock at a specific price for a limited amount of time, if you know in advance which way a stock is going to go and by how much. Having a wife who happens to know what is in every single piece of legislation being worked on in Congress, as well as access to advance information as to which companies will be getting (call options) or not getting (put options) large government contracts before the information is publicly disclosed, is the ultimate sure thing for successful options trading. It shouldn’t take a rocket scientist to figure out why the Paul Pelosi has been able to achieve returns that far exceed what most investment banks and hedge funds only dream of.

By the way, I’m sure there are many members of Congress who essentially do the exact same thing. I just used Paul Pelosi as an example, because or the recent articles outlining his amazing stock trading performance year after year. I’m simply highlighting why it has always been so hard to get any sort of legislation passed by Congress that would, in effect, do away with their means to greatly supplement their government salaries to the point where their salaries are pocket change.

If members of Congress want to participate in the financial market, which they should be allowed to do like any American, the right way to do it is to only allow them to own broad-based index funds or ETFs. Owning something like a S&P 500 index ETF gives them exposure to the market but doesn’t allow them to game the system for personal financial gain like many are obviously doing today. No individual stocks, bonds and certainly no options trading. Now good luck in ever getting both chambers of Congress to ever pass any legislation that does that. Not going to happen until a whole lot of Congress is replaced by people that actually are there to serve the people and NOT themselves.

BAE
BAE
2 years ago

The government workers like Pelosi and Schumer should never be able to use insider trading to get rich, but that is how they did. Pelosi and her sneaky husband got all their money that way.

Pete from St Pete
Pete from St Pete
2 years ago

Sunshine is the best disinfectant. Require them to announce in public any and all securities transactions withing 10 days after they close. Include real estate transactions.

K
K
2 years ago

This has been going on for as long as I can remember and I’m 73 years old. I remember my parents talking about it. However at that young age It didn’t bother me. I became more politically aware when I was in Junior High. I realized that there were those who flip floped After they were in office, and All the benefits they received after leaving office for the rest of their lives was an outrageous burden on “WE THE PEOPLE”! Then when articles and news stories would come out about different Congressmen making money on insider info that crosses their desks, I started questioning why and what for. Now, and for a very long time, it makes me angry. So maybe it’s a little question, However, Why Did Martha Stewart get put in prison for insider trading one time, and Nancy Pelosi, Joe Biden, John McCain, and and many more Not Get The Same Treatment?? If the Average Citizen is accused, found guilty of insider trading and put in prison, Why Isn’t The Same Law Applied To Those In The Congress????

Geraldine Tollison
Geraldine Tollison
2 years ago

As far as I’m concerned that is insider trading and is illegal

Ann
Ann
2 years ago

If the Republicans don’t stop this practice, they are no different from the democRATs.

jake the snake
jake the snake
2 years ago

All government employees at all levels shoudl have all investments in blind trusts. they shoudl include that no discussions with the trust managers can result in investment changes for 30 days.

Further no government employee nonprofit can have that employee in a decision making position or provide them any income.

all government employee owned companies must be audited every year and get not have government contract unless that contract pre-existed government employment.

Tighten it down so that no government employee can profit of the government.

Garye
Garye
2 years ago

Maybe closing this lucrative loop hole will eliminate the career politicians and get new Patriots with fresh ideas to participate in Our Government.
It’s obvious that the same old self serving politicians care nothing about America or its Citizens, just their own power and money!

Rosalee Cavanaugh
Rosalee Cavanaugh
2 years ago

Amen, Charles

Mike B.
Mike B.
2 years ago

Do we all remember Martha Stewart ? Didn’t she go to jail for insider trading ? Hmmmm . Wouldn’t it be nice if we / working class Americans received tips what & when to buy & sell ? The corruption is so abundant In congress, and not just Democrats. Do you think these politician’s would vote to ban this practice, or vote against this bill proposed by Ossoff, and Kelly ? Good luck

Owen Shrock
Owen Shrock
2 years ago

It definitely should be banned. Especially when members of Congress like Nancy Pelosi make millions each and every year because of insider trading. I read where Nancy Pelosi made over 31 million dollars in the stock market last year where Warren Buffet only made eighteen. So you’re telling me that when it comes to the stock market, Nancy Pelosi is smarter than Warren Buffet? I think NOT, the difference is Nancy is in Congress and a CROOK!

Mohave50
Mohave50
2 years ago

Perhaps we need to clean both House and Senate of those who have been in office forever and have become multi-millionaires at our expense regardless of Party. I love seeing regular citizens step up and run for office. That is how the founding Fathers set up the Government to be. This country was not founded to serve an elite political class that cares more for their own enrichment and power than they do for ordinary citizens and the good of the country. Insider Trading? If it is illegal for us, it sure as Hell is illegal for them.

R. Bart
R. Bart
2 years ago

Ever wonder why so many elites have been running for office over the past twenty years? Congress passed the insider information law which stopped them from legally using that information they got. But it didn’t stop members of congress, the ultimate insiders, from using the information they got by passing bills and directing regulations that affected companies stocks. So now they spend their money running for office so they can get richer by knowing in advance what companies will be e affected. If we can get this passed, I predict fewer ultra rich running for office.

Stephen Russell
Stephen Russell
2 years ago

OR invest the way we do: No Insider Info
House & Senate

Boz
Boz
2 years ago

Agreed. No one should go to Congress and leave a millionaire. Term limits! Send common people, bakers, farmers, tire shop owners, go for 6 years, do the job, then GO HOME! No lifetime pension, no lifetime healthcare.

ops
ops
2 years ago

Why would they kill the cash cow?

PaulE
PaulE
2 years ago

Well RBC, this is essentially similar to an article posted earlier today, but the basics of it are the same. So, here’s my response to that one, that is also applicable here:

Virtually every other federal government employee has to file annual or semi-annual disclosures of all financial assets (stocks, bonds, options, futures contracts, real estate, etc.) held and are barred from participating in management decisions or activities, such as contracts or vendor selection, that would either directly or indirectly benefit themselves, their families or even give the remote appearance of a potential conflict of interest. Everything you were involved with was measured against the standard of avoiding even a remote potential of any conflict of interest at ALL costs. This is the standard that I had to abide by when I worked in the federal government, and it was rigidly enforced. I’m sure you as well in the State Department had to do the exact same thing.

The ONLY members of the federal government that are exempt from this standard are the members of Congress. They wrote the legislation years ago in such a way to ensure they had a loophole to allow them to trade financial assets. They have to file the same forms as all federal employees, but they are free to pretty much trade whatever they want, even though they have inside knowledge of all major government contracts that will be awarded, know how future legislation, that they themselves write by the way, will influence not only individual stocks, bonds and options, but whole sectors of the economy their legislation will touch. They not only know what will happen, but they control when it will happen and who will benefit and who will lose. In short, members of Congress being able to either trade securities themselves or more usually through their family members, relatives or their so-called investment advisors is nothing more than a massive conflict of interest, because all they are doing is insider trading.

When you look at how Paul Pelosi made some of his most lucrative trades in the last few years, they are off of options trading. You generally ONLY buy options, which are the right to buy (call options) or sell (put options) a specific stock at a specific price for a limited amount of time, if you know in advance which way a stock is going to go and by how much. Having a wife who happens to know what is in every single piece of legislation being worked on in Congress, as well as access to advance information as to which companies will be getting (call options) or not getting (put options) large government contracts before the information is publicly disclosed, is the ultimate sure thing for successful options trading. It shouldn’t take a rocket scientist to figure out why the Paul Pelosi has been able to achieve returns that far exceed what most investment banks and hedge funds only dream of.

By the way, I’m sure there are many members of Congress who essentially do the exact same thing. I just used Paul Pelosi as an example, because or the recent articles outlining his amazing stock trading performance year after year. I’m simply highlighting why it has always been so hard to get any sort of legislation passed by Congress that would, in effect, do away with their means to greatly supplement their government salaries to the point where their salaries are pocket change.

If members of Congress want to participate in the financial market, which they should be allowed to do like any American, the right way to do it is to only allow them to own broad-based index funds or ETFs. Owning something like a S&P 500 index ETF gives them exposure to the market but doesn’t allow them to game the system for personal financial gain like many are obviously doing today. No individual stocks, bonds and certainly no options trading. Now good luck in ever getting both chambers of Congress to ever pass any legislation that does that. Not going to happen until a whole lot of Congress is replaced by people that actually are there to serve the people and NOT themselves.

BAE
BAE
2 years ago

The government workers like Pelosi and Schumer should never be able to use insider trading to get rich, but that is how they did. Pelosi and her sneaky husband got all their money that way.

Pete from St Pete
Pete from St Pete
2 years ago

Sunshine is the best disinfectant. Require them to announce in public any and all securities transactions withing 10 days after they close. Include real estate transactions.

K
K
2 years ago

This has been going on for as long as I can remember and I’m 73 years old. I remember my parents talking about it. However at that young age It didn’t bother me. I became more politically aware when I was in Junior High. I realized that there were those who flip floped After they were in office, and All the benefits they received after leaving office for the rest of their lives was an outrageous burden on “WE THE PEOPLE”! Then when articles and news stories would come out about different Congressmen making money on insider info that crosses their desks, I started questioning why and what for. Now, and for a very long time, it makes me angry. So maybe it’s a little question, However, Why Did Martha Stewart get put in prison for insider trading one time, and Nancy Pelosi, Joe Biden, John McCain, and and many more Not Get The Same Treatment?? If the Average Citizen is accused, found guilty of insider trading and put in prison, Why Isn’t The Same Law Applied To Those In The Congress????

Geraldine Tollison
Geraldine Tollison
2 years ago

As far as I’m concerned that is insider trading and is illegal

Ann
Ann
2 years ago

If the Republicans don’t stop this practice, they are no different from the democRATs.

jake the snake
jake the snake
2 years ago

All government employees at all levels shoudl have all investments in blind trusts. they shoudl include that no discussions with the trust managers can result in investment changes for 30 days.

Further no government employee nonprofit can have that employee in a decision making position or provide them any income.

all government employee owned companies must be audited every year and get not have government contract unless that contract pre-existed government employment.

Tighten it down so that no government employee can profit of the government.

Garye
Garye
2 years ago

Maybe closing this lucrative loop hole will eliminate the career politicians and get new Patriots with fresh ideas to participate in Our Government.
It’s obvious that the same old self serving politicians care nothing about America or its Citizens, just their own power and money!

Rosalee Cavanaugh
Rosalee Cavanaugh
2 years ago

Amen, Charles

Mike B.
Mike B.
2 years ago

Do we all remember Martha Stewart ? Didn’t she go to jail for insider trading ? Hmmmm . Wouldn’t it be nice if we / working class Americans received tips what & when to buy & sell ? The corruption is so abundant In congress, and not just Democrats. Do you think these politician’s would vote to ban this practice, or vote against this bill proposed by Ossoff, and Kelly ? Good luck

Owen Shrock
Owen Shrock
2 years ago

It definitely should be banned. Especially when members of Congress like Nancy Pelosi make millions each and every year because of insider trading. I read where Nancy Pelosi made over 31 million dollars in the stock market last year where Warren Buffet only made eighteen. So you’re telling me that when it comes to the stock market, Nancy Pelosi is smarter than Warren Buffet? I think NOT, the difference is Nancy is in Congress and a CROOK!

Mohave50
Mohave50
2 years ago

Perhaps we need to clean both House and Senate of those who have been in office forever and have become multi-millionaires at our expense regardless of Party. I love seeing regular citizens step up and run for office. That is how the founding Fathers set up the Government to be. This country was not founded to serve an elite political class that cares more for their own enrichment and power than they do for ordinary citizens and the good of the country. Insider Trading? If it is illegal for us, it sure as Hell is illegal for them.

R. Bart
R. Bart
2 years ago

Ever wonder why so many elites have been running for office over the past twenty years? Congress passed the insider information law which stopped them from legally using that information they got. But it didn’t stop members of congress, the ultimate insiders, from using the information they got by passing bills and directing regulations that affected companies stocks. So now they spend their money running for office so they can get richer by knowing in advance what companies will be e affected. If we can get this passed, I predict fewer ultra rich running for office.

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