As pressure mounts on Congress to ban representatives from trading stocks, a group of over seventy lawmakers issued a letter to House Speaker Nancy Pelosi and Minority leader Kevin McCarthy in support of several anti-insider trading bills currently under consideration in the House. The letter, signed by a wide range of congresspeople, including Rashida Tlaib and Matt Gaetz, calls on Congress to swiftly bring “legislation to prohibit members of Congress from owning or trading stocks, such as the Ban Conflicted Trading Act or the TRUST in Congress Act, to the House floor.” They add that “This common-sense, bipartisan legislation is unfortunately necessary in light of recent misconduct and is supported by Americans across the political spectrum. Both of you have recently addressed this issue in public comments, but this glaring problem will not go away until it is fixed, and Congress should not delay when we have the power to fix it.”
However, not everyone is on board with the proposed change. Speaker Pelosi, whose husband has been described as a “prolific trader,” appealed to Capitalist principles to defend congresspeople trading stocks. “We’re a free-market economy,” Pelosi said. “They should be able to participate in that.” In response to the letter, however, Speaker Pelosi expressed willingness to work with the rank and file on this issue. “I just don’t buy into it, but if members want to do that, I’m OK with that,” she said.
Polling suggests, however, that the American people are firmly on the side of the attempts to ban Congressional trading. In one poll 70% of Democrats, 78% of Republicans, and 80% of Independents expressed support for the idea. While the bill is popular with the American people, its lack of appeal to congresspeople is understandable. Last year, at least 55 congresspeople, around 10% of Congress, violated the STOCK Act, which bars congresspeople from trading on insider information.
Insider trading, the practice of trading securities on information that is not publicly available, has long been illegal. However, in the case of congresspeople, it is often difficult to prove that they are trading on a particular piece of insider information. In 2012, Congress passed the STOCK Act, which aimed to make trading on insider information more difficult. However, the law was criticized for being ineffective and failing to prevent many congresspeople from reaping large windfalls by selling off their portfolios in February 2020, when they had access to US government assessments of the potential scare of COVID, yet the public was unaware of the magnitude of the threat posed by the pandemic. The current legislation, however, would go a step further and prevent congresspeople from trading any individual stocks at all, whether or not they are trading on insider information.