Legislators abusing access to privileged information for financial benefit isn’t uncommon. Recently, several legislators were investigated for selling large amounts of stock just prior to the economic recession caused by the pandemic in an insider trading scandal. There are mechanisms in place to prevent and punish such nefarious behavior, but congressional leaders have conveniently revived the issue to shame members of opposing parties.
A recent push in Congress to ban legislators from trading stocks has garnered bipartisan support in recent weeks. On Jan. 24, 27 representatives addressed a letter to House of Representatives leadership, urging them to permit a bill targeting the issue to be heard on the floor. U.S. House of Representatives Speaker Nancy Pelosi (D-Ca.) dismissed the movement Dec. 15 after being questioned on whether legislators should be allowed to engage in stock trading, claiming that members of Congress have the right to participate in the free-market economy.
Pelosi is among the wealthiest members of Congress who, primarily through her husband who operates an investment firm in California, consistently outperforms the S&P 500 — an index tracking the performance of the 500 largest publicly traded companies in the U.S. — and is reportedly worth over $40 million.
The Stop Trading on Congressional Knowledge, or STOCK Act of 2012, prohibits members of Congress from acting on non-public information to gain in the stock market. Moreover, this law requires members of Congress to report all stock market transactions, including those of their spouses. This law was embraced by both Democrats and Republicans to combat what was effectively insider trading. In light of the Federal Reserve enforcing new, stricter guidelines on what members of the Federal Reserve Board and other staff are allowed to do regarding the stock market, Congress and other government branches have felt pressure to follow suit.
In the case of the Fed, members of the board and other staff were barred from purchasing individual stocks and bonds and in large part limited to investing in diversified investment vehicles, such as mutual funds. Furthermore, these individuals were forced to hold on to any investments for at least one year before trading them. Considering the Fed’s proximity to the financial sector, this move was long overdue; however, similar action restricting members of Congress would be harder to justify.
Timothy LaPira, a JMU political science professor with a focus on Congress, lobbying and interest groups, discussed how political parties weaponize the issue of banning legislators from trading stocks to attack members of opposing parties and ultimately assume more power.
“The reason we’re having this conversation right now is not because members of Congress are trading stock; it’s because there are some politicians that want to make it an issue,” LaPira said. “Kevin McCarthy, the minority leader, is trying to embarrass Nancy Pelosi ... because he’s trying to score political points. The more and more we talk about members of Congress trading stocks, the less we talk about the Jan. 6 insurrection.”
LaPira further discussed how political polarization is effective in preventing legislators from prioritizing wealth accumulation over maintaining the party line. He said this knowledge enables us to see through the political ploys of each party.
“One truism in all of legislative studies is that members of Congress are single-minded seekers of reelection; that is the primary motivation,” LaPira said. “In many ways, it would be dumb for them to make a business decision that is going to hurt their primary motivation. Political party is the number one predictor of how they’re going to vote … They’re not all of a sudden going to flip a vote to affect a few thousand shares of Google.”
The STOCK Act of 2012 could also be interpreted as an attempt to score political points and appear bipartisan, insofar as it included limited provisions to ensure its guidelines would be adhered, resulting in many legislators violating the law with little or no consequences, according to Business Insider.
“Congress is the only branch of government that the constitution says governs itself,” LaPira said. “What the STOCK Act says is that you can trade all the stock you want, but you have to report to this internal office that we’re creating what your stock trades were. Unfortunately, perhaps not mistakenly, it had very weak enforcement mechanisms.”
LaPira said he believes members of Congress should be barred from trading on the stock market to force them to spend more time focusing on solving problems that face the nation. This would be of particular importance to Virginia, considering Senator Mark Warner (D-Va.) is wealthier than Nancy Pelosi and almost all other Congress members, according to Business Insider. However, LaPira said simply banning members of Congress from trading stocks won’t solve anything, considering the friends and family of Congress members who could be permitted to do so.
Legislators shouldn’t pursue their positions to obtain information others aren’t privy to, and the laws in place to prevent them from acting on this information should be bolstered. However, this issue is being used as political ammunition and masks those that more seriously challenge our democracy and a variety of issues, including education.
One of President Joe Biden’s campaign promises was to provide two years of free education at either a community college or four-year institution. It was then made a provision of Biden’s Build Back Better Bill, but only for community college in order to make the provision more palatable. Ultimately, considering the razor-thin margins in both the House and Senate, senators, namely Joe Manchin (D-W.V.) and Kyrsten Sinema (D-Az.), exploited their growing significance to force the hand of senate democrats and squandered the provision.
Opportunistic legislators and their hyperfixation on reelectability prohibits the advancement of comprehensive bills that address real issues facing U.S. citizens including ubiquitous inflation in grocery market prices and college tuition alike. Only those bills that promote these aims make it into law, reflecting not the will of the people but that of a desire to maintain power. Banning legislators from trading stocks is yet another case overshadowing and dismissing solutions to issues that burden our community of students, among others.
Evan Weaver is a sophomore English major. Contact Evan at email@example.com. For more editorials regarding the JMU and Harrisonburg communities, follow the opinion desk on Instagram and Twitter @Breeze_Opinion.