‘Too many members of the Senate trade in stocks,’ Senate Banking Committee chair says
The push for stricter regulation related to members of Congress trading individual stocks has been picking up momentum in 2022.
There are currently at least half a dozen bills that have been proposed in recent months to address the issue, which one senator said has gotten out of hand.
“Too many members of the Senate trade in stocks, and their spouses do,” Sen. Sherrod Brown (D-OH), the chair of the Senate Banking Committee, said on Yahoo Finance Live (video above). “I don’t accuse anybody individually of a conflict of interest and in betraying the public interest. But the temptation — if you own shares of stock, everything looks like a conflict of interest because we vote on everything in the Senate. We vote on banking rules. We vote on environmental rules. We vote on labor rules. We vote on minimum wages sometimes, so there are all kinds of conflicts.”
Under the STOCK Act of 2012, lawmakers are required to report their stock trades within 45 days of the transactions. However, a report by Insider found that 54 members of Congress have failed to properly report their transactions.
“We need to write the strongest bill that we can get a majority of senators on,” Brown said. “It will be a challenge because a number of senators, especially Republicans, have complained about this. And there are a lot of people in the Senate that hold a lot of investments, and I’m concerned.”
‘You’re here for public service’
Several senators have come under scrutiny for insider trading practices since the pandemic first hit the U.S. In March 2020, the Justice Department announced that it would be investigating some senators to determine whether they traded ahead of the stock market crash triggered by the coronavirus pandemic.
An investigation by ProPublica and The Center for Responsive Politics revealed that Sen. Richard Burr (R-NC), who was chairman of the Senate Intelligence Committee at the time and received confidential briefings about the emerging threat of the coronavirus pandemic, and his wife sold numerous stock shares following those briefings.
Burr denied the allegations, and the Department of Justice ended its inquiry into his trading actions in January 2021, though the Securities and Exchanges Commission (SEC) is reportedly still investigating.
Kelly Loeffler (R-GA), who was a member of the Senate Health Committee, reportedly sold stock on January 24, 2020, which was the same day the committee was briefed by administration officials on the coronavirus.
Sens. Dianne Feinstein (D-CA) and Jim Inhofe (R-OK) were also scrutinized for their stock moves.
“You’re here for public service, not here to enrich your portfolio,” Brown said. “If you want to make more money, stay out of it. Don’t run for the Senate. Do something else. We have a public trust here.”
House Speaker Nancy Pelosi (D-CA) has been a vocal opponent of banning members of Congress from participating in the stock market. Her husband, Paul, is an active stock trader, according to reports.
“We are a free-market economy,” she said during a press conference in December, adding that lawmakers “should be able to participate in that.”
Twenty seven lawmakers recently wrote a letter urging House leaders to act quickly to bring “commonsense, bipartisan” legislation to the floor banning members of Congress from owning or trading stocks.
In an interview with Yahoo Finance, progressive Congresswoman Alexandria Ocasio-Cortez (D-NY) detailed the fundamental issue as she sees it.
“I am a member of Congress: Members of Congress have access to very sensitive security clearances,” Ocasio-Cortez said. “We have access to very detailed, tailored briefs. We, our job is to try to anticipate and legislate for what we see is coming. And we should not have the ability to both have access to that information and be able to hold and trade individual stock.”
‘They were doing stock trading’
Members of Congress from both political parties have proposed legislation to limit stock trading among their colleagues.
A proposal from Sens. Jon Ossoff (D-GA) and Mark Kelly (D-AZ) would prohibit members of Congress and their immediate family members from conducting any stock transactions while serving in office and confiscate the lawmaker’s entire salary if they break the rules. U.S. Representatives Abigail Spanberger (D-VA) and Chip Roy (R-TX) unveiled a similar proposal to be passed in the House.
Republican Senator Josh Hawley has also proposed a bill that would prohibit lawmakers and their spouses from owning or trading individual stocks.
Amid these discussions, however, Brown stressed: “Don’t forget about the Federal Reserve.”
Last October, Brown co-sponsored a bill — the Ban Conflicted Trading at the Fed Act — that would prohibit officials at the Federal Reserve from trading individual stocks. This came as a result of ethics concerns surrounding stock trades made by former Dallas Fed President Robert Kaplan and Boston Fed President Eric Rosengren, who both left their roles after scrutiny increased on the Fed.
“We know about some compromise, if you will,” Brown said. “We’ve had Fed presidents around the country — a couple resigned probably because of this. They were doing stock trading.”
In January, Federal Reserve Vice Chair Richard Clarida resigned earlier than initially planned after it was revealed that he had failed to properly disclose his trading activities in 2020, raising the question of whether or not he benefited from Fed actions.
Brown said he would be meeting with fellow lawmakers to “get something significant through the Senate.”
“It won’t be exactly the bill the way that I introduce it or Senator Ossoff or Senator Merkley,” he said. “But we need to move and we need to include the Federal Reserve in it. We need to include — not all family members, not grown children — but we need to include spouses in these rules.”
Adriana Belmonte is a reporter and editor covering politics and health care policy for Yahoo Finance. You can follow her on Twitter @adrianambells and reach her at [email protected].
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