Stock trading ban gains steam but splits Senate GOP
Proposals to ban members of Congress from trading individual stocks are gaining major momentum in the House, but some Republicans in the Senate are raising early red flags, arguing that some of the leading proposals go too far or would be too difficult to implement.
Senate Republicans are also voicing concerns that restricting stock ownership will put the most burden on colleagues with less money and could dissuade otherwise well-qualified candidates from running for office.
There’s also a view among GOP senators that Democrats are giving new prominence to a proposed ban on stock trading in a scramble to find promising political issues to run on in the midterm elections after failing to pass key elements of President Biden’s agenda.
“Right now I’m not ready to say I’m ready to do that,” Sen. Chuck Grassley (Iowa), the most senior member of the Senate Republican Conference, said of proposals to bar lawmakers from trading individual stocks.
Grassley, who is up for reelection this year, noted that lawmakers are already required to publicly report their stock trades and face prosecution or censure if they break insider-trading law.
“Transparency brings accountability,” he said.
Grassley reported owning farmland in Butler County, Iowa, and earning between $100,000 and $1,000,000 from grain sales.
He also reported his wife, Barbara Grassley, owning various mutual funds.
Sen. Roger Wicker (R-Miss.) pointed out that he’s one of the least wealthy members of the Senate and questioned why his wife should be required to divest herself from bank stock that she inherited from her father.
“Don’t we have full disclosure now?” he asked. “Gayle and I have got to be among the 5 percent lowest net-worth members of the Senate. It seems to me like full disclosure is something that ought to be sufficient.”
Wicker reported that his spouse, Gayle Wicker, owned between $1,001 and $15,000 in stock in Renasant Corp., a regional banked based in Tupelo, Miss., in 2020.
The idea of banning lawmakers from making trades is gaining steam in Congress after Speaker Nancy Pelosi’s (D-Calif.) husband’s stock trades attracted widespread attention.
Recent media reports have highlighted various lawmakers who allegedly violated the reporting requirements of the STOCK Act, a law that passed in 2012 and prohibits members of Congress from using nonpublic information derived from their official position for personal benefit.
Court filings showed the Security and Exchange Commission also investigated stock trades made by Sen. Richard Burr (R-N.C.) and his brother-in-law at the start of the COVID-19 pandemic in early 2020.
Pelosi initially defended lawmakers’ ability to trade individual stocks, telling reporters in December: “We are a free market. They should be able to participate in that.”
But Pelosi abruptly shifted her stance this year, telling reporters Wednesday that she is now open to restricting members of Congress from trading stocks.
She did add the major caveat that she wants new rules to apply to the Supreme Court as well.
“It has to be government-wide,” she said, noting, “The third branch of government, the judiciary, has no reporting.”
A bipartisan bill to require all members of Congress, their spouses and dependent children to put certain investment assets in a qualified blind trust within 90 days of the bill’s enactment is fast gaining bipartisan support in the House, where it’s sponsored by moderate Democratic Rep. Abigail Spanberger (Va.) and conservative GOP Rep. Chip Roy (Texas).
On Wednesday, Sens. Elizabeth Warren (D-Mass.) and Steve Daines (R-Mont.) introduced the first bipartisan Senate bill to restrict stock trades.
The legislation bans members of Congress and their spouses from owning and trading individual stocks, bonds, commodities, futures and other securities, including interest in a hedge fund. It allows lawmakers to trade mutual funds and exchange-traded funds as long as they do not pose a conflict of interest.
It allows a transition period for lawmakers to divest their holdings and allows a deferral of capital gains taxes for lawmakers and spouses who are forced to divest.
Violators would face a civil penalty of up to $50,000 per violation, and the Department of Justice and the U.S. Office of Special Counsel would be tasked with enforcing the law.
Sens. Debbie Stabenow (D-Mich.) and Marsha Blackburn (R-Tenn.) have joined the legislation as original co-sponsors.
Senate Republican Whip John Thune (S.D.) said he’s not sure how many more Republicans will sign on to legislation cracking down on their ability to trade stocks.
“It depends on what it looks like. It’s an issue now that’s gotten some traction in the House among some Republicans over there, and we’ve got Republicans with bills over here. There will be some support depending on what it ultimately looks like,” he said.
Senate Minority Leader Mitch McConnell (R-Ky.) is staying noncommittal on the issue, but he usually tries to avoid dividing his caucus on politically charged votes.
“I haven’t given that any serious thought yet,” he told reporters Tuesday, but also noted that he doesn’t own individual stocks and keeps his money in mutual funds.
The Republican position is made more complicated by House Minority Leader Kevin McCarthy’s (R-Calif.) plan to campaign on lawmakers’ stock trading in the midterms, something he has discussed with allies, according to media reports.
Sen. Josh Hawley (R-Mo.) announced last month his plan to introduce the Ban Insider Trading in Congress Act, which would prohibit lawmakers and their spouses from holding, acquiring or selling stocks or “equivalent economic interests” while in office.
“From my point of view, a couple things are critical. Any ban on stock holding and stock trading has got to include spouses, not just members. If you say that spouses are exempt, well then you just created a giant, giant loophole,” he said.
“If you come into Congress, my view is you should have to sell the stock and either put it in a broad-based mutual fund, like most Americans invest in, or in a completely blind trust that you have no control in,” he said.
But Hawley’s not sure how many members of the Senate GOP conference will join the effort.
“I think that in the country the support for this is across the board, but it’s probably strongest among Republican voters and independents. Interestingly, you don’t see that reflected in the caucus. Maybe some of that is that people haven’t really focused on it, but I hope that they will,” he said.
Sen. Ben Sasse (R-Neb.) has introduced his own ethics reform bill that would bar members of Congress from buying or selling stocks while in office and ban them from making money lobbying after leaving public service.
It would also restrict the immediate family of Cabinet members, the president and the vice president from soliciting donations from foreign sources.
Other Republicans, however, say that while a broad ban on individual stock trading might sound good in theory, it could be difficult to implement or have unintended consequences in practice.
Sen. Roy Blunt (R-Mo.), who is retiring this year, said, “I think it’s a lot easier to say than do.”
He questioned whether it would apply to extended family and could become a disincentive for running for or staying in office.
“Seems to me there’s some danger here of creating one more reason to make it either hard to come, hard to serve or hard to stay, and we’ve done plenty of that,” he said.
He cautioned that just because something polls well doesn’t mean it’s good for the institution.
“If you introduced a bill that members should take a 50 percent cut in pay, that would poll really well,” he said.
Sen. Susan Collins (R-Maine) said she’s not yet sold on the idea of banning individual stock transactions.
“I was an original sponsor, co-sponsor of the real STOCK Act that passed that required disclosure, and I tend to think disclosure and enforcement are the ways to go, but I haven’t really looked at precisely at what they’re proposing,” she said.
Sen. Mitt Romney (R-Utah) questioned how difficult it would be to impose a ban on lawmakers selling individual stocks.
“I think it’s a good idea to prohibit the trading of stocks. I think it’s hard to implement because of people who in some cases come to Congress or the Senate with 401(k)s or other instruments and other investments — private companies, apartment buildings they might have an ownership stake in. So it’s hard to implement but I think the intent is good,” he said.
He said there would “have to be some kind of flexibility” for people “who might come from a small business and own a hardware store.”
“And how do you deal with spouses? You have spouses that are highly accomplished and that are working in businesses. Perhaps they’re actually in the world of stocks or trading stocks. How do you deal with that? So figuring out how to make this work without preventing people from serving is the challenge ahead,” he said.