WASHINGTON — An effort to tightly control shareholding by members of Congress is gaining momentum on Capitol Hill for the first time in a decade, fueled by politically vulnerable lawmakers who recognize the potential of signaling voters to act against the alleged corruption in Washington.
The issue of banning the ownership and trading of individual stocks by lawmakers is a complex one. It raises questions about what other types of personal investments or economic obligations could be seen as conflicts of interest, and how far the prohibitions should extend. California Speaker Nancy Pelosi and Maryland Majority Leader Steny H. Hoyer initially expressed their opposition, and even now it’s not clear how far Ms. Pelosi will go to get strong legislation passed.
But with mounting pressure from regular members in both parties and both houses of Congress, the top two Democrats showed openness to action on Wednesday.
New York Senator Chuck Schumer, the majority leader, took to the Senate floor to embrace a stock-holding ban and encourage Democrats to reach out to Republicans to reach an agreement quickly.
Ms. Pelosi was less effusive, telling reporters at her weekly press conference that she would accept such a ban, but with a complicating twist. She said she wanted any inventory restrictions, including tightening existing disclosure rules on stock ownership and trading that now apply to members of Congress and the executive branch, to also apply to the government’s judiciary, especially the Supreme Court.
The judiciary does have ethical rules that require some disclosure, in some cases faster and more frequently than the congressional branch. But an investigation last month by The Wall Street Journal found hundreds of cases where federal judges presided over cases involving companies in which they or their relatives owned stock.
“It should apply to the entire government,” she said, adding, “the judiciary has no reporting. The Supreme Court has no communications. It has no reporting on stock transactions and makes important decisions every day.”
There are already several proposals for a trade ban in the House and Senate, including a new law unveiled this week by Senators Elizabeth Warren, Democrat of Massachusetts, and Steve Daines, Republican of Montana. A proposal by New York Democrat Kirsten Gillibrand and California Democrat Katie Porter, reintroduced on Wednesday, would ban individual stock trading and extend financial disclosure rules to both the judiciary and the Federal Reserve. board.
The speaker’s caveats infuriated some of the strongest proponents of quick action to ban Congressional stock ownership, which they saw as a veiled attempt to back up the effort. For all the benefits of applying disclosure rules to the judiciary, they argued, such legislation would spark debate about the constitutional separation of powers and Congress’ rights to dictate the judiciary.
“That’s literally a different conversation, and a conversation so hard to put your arms around you that you’ve fueled the movement,” said Virginia Democrat Abigail Spanberger, a Virginia Democrat and a co-author of bipartisan legislation for the ban. of stocks that is gaining momentum.
She added: ‘I have not heard from any voter: ‘I am really concerned about the Supreme Court ruling in such a way for their personal gain.’ That’s not a thing.”
The push to ban the trading of congressional stock was sparked in 2020 by a spate of revelations that senators from both parties had traded health care stock after closed-door briefings about the then-nascent coronavirus pandemic.
Things have picked up pace in recent weeks as Democrats from conservative-oriented districts eager to demonstrate their independence from Ms. Pelosi and other party leaders took to the issue to appeal to growing populist sentiment among their voters. Proponents readily admit that voters view Congress as corrupt.
“The idea that we come in and buy, sell, buy, dial in, it’s a two-pronged problem,” said Texas Republican Representative Chip Roy, who co-wrote the 2020 stock ban legislation with Ms. Spanberger. †
The sophisticated and lucrative trades of Ms. Pelosi’s wealthy husband, Paul Pelosi, have also attracted attention, after investors on TikTok and other platforms began watching her stock disclosures and mimicking his investments.
Mr. Schumer said on Wednesday, “I believe this is an important issue for Congress to address, and it is something that has clearly sparked interest on both sides of the aisle in recent weeks.”
Mrs. Pelosi’s embrace was hardly unequivocal. She said she had instructed the House Administration Committee, which has jurisdiction over the chamber’s operations, to produce new stock trading legislation, assuming “they will have it pretty soon.”
She also called for tougher penalties for lawmakers who violate existing rules about reporting share ownership and trading under a 2012 law called the Stop Trading on Congressional Knowledge (STOCK) Act.
“What we’re trying to build is consensus,” she said.
Proponents of action worry that the commission, led by California Representative Zoe Lofgren, a close confidant of Pelosi, will bottle up the effort. So far, Ms Lofgren has said little other than that she is reviewing the issue and the merits and demerits of the existing stock ban bills. She has not scheduled any hearings or a public drafting of committee legislation.
“I look forward to working with members and stakeholders to determine whether new strategies can be devised to increase transparency and accountability and build public trust in the United States Congress,” Ms Lofgren said in a statement. .
New Jersey Democrat Tom Malinowski said that as lukewarm as Ms. Pelosi’s language was, she had shocked the effort to ban stock trading. Malinowski was charged last year with charges of failing to properly disclose hundreds of thousands of dollars in transactions, which is sure to haunt him as he faces a tough reelection race this fall. Since his ethical clash, he has become an outspoken advocate of mandating all investment holding companies into a blind trust.
“The speaker listens to her caucus, as it should,” he said, noting that her change in words, if not in tone, reflected the direction of her party. “Did her initial public opposition actually contribute to the momentum? I think it raised the debate, let’s put it this way.”
It can be difficult to conclude such an agreement. Existing bills differ on whether spouses and family members should also be prohibited from owning and trading individual stocks, whether capital gains taxes on forced stock sales should be deferred, and whether the prohibition should apply to other assets, such as businesses.
And some Democratic leaders have raised questions about a slippery slope. Insider trading is already illegal, and the STOCK Act prohibits members of Congress from trading with “nonpublic information derived from” their position. That law also requires disclosure of most stock transactions, although Ms. Pelosi noted that it was not an effective deterrent.
If Congress goes further and completely excludes individual stock ownership, critics argue, what about real estate ownership? Should a legislator be allowed to factor student loans into loan forgiveness legislation?
“My answer to that is, let’s use common sense,” said Mr. Malinowski. “Most people can differentiate between investing in the stock market from owning a house or having a student loan or having to obey the speed limit.”
Ms. Spanberger admitted that some of her colleagues had suggested that a stockholding ban could prevent capable people from running for Congress. But she showed little compassion.
“There are many jobs and millions of Americans out there,” she said. “If this is too much of a restriction, you just showed what your priorities are, and you shouldn’t be in Congress.”