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Bipartisan Senate group proposes ban on stock trading in Congress

Bipartisan Senate group proposes ban on stock trading in Congress

A group of bipartisan senators passed a new bill on Wednesday that would impose heavy penalties on members of Congress and their families for trading stocks.

The bill, introduced by Senators Jon Ossoff (Democrat of Georgia), Gary Peters (Democrat of Michigan), Jeff Merkley (Democrat of Oregon) and Josh Hawley (Republican of Missouri), would prohibit members of Congress from buying and selling stocks and certain other investments and impose similar restrictions on spouses and dependent children of members of Congress through 2027.

In addition, members of Congress, as well as the President and Vice President, would have to divest from certain investments by 2027.

If politicians violate the new rules, they face fines amounting to their monthly salary or ten percent of the value of any illegal investment.

The Homeland Security and Governmental Affairs Committee will vote on July 24 to forward the bill to the Senate, committee chairman Peters announced on Wednesday.

“I believe Americans have the right to trust that their federal elected officials will make decisions that are in the best interests of the American public and not in the interests of their personal finances or financial decisions,” Peters said.

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Lawmakers are already prohibited from using information from classified briefings to make investments, and members must publicly disclose what stocks they buy and sell. But the penalty for such a violation is $200, barely a fraction of the $174,000 salary that most members of Congress receive.

And the members of Congress were so active in the stock market that they launched investment products that allow ordinary investors to mimic the trading activities of the members of Congress.

Under the bill passed Wednesday, members of Congress would still be able to invest in mutual funds or securities investments such as exchange-traded funds (also known as ETFs).

“When people are in government, they have more and more access to sensitive, nonpublic information. It’s important to mitigate those conflicts of interest, but that doesn’t stop them from being invested in the market,” says Virginia Canter, chief ethicist at the government watchdog group Citizens for Responsibility and Ethics in Washington.

Previous bipartisan efforts to ban or restrict stock trading in Congress have failed. Then-House Speaker Nancy Pelosi (D-California) declined to introduce the bill for a vote in the House in 2022, saying the bill did not have enough votes to pass. But she herself also opposed the bill, and her husband Paul Pelosi is a very successful investor.

“We are a free market economy,” Pelosi said in 2022. “You (members of Congress) should be able to participate in that.”

The former spokeswoman has long insisted that she personally does not own any shares and has no knowledge of or involvement in her husband’s investments.

“Let’s call a spade a spade,” Hawley told reporters on Wednesday. “There are many members who do not want to ban stock trading.”

There was little to fear from any consequences for politicians whose stock transactions have been subjected to close scrutiny in recent years.

Republican Rep. Pat Fallon of Texas failed to disclose 122 transactions valued between $9 million and $21 million in 2021 on time. He paid $600 in late filing fees and corrected the records, but refused to cooperate with a review by the Office of Congressional Ethics.

The Senate Select Committee on Ethics has not disciplined a senator in more than 15 years, even after a stock-trading scandal rocked the upper chamber. Then-Senators Richard Burr (R-N.C.), Dianne Feinstein (D-Calif.), James M. Inhofe (R-Okla.) and Kelly Loeffler (R-Ga.) came under scrutiny in early 2020 after dumping huge stock holdings ahead of the coronavirus-induced market crash. Neither the Senate Ethics Committee nor the Justice Department, whose investigators had launched an investigation into the stock sales, brought charges.

The “unequivocal exoneration by the Department of Justice confirms what Senator Loeffler has been saying all along – she did nothing wrong,” a spokesman for Loeffler said at the end of the investigation, adding: “She and her husband acted entirely appropriately and followed both the letter and the spirit of the law.”

The initiators of the bill expressed their hope on Wednesday that Senate Majority Leader Charles E. Schumer (DN.Y.) would bring the bill to a vote in the plenary in the coming months. The leadership of the Republican-dominated House of Representatives has also signaled potential interest in a stock trading ban.

But the bill could face greater hurdles in the Senate, where 60 votes would be needed to overcome a possible filibuster. Hawley said he was confident other Republicans would support the bill as well.

“A whole bunch of my Republican colleagues ran in 2018, 2020 and 2022 on the stock trading ban. That was part of their campaigns. They said they would do it, they promised to do it,” Hawley said. “I hope and expect and expect that there will be a number of Republicans – I think it would be hard to explain otherwise … that would support that.”