Drew Angerer/Getty Images
· 3 min read
If there’s one thing that can unite liberal Democrats, MAGA hat-wearing Republicans, and everyone on Fintwit, it’s the idea that congressional lawmakers, with their insider intel and ability to create market-moving policy, shouldn’t be able to trade individual stocks.
Momentum is building. Two bills proposed this week, one from a pair of Democratic senators and the other from GOP Senator Josh Hawley, would reduce members of Congress to r/WSB lurkers like the rest of us. Biden’s top economic advisor called a stock-trading ban “sensible.” And House Minority Leader Kevin McCarthy, a Republican, said he’s considering limiting or banning congressional stock trades should his party take back the House in November.
The current Congress is unlikely to move forward with either bill. House Speaker Nancy Pelosi, who has become a meme for her and her husband’s uncanny investing skills, is against a stock-trading ban. “We are a free market economy” and members of Congress “should be able to participate in that,” she said last month.
And participate they did. Unusual Whales, a site that seeks to empower retail traders, crunched the numbers and found that, last year, members of Congress bought and sold about…
As a group, on average, they beat the broader market. But these trades were concentrated among a sizable minority of lawmakers; 430 out of 535 total congresspeople didn’t make any trades.
The Stop Trading On Congressional Knowledge (STOCK) Act, passed in 2012, made it illegal for federal lawmakers to conduct insider trades. It also required them to publicly disclose trades greater than $1,000 within 45 days of making them.
But enforcement of the STOCK Act has been less strict than a substitute teacher on a Friday. The Campaign Legal Center, an independent ethics organization, filed complaints Wednesday against seven of at least 15 lawmakers it says have failed to report investments, including one who it claims is 300 transactions behind. No lawmaker has ever been formally sanctioned as a result of the STOCK Act, though some have had to pay fines that are not disclosed to the public.
Zoom out: Why has backlash to congressional stock trading reached a frenzy…now? It’s not exactly a new problem.
One hypothesis is that the surge in retail trading during the pandemic has led to a wave of resentment against any investor with an unfair advantage—like, say, Fed officials who decide interest rates or lawmakers who receive intelligence briefings.
Basically, if Reddit isn’t your best source of information on stocks, then maybe you shouldn't be able to trade them.
—JW, NF
Sherry Qin / 01.10.2022
Matty Merritt / 01.14.2022
Matty Merritt / 01.14.2022
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