In case you haven’t heard, congresspeople are evil. Their terrible legislative decisions aside, 59 members of Congress have committed insider trading according to 15 U.S. Code § 78u–1. The statute says that if any person buys or sells a “security or security-based swap agreement while in possession of material, nonpublic information,” they have committed insider trading. Many members of Congress are guilty of this offense, and the exact details behind it are disheartening.
One hobby that I’ve picked up recently is looking at the trades of members of Congress and wondering what the market will do next. A website called House Stock Watcher compiles publicly available congressional stock transaction information, and you can even sort by individual member to see each congressperson’s trades. For example, by looking at Nancy Pelosi’s trades, we can see that she owns a lot of tech stocks and has made 63 trades since Q1 of 2020.
Business Insider recently did an in-depth report on members of Congress and how well they are complying with the Stop Trading on Congressional Knowledge (STOCK) Act of 2012. This bill passed with bipartisan support in the wake of the 2008 global financial crisis and the Affordable Care Act legislative debates in 2009-2010 and the heavy insider trading that occurred during them.
Insider trading was also rampant at the beginning of the COVID-19 pandemic. Senator Richard Burr sold up to $150 thousand worth of shares of Wyndham Hotels and Resorts shortly before Wyndham’s stock plummeted. Burr made these trades after attending congressional briefings on the fast transmission of the coronavirus. This indicates that he not only knew about the impending stock market crash, but was spineless enough to make sure that he didn’t lose any money from it. Other congresspeople committed similarly egregious stock trades, like when Kelly Loefler bought between one hundred thousand dollars and $250 thousand of Citrix, a remote-working software company.
The act requires congresspeople to make public stock transactions with a value above one thousand dollars within 45 days of the transaction, but compliance with that reporting requirement has been spotty at best and non-existent at worst. Part of the reason for this failure to comply is the small penalty that the STOCK Act carries. The standard penalty is only two hundred, and that can be waived by Congressional ethics officials. To study compliance with the STOCK act, Business Insider created a project called “Conflicted Congress.” It places congresspeople into three categories: solid, borderline and danger. Solid means that their financial disclosure is in-line with the STOCK Act, borderline means that their financial disclosure deserves a closer look and danger means that they have problems that could be considered ethics violations. There are a total of 405 congresspeople in the solid category, 116 in the borderline category and 13 in the danger category.
The violators of this law come from both parties, and some are higher-ups in their party. Notable names in the borderline category include Joe Manchin, Ed Markey, Mitch McConnell, Ted Cruz, Richard Burr (who voted against the STOCK Act in the Senate), Kevin McCarthy, Dan Crenshaw and Nancy Pelosi. The notable members of the danger category are Dianne Feinstein, Tommy Tuberville and Kevin Hern.
Should congresspeople, some of whom have net worths over one hundred million dollars, be able to act on information that the general public doesn’t have yet and may never have? The answer is clear: obviously not. And congresspeople who do act on that information should be punished accordingly, with impeachment and subsequent fines and prison time. Impeachment proceedings can occur when any civil official commits a high crime or a misdemeanor. So, let’s get these people who wrongly used their positions out of office. They have used their jobs to gain a financial advantage over those who aren’t lucky enough or morally reprehensible enough to become a congressperson, and should thus lose the privilege of representing their constituency.
We desperately need a corrective measure to stop insider trading, but I sadly don’t see it happening. The people who would need to vote to pass this law are committing insider trading themselves, so it would require congresspeople to voluntarily vote to get less money from their jobs. The richest, most powerful people in our country shouldn’t be able to get even richer just because they have more information than us.