There have been recent headlines about several members of Congress unloading thousands, and in some cases millions of dollars worth of stock before the market plummeted this month due to the coronavirus. And a wave of outrage and calls for some of those members to resign soon followed. But at least some of that outrage is misplaced.
Republican Sens. Richard Burr and Kelly Loeffler have received the brunt of this criticism. According to Politico, they and other elected officials, including Democrats like Sen. Dianne Feinstein and Rep. Susan Davis, along with staff working for members in both parties, made eyebrow-raising trades leading up to the current economic slide. It’s a particularly bad look for Burr, a retiring member who chairs the Senate Intelligence Committee and was one of only three senators to vote against a law several years ago prohibiting members of Congress from profiting from nonpublic information, and Loeffler, a wealthy businesswoman who was just appointed to the Senate in January and whose husband runs the company that owns the New York Stock Exchange.
However, bad optics and illegal acts are very different things.
Any members who engaged in questionable stock trading before this most recent market fall should be investigated by the House or Senate Ethics Committee. Burr has already called for such an investigation into his own actions, stressing that he “relied solely on public news reports” to guide his stock sales.
The Department of Justice may also need to get involved, as this may not be the best time for Congress to be policing itself. But smoke doesn’t necessarily mean fire.
The accusations of what amounts to congressional insider trading require caution and more investigation. But above all, the situation already speaks volumes about the limitations of current law.
Whether an investigation occurs, regardless of who conducts it, and no matter the details of these stock trades in question, it seems very unlikely to end in a volition or prosecution under the Stop Trading On Congressional Knowledge Act.
That’s because, for a member of Congress to violate the STOCK Act, the trade or trades in question must be made using nonpublic information. And proving that a trade was made based on nonpublic information, as opposed to information available to everyone, can be difficult.
For instance, while there was a Jan. 24 coronavirus briefing for senators right around the time some senators sold stock, there was also plenty of publicly available information about the global spread of the virus. Members can and have pointed to that public information to explain the trades.
In addition, some members and staff from both sides of the aisle — including Loeffler — have said that third-party financial managers made the trades without their knowledge at the time. That’s an explanation that has surfaced in past stock trading controversies as well.
This current controversy, at least for now, is more of an indictment of the existing system than it is for any individual member. Rather than being outraged about trading behavior that is probably legal, energy would be better spent calling for a reassessment of whether members of Congress should be allowed to trade stock at all while in office.
Voters should have confidence that their elected officials are making decisions based on what they think is right for the country, and not what is right for their stock portfolio. The STOCK Act clearly has limits in that regard.
Sen. Elizabeth Warren introduced legislation back in 2018 that would, among other lofty government reform proposals, tighten stock restrictions for members of Congress and their staff.
Maybe Warren’s ban on individual stock ownership would go too far. Perhaps a blanket requirement that members have no direct control over their stock portfolios while in office would be a step in the right direction. But there is plenty of room for stronger restrictions.
Taxpayers are already compensating each member of Congress with a salary of $174,000 per year. The average salary for congressional chiefs of staff isn’t far behind. It’s not too much to ask that additional steps be taken to ensure their public service is strictly that, and not a means to personal profit.
Existing stock trading reports haven’t proven corrupt acts or motives on the part of any members or staff leading up to the current economic upheaval. But the current situation sends a bad message to the public, and as we’d expect just about any municipal lawyer to advise a town council here in Maine, it’s important to not only guard against corruption, but the appearance of corruption as well.