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Speaker of the House Nancy Pelosi made a good case for banning members of Congress from trading individual stocks, even as she argued against such a ban.
A reporter asked about this potential ethics reform in December, and she quickly dismissed it.
“We’re a free market economy,” she said. “They should be able to participate in that.”
The question followed reporting from Business Insider that found approximately 50 members of Congress and over 180 congressional staffers have violated the Stop Trading On Congressional Knowledge (STOCK) Act, a law passed almost 10 years ago in an attempt to combat insider trading from members of Congress. However, even seemingly obvious violations are difficult to prosecute given the law’s limitations.
Walter Shaub, a former director of the U.S. Office of Government Ethics, wasn’t impressed by Pelosi’s answer. No one who cares about ethical governance should be.
“It’s a ridiculous comment!” Shaub wrote on Twitter. “She might as well have said ‘let them eat cake.’ Sure, it’s a free-market economy. But your average schmuck doesn’t get confidential briefings from government experts chock full of nonpublic information directly related to the price of stocks.”
The need for stronger ethics protections, to help ensure that public service is better and more clearly insulated from personal gain, extends beyond lawmakers. Other recent events highlight the work that remains in the judicial branch and at the Federal Reserve.
In September, the Wall Street Journal reported that over a seven year period, 131 federal judges failed to recuse themselves in 685 cases that involved companies in which they or members of their family owned stock — something that flies in the face of federal law and conflict-of-interest rules.
Clearly, stronger ethics rules, better enforcement or both are also needed for judges. Supreme Court Chief Justice John Roberts made some similar remarks in his end-of-the-year report, though he argued that reform should come from within the judicial branch. Roberts did acknowledge the ethical shortcomings and outlined internal action for the federal judiciary to take, like improving ethics training and updating compliance-related software.
“Let me be crystal clear: the Judiciary takes this matter seriously. We expect judges to adhere to the highest standards, and those judges violated an ethics rule,” Roberts wrote, while stressing that the instances reported by the Wall Street Journal were a small fraction of the total cases over that period of time. “Still, this context is not [an] excuse. We are duty-bound to strive for 100% compliance because public trust is essential, not incidental, to our function.”
The Federal Reserve has had its own stock trading issues of late, with controversy surrounding the trades of two regional bank presidents, as well as trades made by Fed Chairman Jerome Powell and Vice Chairman Richard Clarida. This fall, the Fed announced new rules to “prohibit the purchase of individual securities, restrict active trading, and increase the timeliness of reporting and public disclosure by Federal Reserve policymakers and senior staff,” according to an Oct. 21 press release.
“The new rules are a good start, but they don’t go far enough,” one financial transparency advocate told NPR.
The rich are getting richer. Those in positions of power remain relatively comfortable, sometimes seeming to blur the lines between public service and personal interest, while many Americans scramble to stay safe, housed and fed during this sustained pandemic.
Given this backdrop, we don’t think it’s particularly hyperbolic to view Pelosi’s recent comments as a sort of “let us trade stocks” moment. And it is far from the only current example of powerful people, and the rules that supposedly ensure their ethical behavior, being underwhelming and out of touch.
It’s not as if there is a lack of ideas for ethics reform in Congress. For example, the Ban Conflicted Trading Act, which Rep. Jared Golden has cosponsored, would require members of Congress to divest from individual stock ownership.
“With comments like these from House leaders, it’s easy to see why trust in Congress is at an all-time low,” Golden tweeted after Pelosi’s remarks. “It *should* be illegal for members of Congress to trade stocks. Period. We should pass the Ban Conflicted Trading Act and get that done.”
That would be a good place to start.