In recent days, multiple legislators have expressed new (or renewed) interest in banning members of Congress from trading individual stocks. While lawmakers should be broadly interested in assuring that the stock market performs well – which benefits American businesses, workers, and investors – lawmakers enjoy too many advantages over the average investor to justify the owning and trading of individual stocks during their period of public service.
For years, NTU has supported legislation that would require Members of Congress, their spouse, and their dependents to place certain “covered assets” – including individual stocks – into a blind trust until 180 days after their service in Congress ends. This legislation, the TRUST in Congress Act, was first introduced by Reps. Abigail Spanberger (D-VA) and Chip Roy (R-TX) in June 2020.
Interest in this legislation picked up in early January after the New York Post reported that Sen. Jon Ossoff (D-GA) is working on similar legislation in the Senate, and picked up further when House Minority Leader Kevin McCarthy (R-CA) told Punchbowl News that he “is considering instituting new limits or an outright ban on lawmakers holding and trading stocks and equities if Republicans take the majority in November.” Sen. Ossoff has since introduced his legislation, the Ban Congressional Stock Trading Act, with Sen. Mark Kelly (D-AZ). NTU has endorsed the Ban Congressional Stock Trading Act.
The idea is not without controversy, though.
Speaker Nancy Pelosi (D-CA) told reporters in December that she believes lawmakers should be able to trade individual stocks, arguing: “[w]e are a free market economy.”
The U.S. is a free market economy, but there are at least two major ways in which members of Congress are not typical free market participants.
- They have access to privileged information not available to the public, in settings such as intelligence briefings and closed-door hearings, that could affect the performance of both individual stocks and the broader market; and
- They have a unique ability to affect stock prices with their own actions, such as floor votes, proposed legislation, investigations, hearings, and more.
For example, a Member of Congress serving on a certain committee could receive access to a committee investigation into a publicly-traded company days or even weeks before the report leaks or is made public. If the investigation is set to reveal bad or harmful news for the company, and the Member or their spouse owns stock in the company, they could sell the stock before the investigation is made public and negatively impacts the company’s stock price. This would be an example of a Member of Congress trading on information (and/or on Congressional action) that the public is not aware of at the time.
Importantly, all the legislation NTU supports regarding lawmaker stock trades would still allow lawmakers and their spouses to be invested in mutual funds or exchange-traded funds (ETFs) that track the broad performance of a stock market index (such as the S&P 500 or the Dow Jones). If the stock market as a whole grows from year to year, it’s fair for lawmakers and their families to participate in that.
What the TRUST in Congress Act would do is prevent lawmakers and their spouses from using their unique powers or access to information to financially benefit from their public service. NTU is proud to support this legislation, and we urge House lawmakers who have not yet supported the TRUST in Congress Act to do so.