A suggestion by House Minority Leader Kevin McCarthy (R-Calif.) that he might seek to limit lawmakers’ ability to trade individual stocks if the GOP takes control this November is going among its members like a decline in the Dow by 500 points over.
McCarthy told Punchbowl News that he was considering a range of ideas, from restricting members to holding only professionally managed mutual funds to banning lawmakers from owning stock in companies overseen by their committees. He added that the deliberations were still at an early stage and no final decisions had been made.
Citing the case of House Speaker Nancy Pelosi (D-Calif.), McCarthy argued that her husband, who trades millions of dollars worth of technology stocks, may pose a conflict of interest. (Pelosi himself does not own individual shares, but supports members’ trading ability.)
“I just think when you’re the Speaker of the House, you control what gets said, what goes through the committee, you have all the power to do whatever you want – you can’t trade with millions of dollars.” McCarthy told the Post on Tuesday.
But GOP critics say their guide is proposing a solution in search of a problem. They argue that most legislators and staffers do not abuse their positions for personal gain. Some members also say that restrictions could negatively impact civil servants by limiting their ability to prepare for retirement while performing their duties.
“It’s a short-term political win against Pelosi while making members worse off in the long-term,” a Republican lawmaker told The Post. “Pelosi’s stock portfolio is not representative of 98 percent of the net worth of members of the House of Representatives. Members should live by the rules every American lives by, not remove us from the economy.”
“I think it’s a stupid idea,” added another member. “We don’t increase our wages, so every year we lose income to inflation. When you start penalizing people who have stocks in bond funds, that’s crazy.”
Critics also noted that there are safeguards aimed at creating transparency and banning insider trading in Congress. Legislators and employees are already prohibited from using non-public information for financial purposes and are required to publicly disclose stock and bond transactions within 45 days under the STOCK Act 2012.
Disclosure requirements have led to numerous Justice Department investigations into legislative dealings.
In 2020, Senator Richard Burr (R-NC) resigned as Chair of the Senate Intelligence Committee after facing allegations of insider trading early in the COVID-19 pandemic. The DOJ ultimately pursued no charges.
The House Ethics Committee has also launched investigations into two members – Reps. Mike Kelly (R-Pa.) and Tom Malinowski (D-NJ) – for trading deals during the current Congress.
One lawmaker feared the change could hurt both recruiting qualified candidates and retaining valued members — and preventing those who aren’t independently wealthy from running or staying in Congress.
“I just think the more you try to restrict, it just diminishes the pool of quality people to serve,” the member, who doesn’t own individual shares, told The Post. “I think there are enough laws in place right now to put people in jail for that [insider trading]. “
McCarthy dismissed that notion on Tuesday.
“Think I’m recruiting someone who’s running for Congress so they can get an edge or some knowledge of what they can bring to the ground and then make options so they can make millions of dollars like Paul Pelosi did and Speaker Pelosi did? ” he said. “I don’t think those are the people I want to recruit.”
Pelosi’s office has claimed that she or her husband violated any law or House Rules in their financial dealings, with spokesman Drew Hammill stating that “the spokesman has no prior knowledge of, or subsequent involvement in, any transactions.”
Other members expressed openness to new rules but warned that there are caveats that should be considered before a new policy is implemented.
“Since I came to Congress 20 years ago, I’ve made a choice – unlike the company I started, which I obviously still own [stock in] that for a while — but I made a decision that buying and selling individual stocks inherently exposes you to conflict issues,” said Rep. Darrell Issa (R-Calif.), who helped drive the legislative effort to oblige federal judges to report their stock transactions.
“My middle ground was, I do the electronic trading funds, I do the mutual funds, and those are all currently exempt from the STOCK Act, so passing the STOCK Act had absolutely no impact on me,” Issa told the Post. “The reality is there will be some people who come here, for example, who own public stocks who control their families, and so any leadership decision has to recognize that element. But other than that, I’ve never seen the need or value in it [trading individual stocks]. “
MP Kelly Armstrong (R-ND) argued that “people’s trust in government is at an all-time low” and additional measures could help restore voters’ trust in officials.
“I think no matter how much we try to isolate information, we just have access to a lot of things early on, and we need that information to do our jobs,” he said. “The devil is in the details, but it’s a good idea to demand better guard rails.
“I’m open to it. I don’t want to see unrealistic schedules or requirements. But professionally managed and/or blind trusts make sense,” Armstrong added. “I always think about the ethics of justice. Inappropriateness or the appearance of inappropriateness are both grounds for a walkout.”
Proponents of the move on both sides of the aisle have been working to draft legislation, with Sen. Jon Ossoff (D-Ga.) planning to introduce a measure to ban individual stock trading and likely require members to cite their Investing assets in blind trusts. Rep. Chip Roy (R-Texas) and Abigail Spanberger (D-Va.) have also joined forces to introduce the TRUST Act, which also requires members to use blind trusts.
“As Speaker Pelosis’ recent transactions make clear, decisions made for the people should be made separately from decisions made for personal gain,” Roy said in a statement. “We should have a reasonable debate about the conflicts of interest that arise or are perceived to arise from trading in equities while making policy decisions.
“Contrary to what some other members say, this does not prohibit investing assets in a blind trust or broadly traded mutual funds.”
This post first appeared on Nypost.com