“Membership in Congress is a choice. It carries obligations private citizens do not share. Members must divulge private financial information and follow ethics rules that proscribe some activities, which are otherwise perfectly legal.”
We wrote those words nine years ago to shame members of Congress who were habitually beating the market with their stock trades. We argued that it is improper for members of Congress, given their unfortunate and undue influence over markets, to own individual stocks at all — that they should settle for diversified mutual funds that follow the market broadly.
In the time since, insider trading has forced many members of Congress to bow out. One, former Rep. Chris Collins, a New York Republican, was sentenced to 26 months in prison for a case in which he helped friends and family avoid losses by sharing information about an obscure Australian drug company on the board of which he controversially sat. His membership in Congress was incidental to his crime, but it is a reminder that lawmakers should be especially careful to avoid having personal interests that could conflict with their official duties.
But even members of Congress who do not sit on corporate boards frequently come across situations in which they can profit from their knowledge as lawmakers. In order to prevent this, Congress enacted and President Barack Obama signed the STOCK Act in 2012, barring all government employees, including members of Congress, from trading on nonpublic knowledge.
In recent days, multiple U.S. senators have been accused of selling stocks with incredibly good timing just before the spreading coronavirus caused the market to crash. Sen. Richard Burr, a Republican from North Carolina, insists that he relied on public information, “CNBC’s daily health and science reporting out of its Asia bureaus,” when he sold up to $1.7 million in stocks on Feb. 13. Sen. Kelly Loeffler, a Georgia Republican, says she and her husband have a “blind portfolio” with a manager that sold the stocks without their input or knowledge. Sens. Dianne Feinstein of California and Jim Inhofe of Oklahoma also made substantial stock transactions at about the same time, and both claimed that they don’t personally manage their portfolios.
It’s entirely possible that most or all of these transactions were innocent. After all, who didn’t consider taking some profits earlier this year as stocks rose to all-time highs at such a dizzying pace?
But the whole point of our warning from 2011, and of the STOCK Act, was that voters should never have to wonder about their lawmakers’ integrity. It’s not enough that members of Congress report their trades a month after the fact. People with intensively managed investments simply shouldn’t be in public life. If they want to serve, they should buy and hold simple investments that follow the market as a whole, perhaps fixed-year retirement funds. Lawmakers especially should refrain from timing markets — good advice for anyone who doesn’t have inside information but especially good for members of Congress seeking to avoid conflicts of interest.
Whether these senators did any wrong ultimately will be up to their constituents. But the public would not even know about the potential problem if not for disclosure.
This is why continued resistance by President Trump to disclose his income and assets voluntarily is such a huge problem. Even if no one cares about his tax returns, as is evidently the case, he should release them for the sake of transparency and integrity. As long as he fails to do so, people will keep raising questions about his motives and whether he benefits from his own decisions in government.
