A growing campaign is pushing for a ban on stock trading by members of Congress after investigations revealed significant market outperformance by a number of lawmakers.

This comes after revelations that politicians have engaged in stock trades exceeding $1 billion in value last year, with many achieving returns significantly above market averages. Critics have labeled these actions as unethical and demanded legislative action to prevent potential conflicts of interest, as reported by the Daily Mail.

Legislative efforts and public opinion lean towards a ban

The proposed legislation, dubbed the ETHICS Act, aims to restrict stock ownership and trading activities of Congress members and their immediate families.

Although the act has garnered some support within Congress, it requires further backing to become law. The initiative reflects growing concerns over the possibility of lawmakers using privileged information for personal gain.

Joshua Graham Lynn, CEO of RepresentUs, expressed his dismay at the situation. He highlighted the disconnect between lawmakers' financial successes and the struggles of average Americans. Lynn's comments underscore the broader public sentiment that seeks to address this issue.

Lynn said:

It's outrageous that members of Congress are gaming the stock market while millions of Americans struggle to make ends meet. I'd call it gangster behavior, but that would imply it's illegal and, sadly, it is not.

Surveys indicate that a substantial majority of Americans, approximately 70%, support a ban on stock trading by lawmakers. This widespread support crosses political divides, with many politicians also signaling their agreement with the proposed ban. However, concrete legislative steps to implement such restrictions are still pending.

High-profile cases highlight the issue

Nancy Pelosi, the former House Speaker, has been particularly noted for her and her family's active engagement in stock trading.

Since 2019, Pelosi's transactions have reportedly amounted to around $100 million, with last year's returns significantly outstripping general market performance. Such cases have fueled the argument for stricter regulations to prevent potential conflicts of interest.

Among other members of Congress, some have particularly stood out for their apparent investment acumen.

Democratic Rep. Brian Higgins and Rep. Mark Green, a Republican, have recorded staggering returns on their investments, further illustrating the exceptional success some lawmakers have had in the stock market. These performances, while not illegal, raise questions about the fairness and ethics of such activities given their public office roles.

The STOCK Act and the push for stricter regulations

Current regulations, established by the 2012 STOCK Act, are designed to prevent insider trading among Congress members and their staff. The act requires prompt disclosure of trades and prohibits the use of non-public information for personal financial gain. However, critics argue that the penalties for non-compliance are insufficient and that the act does not go far enough to ensure transparency and accountability.

A review found that numerous lawmakers have failed to adhere to the STOCK act's requirements, often disclosing their trades late, well after the fact. This has included prominent figures from both major political parties, highlighting the bipartisan nature of the issue.

The proposed ETHICS act seeks to impose more stringent restrictions on stock trading by Congress members and their families.

Sen. Jeff Merkley (D-OR), a leading advocate for the bill, has criticized the current state of affairs as 'deeply corrupt,' emphasizing the need for legislators to prioritize public service over personal financial interests.

Trading trends and performance among Congress members

Analysis of trading activities within Congress reveals a decline in the number of transactions from previous years, with approximately 11,000 trades recorded in 2023.

Despite this reduction, the total value of these trades approached $1 billion, indicating the significant financial involvement of lawmakers in the stock market.

Democrats have reportedly outperformed Republicans in both the volume and success of their stock trades, with a portion of Congress members achieving returns that surpassed those of major market indices. This success rate has contributed to the perception that lawmakers may have an unfair advantage in the stock market.

The data also shows that not all active traders among Congress members have enjoyed high returns. Some, like Rep. Ro Khanna (D-CA) and Rep. Michael McCaul (R-TX), have reported numerous transactions but have not matched the performance of major market benchmarks.

Members of the House Oversight and Accountability Committee, as well as the Armed Services Committee, have been active in trading stocks related to their areas of oversight. This has raised concerns about the potential for conflicts of interest and the need for more stringent regulations to prevent such situations.

Conclusion

• The campaign to ban stock trading by Congress members gains momentum following revelations of significant market outperformance.
• Public opinion and a substantial portion of lawmakers support the ban, though legislation has yet to be passed.
• High-profile cases and research highlight the potential for conflicts of interest, underscoring the need for stricter regulations.
• The proposed ETHICS Act seeks to impose more stringent restrictions, aiming to align lawmakers' activities more closely with public service ethics.