U.S. Congress’ Insider Stock Trading Scandal Expands
Business Insider‘s Dave Levinthal broke a big story in the week before Christmas 2021. After a five-month investigation, he found 52 members of Congress and 182 senior congressional staffers have violated the STOCK Act.
What Is the STOCK Act?
The Stop Trading On Congressional Knowledge (STOCK) Act is an anti-corruption law. It requires lawmakers and employees of the Congress, along with their close family members, to report all their investment transactions involving individual stocks, bonds, and commodity futures to regulators. The law aims to prevent members of Congress and their staff members from cashing in on the insider knowledge they possess of what’s in legislation and budget bills that can affect the fortunes of businesses. Under the law, they get up to 45 days to report their investment transactions.
What Did the Investigation Find?
Here’s a bullet point summary of several of Levinthal’s major investigative findings, which reveal:
- 52 members of Congress and 182 senior-level congressional staffers who have violated a federal conflicts-of-interest law.
- That lawmakers and top congressional staffers face minimal and inconsistently applied penalties for violating the STOCK Act, and that it’s nearly impossible (but we did it anyway) to comprehensively obtain “public records” about senior-level staffers’ personal finances.
- Nearly 75 federal lawmakers who held stocks in COVID-19 vaccine makers Moderna, Johnson & Johnson, or Pfizer in 2020, with many of them buying or selling these stocks in the early weeks of the pandemic.
- How numerous Capitol Hill staffers are themselves saddled with student loans at a time when Congress is considering erasing education debt. But congressional staffers get loan repayment perks average Americans don’t.
- 15 lawmakers tasked with shaping US defense policy that actively invest in military contractors.
These findings confirm the inherent conflict of interest these politicians and bureaucrats have in holding their positions. It also confirms they receive special benefits that are not available to ordinary Americans.
Why Is That a Scandal?
Most members of the House of Representatives and the U.S. Senate collect $174,000 in salary each year. A handful of elected lawmakers collect more. The President pro tempore of the Senate, and the majority and minority leaders in both the House and Senate collect $193,400 per year. The House Speaker earns the most, with an annual salary of $233,500. High ranking senior staffers in the U.S. Congress can earn more than elected officials, with a top annual salary of $199,300 per year.
These incomes put elected lawmakers into the top 5% of individual income earners in the U.S. And they get to engage in insider trading with little-to-no consequence, so they can become even richer.
The Willful Blindness of the House Speaker
On Wednesday, December 15, 2021, House Speaker Nancy Pelosi communicated she sees no problems with that status quo:
House Speaker Nancy Pelosi scoffed Wednesday at the idea of banning congressional lawmakers and their spouses from owning shares of individual companies, despite the possibilities for conflicts of interest between their legislative duties and personal finances.
“No,” Pelosi, D-Calif., told reporters at a news conference where she was asked whether she would support such a prohibition.
“We’re a free market economy,” she said. “They should be able to participate in that.”
Pelosi’s dismissal of the idea of a stock purchase ban came in response to a question about a Business Insider investigative report this week on share ownership by lawmakers, and after controversies over stock purchases by a number of senators since the beginning of the Covid-19 pandemic.
Pelosi’s rationale for rejecting the proposed reform comes close in spirit to the “let them eat cake” statement attributed to Marie-Antoinette, which inflamed French revolutionaries in the late 1700s. Since congressional members, including Pelosi, are cashing in based on their knowledge of how they will affect U.S. businesses, it’s also false statement. There’s no free market involved whenever the U.S. Congress picks winners and losers in its legislation and spending bills.
If you know French history, you already know things did not end well for Marie-Antoinette. What political fate awaits a House Speaker suffering from such a willful blindness to corruption?