Pelosi said it’s fine for lawmakers to trade stocks. She’s wrong.
House Speaker Nancy Pelosi (D-Calif.) talks to the media on Dec. 15. (J. Scott Applewhite/AP) Opinion by the Editorial Board December 22 at 5:46 am Taiwan Time House Speaker Nancy Pelosi (D-Calif.) stunned a lot of Americans this past week when she ardently defended the right of lawmakers — and their spouses — to buy and sell stocks while they serve in Congress. “We’re a free-market economy. They should be able to participate in that,” Ms. Pelosi told reporters. She should have advocated for tighter scrutiny on congressional trading. Even better would be a full ban on individual stock trades for members of Congress. There’s a big catch to Ms. Pelosi’s “free-market economy” claim: U.S. representatives and senators have access to a lot of confidential, nonpublic information. That gives them an unfair advantage in trading. Walter Shaub, former director of the U.S. Office of Government Ethics, put it this way in a tweet: “It’s a ridiculous comment! She might as well have said ‘let them eat cake.’ Sure, it’s a free-market economy. But your average schmuck doesn’t get confidential briefings from government experts chock full of nonpublic information directly related to the price of stocks.” When members of the general public trade on nonpublic information, they go to jail for it (just ask Martha Stewart). It’s theoretically possible to go after members of Congress for trading on insider information as well, but that has proved extremely difficult. [Paul Waldman: A question for Pelosi: Why are members of Congress allowed to trade stocks?] In 2012, lawmakers passed the Stop Trading on Congressional Knowledge Act, or “Stock Act.” It forbids members of Congress and staffers from trading on confidential information they learn on the job. It also requires them to report all trades within 45 days. The hope was that shining light on trades would be enough to prevent questionable — or outright wrong — trading. So far, the track record is thin. Lawmakers from both parties made hundreds of stock trades in the early months of 2020 as they were receiving closed-door briefings about the coronavirus. While most of these lawmakers were not accused of doing anything wrong, it certainly gives a poor impression of where their priorities were during a massive crisis. Furthermore, an investigation by Insider found that at least 49 members of Congress and 182 staff members were late in filing their stock trade reports in the past two years. Both Democrats and Republicans are on the naughty list. There is no public record of whether they paid fines for filing late. It’s clear that transparency isn’t enough. A bipartisan group of lawmakers has introduced the Ban Conflicted Trading Act, which would prohibit buying or selling individual stocks and serving on corporate boards while in office. This is a common-sense reform that would go a long way toward restoring trust in Congress. It would still allow lawmakers to invest in mutual funds and similar investments that are the most commonly used among everyday investors. Being a member of Congress should be about putting the American people first, not a lawmaker’s stock portfolio.