If you want to get rich, get elected.
This truism is the worst kept secret in America. As NPR observed: “Young investors have a new strategy: watching financial disclosures of sitting members of Congress for stock tips.”
That racket was reported six months ago, and nothing has changed since. Members of Congress still enjoy unprecedented access to inside information, and whenever there’s a crisis, they are quick to cash in on it. The latest example involves Russia’s invasion of Ukraine.
ADVERTISEMENT
While Congress was debating “economic sanctions, military assistance, and billions of dollars in emergency spending, to deal with this crisis in Ukraine,” reports CNBC’s Ylan Q. Mui, “more than a dozen members reported trades—either their own or by their spouse or by their child—in sectors that were directly affected by the war in Ukraine.” CNBC estimates the total trading activity since Feb. 1 to be about $7.7 million.
“It looks like Congress saw this as a gold rush,” Fox News’ Jesse Watters observed last week. “They knew what sanctions could be coming down, and all they had [were] dollar signs in their eyes. Members from both sides of the political aisle poured money into the market...so as Ukraine burned to the ground, Congress got rich.”
Waters pointed out that Florida Rep. Debbie Wasserman Schultz, a Democrat, bought energy stocks in late January that “shot through the roof” since their purchase. “Maybe she knew something we didn’t?” Watters concludes, “And unfortunately, she’s not alone.”
The day before Russian tanks crossed into Ukraine, GOP Rep. Marjorie Taylor Greene tweeted: “War and rumors of war is incredibly profitable and convenient.”
She’s right. Greene later revealed that just two days before Russia’s invasion, she bought stock from a major defense contractor, an oil company, and an energy company.
In a statement to Business Insider, Greene said that her “investment advisor has full discretionary authority over our accounts.” I guess we’ll have to take her word on that.
This behavior is all too common. When it comes to profiteering, members of Congress never let a major crisis go to waste.
Consider some recent history.
On Sept. 16, 2008, Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke held a secret conclave with members of Congress. As Business Insider noted in 2011, “Congressmen privy to this information reacted—not by dropping everything and drawing up a plan to save the economy, but by dumping stock and avoiding the losses everyone else would take in the coming month. Others bought stocks in financial firms that would later be saved by the federal government.”
Many Americans learned about this from an episode of CBS’s 60 Minutes, which first aired in November of 2011.
“During the health care debate of 2009, members of Congress were trading health care stocks, including House Minority Leader John Boehner,” Steve Croft of 60 Minutes said. “Just days before the [public option] was finally killed off, Boehner bought health care stocks—all of which went up.” (As is the case with Marjorie Taylor Greene, Boehner’s spokesperson said the trades were made by Boehner’s financial advisor “who he only consults with about once a year.”)
The 60 Minutes report led to Congress passing the Stop Trading on Congressional Knowledge (STOCK) Act, which prohibits any members or employees of Congress from using “any nonpublic information derived from the individual's position…or gained from performance of the individual’s duties, for personal benefit.”
How well did the new legislation work? Fast forward to the COVID crisis, when GOP Sen. Richard Burr of North Carolina—one of only three senators to vote against the STOCK Act—was also one of four members of Congress who made suspicious stock trades in 2020; the trades were made after receiving classified reports on COVID-19 but before the general public realized the severity of the pandemic.
According to CNBC, on February 13, 2020, Burr “unloaded stock shares worth $630,000 to $1.7 million, with 33 individual trades made on that single day. The shares he sold represented a significant portion of his financial portfolio.”
A week later, the stock market began plummeting.
The FBI seized Burr’s phone, and he stepped down from his committee chairmanship. However, the Trump Justice Department ultimately decided not to charge him or any of the senators.
We shouldn’t be surprised. It’s nearly impossible to prove that someone acted solely on insider information. And even if someone is found to have violated the law—and according to Business Insider’s Dave Levinthal, at least 57 members of Congress have (mind you, that’s just the ones we know about)—the penalties are puny.
The good news is that there is emerging bipartisan support for banning members of Congress (and their immediate families) from investing in the stock market. After opposing such efforts, House Speaker Nancy Pelosi—who profited handsomely from curious stock market opportunities—has now backtracked from her previous opposition to the idea.
In a perfect world, virtue and a sense of responsibility would prevent most lawmakers from using their office to feather their nests. Absent that, something has to be done to stop the appearance of impropriety, because it is contributing to a sense that the game is rigged.
As the wealth gap between lawmakers and regular Americans continues to widen, trust in government has continued to erode. I’m not suggesting there is a direct correlation, but anyone who cares about conserving American democracy should be concerned about these trends.
Major problems in government don’t often have easy solutions. That’s not the case here. The right thing to do is obvious.
It’s time to ban stock trading for members of Congress and their families.
