America’s political leaders almost never let a crisis go to waste… when it comes to personally lining their pockets.
The latest example involves last month’s banking crisis. The New York Times reported on Wednesday, “At least eight members of Congress or their close relatives sold shares of bank stocks in March.” As the Times noted, this constitutes yet another example of how “members of Congress continue to buy and sell stocks and other financial assets in industries that intersect with their official duties.”
Though not illegal, this sort of behavior contributes to the erosion of trust that Americans have in their elected officials, institutions, and elites.
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A Gallup survey last year showed that, when it comes to trust in institutions, Congress rates dead last (behind “big business,” “television news,” and “large technology companies.”) And according to a 2015 Pew Research Center study, “Roughly three-quarters [of Americans surveyed] (74 percent) say elected officials put their own interests ahead of the country’s...”
There is an increasing sense that the game is rigged for the politically connected—for good reason. It certainly looks like our politicians are using their elected perch to enrich themselves. And even if they aren’t, we all know that optics are everything.
In some cases, elected officials may merely be profiting off of their expertise and knowledge. “As the Silicon Valley Bank was closed, even during that period, there were reports that members of Congress were trading bank stocks,” Sen. Sherrod Brown told The Times in the aforementioned story, adding, “members of Congress are able, because of our jobs, to know more about the economy.”
In other cases, there is at least the appearance of insider trading. I mean, how is it that politicians (the majority of whom are already millionaires) are so often miraculously ahead of the game when normal Americans are scared, hurting, and sometimes in danger of losing their nest egg?
Consider this brief look at the last 15 years.
In the midst of the 2008 financial meltdown, Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke held a secret meeting with members of Congress. The result, as Business Insider noted, was that “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.”
This led Congress to pass The Stop Trading on Congressional Knowledge (STOCK) Act, which made it illegal for members of Congress to use “any nonpublic information derived from the individual’s position… or gained from performance of the individual’s duties, for personal benefit.”
The law clearly didn’t achieve its desired function. During the COVID-19 pandemic, members of Congress who received coronavirus briefings subsequently made suspicious stock trades—which occurred just ahead of the public and the markets learning about he true extent of the pandemic.
Russia’s invasion of Ukraine was the next example. While Congress was debating “economic sanctions, military assistance, and billions of dollars in emergency spending, to deal with this crisis in Ukraine,” reported 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.”
Now, politicians almost always say that some third party, such as a financial advisor or spouse, either manages their stock portfolio or directs their transactions, with zero input or intel coming from the elected official. It’s impossible to say whether this is always true, but it makes it nearly impossible to police—which is why members of Congress never face any real consequences.
It’s also important to know that the most vital information or knowledge that elected officials receive is the kind that is more likely to prevent major losses than to ensure major gains.
Take, for example, Sen. Richard Burr, who chaired the Senate Intelligence Committee and fortuitously sold a bunch of stock at the beginning of the pandemic. According to The Wall Street Journal, Burr’s move saved him and his wife from “at least $250,000 in losses.” (Even more amazing, Burr’s brother-in-law reportedly called his broker and dumped his stock a mere 50 seconds after getting off the phone with Burr.)
Likewise, as The New York Times reported on Wednesday with regards to last month’s banking crisis, “The timing of the sales by those three lawmakers or their relatives meant that the sellers averted an additional price swoon that was still to come.”
Again, this behavior feeds the dangerous perception that the game is rigged for the politically connected.
My forthcoming book, Filthy Rich Politicians, laments that, in modern America, the rich get elected and the elected get rich. I spend considerable time diagnosing the problem and coming up with realistic reforms. And the most obvious solution is to ban members of Congress—and their immediate families—from owning and purchasing individual stocks.
Momentum for such a ban seems to be building, with everyone from far-left Rep. Alexandria Ocasio-Cortez to sorta-center-left John Fetterman to far-right Sen. Josh Hawley to sorta-center-right GOP Rep. Nancy Mace supporting at least one version of a congressional stock trading ban. Of course, the devil’s in the details; politicians can play the game of theoretically supporting, yet always finding a reason to oppose, a given piece of legislation.
Individually, elected officials may profit from retaining the ability to trade stocks; but collectively, it’s vital that they regain the trust of the American public.
This is far from the only crisis facing modern America, but this sense of privilege helps fuel the outrage that makes the American political game dangerous and the concept of liberal democracy tenuous. In the meantime, beatings will continue until morale improves.
