- The STOCK Act is designed to ensure lawmakers are financially transparent and accountable.
- Some use qualified blind trusts or exchange-traded funds or abstain from playing the market.
- Congress has considered, but not implemented, stricter stock-trading rules for its members.
Though several investment scandals have rocked the US Capitol, few lawmakers aggressively seek to ward off any specter of insider trading by handing their finances over to impartial money managers.
Only 10 sitting members of Congress — nine Democrats and one Republican — have reported using what’s known as a qualified blind trust, a formal arrangement, requiring congressional approval, in which a lawmaker officially transfers management of their financial assets to an independent trustee.
While congressional guidance suggests the trusts provide the “most comprehensive approach” to avoiding “potential conflicts of interest or the appearance of such conflicts,” they can be expensive and time-consuming to establish.
As part of the exhaustive Conflicted Congress project, in which Insider reviewed nearly 9,000 financial-disclosure reports for every sitting lawmaker and their top-ranking staffers, Insider identified only six senators and four House members with qualified blind trusts.
The senators were Democratic Sens. Dianne Feinstein of California, Joe Manchin of West Virginia, Tammy Baldwin of Wisconsin, Mark Kelly of Arizona, and Jon Ossoff of Georgia, and Republican Sen. John Hoeven of North Dakota.
The House members were Democratic Reps. Dean Phillips of Minnesota, Carolyn Maloney of New York, Eddie Bernice Johnson of Texas, and Tom Malinowski of New Jersey.
Suspicious stock trading is rampant
During the past decade, suspicious stock-trading activity has plagued members on both sides of the aisle.
The Justice Department and Securities and Exchange Commission has investigated pandemic-related moves by Republican Sen. Richard Burr of North Carolina. Investigators also inquired about the trading activities of Feinstein, Republican Sen. James Inhofe of Oklahoma, and former Republican Sen. Kelly Loeffler of Georgia. And the Office of Congressional Ethics has investigated trades made by the wife of Republican Rep. Mike Kelly of Pennsylvania, as well as allegations of financial-crisis profiteering by former Republican Rep. Spencer Bachus of Alabama.
The Bachus scandal bolstered the enactment of the Stop Trading on Congressional Knowledge Act, a 2012 law designed to hammer home that it is illegal for members of Congress and their top aides to engage in insider trading.
Just over half of members of Congress (55%) did not report owning or trading individual stocks in their 2020 annual disclosures. Some opted for broad-based investments such as mutual funds, or conservative holdings such as government bonds. A few even said they kept their cash in old-fashioned savings accounts.
Senate Democratic Whip Dick Durbin of Illinois, House Minority Leader Kevin McCarthy of California, and House GOP Whip Steve Scalise of Louisiana were among the 277 lawmakers who reported no individual stock investments, indicating they avoid directly buying and selling shares of companies that often spend millions of dollars lobbying the federal government and vying for government business.
Apple, Microsoft, Disney, Alphabet, and Amazon are the most popular stock holdings among members of Congress, an Insider analysis indicates.
But Kedric Payne, a former congressional investigator intimately familiar with Capitol Hill culture, said the STOCK Act’s legacy wasn’t looking too good.
“I can’t remember any other ethics rule that has been violated by so many members so consistently,” Payne, a former deputy chief counsel at the Office of Congressional Ethics who’s now a director of ethics at the nonpartisan Campaign Legal Center, told Insider. He added that disclosure without meaningful enforcement wouldn’t change anything.
“You can’t X-ray a patient back to health,” Payne said.
Insider in March reported that Malinowski had violated the STOCK Act by failing to disclose dozens of stock trades together worth at least $671,000. Malinowski remains under investigation by the House Committee on Ethics after the independent Office of Congressional Ethics said it found “substantial reason to believe” that he had violated federal rules or laws designed to promote transparency and defend against conflicts of interest.
That flurry of stock trades predates Malinowski’s blind trust, which he began establishing in March and which congressional administrators signed off on in July.
“He supports making a blind trust mandatory for all members of Congress who have investments in the stock market and has cosponsored legislation to that effect,” a Malinowski spokeswoman, Naree Ketudat, told Insider, citing his support for the bipartisan, bicameral Ban Conflicted Trading Act, which has languished since its introduction in March.
Qualified blind trusts aren’t necessarily a panacea for lawmakers wanting to avoid conflicts or legal transgressions.
While Manchin established a blind trust in 2012, it doesn’t include all his assets. Notably, Manchin doesn’t include his earnings from his family’s coal company, which could be significantly affected by President Joe Biden’s clean-energy proposals, The Washington Post reported this week.
Likewise, Feinstein’s blind trust doesn’t include all her reportable assets. Earlier this year, she acknowledged being months late to disclose one of her husband’s stock purchases that was worth up to $50,000.
Democratic Sen. Sherrod Brown of Ohio, an author of the Ban Conflicted Trading Act who doesn’t have a qualified blind trust but exclusively invests in broad-based exchange-traded funds, sees room for improvement among his colleagues, his communications director, Trudy Perkins, told Insider.
“Senator Brown deeply believes that public servants should focus on serving the American people, not lining their own pockets,” Perkins said.
Some Capitol Hill newcomers couldn’t agree more.
“Eliminating conflicts of interest is an important step to make Washington work better,” Mark Kelly told Insider, adding that he’d engaged in the “rigorous, multi-step process” of setting up his Ethics Committee-approved blind trust earlier this year. He’d previously violated the STOCK Act by failing to submit a timely disclosure of his exercising of a stock option on an investment in a company developing supersonic passenger aircraft.
Kelly also said he’s developing legislation with Ossoff that would require all senators to adopt qualified blind trusts.
Republican Rep. Peter Meijer of Michigan, a grocery-store scion and family-trust beneficiary, said that retooling stock-ownership guidelines made sense, to an extent.
“A hard-and-fast rule is not reflective of where we are,” Meijer, who said he had no control of or input over his financial trust, told Insider. He added that many members have spouses who might invest as part of a job or receive shares as part of employment compensation.
Meijer said that “as a general rule” lawmakers shouldn’t actively trade individual stocks, and he encouraged colleagues to avoid giving financial advisors instructions beyond desired growth goals and acceptable risk tolerance.
‘It’s just wrong’
Sen. Bernie Sanders told Insider that he decided long ago against owning individual stocks.
“Obviously, you don’t want conflicts of interest here,” the Vermont independent said while walking through the tunnels beneath Capitol Hill.
There was one exception: Sanders recounted spending about $500 on IBM stock while he was serving in the House of Representatives so he could rail against proposed changes to the company’s retirement program during a shareholders’ meeting.
Democratic Sen. Elizabeth Warren of Massachusetts turned Insider’s Conflicted Congress findings into a call to action, blasting colleagues “who think it’s OK to be in a position of trust to represent the people of this country and at the same time to be working to advance your own financial interests.”
“It’s just wrong,” Warren, a two-term lawmaker and anticorruption advocate, told Insider.
Warren’s comments stood in stark contrast to those of House Speaker Nancy Pelosi, who in response to Insider’s questions defended congressional lawmakers’ right to buy and sell individual stocks.
“We are a free-market economy,” Pelosi said on Wednesday. “They should be able to participate in that.”
Democratic Rep. Andy Kim of New Jersey urged leadership to clamp down on congressional stock trading, not embrace it.
—Andy Kim (@AndyKimNJ) December 15, 2021
“Americans are losing trust in government and we need to show we serve the people, not our personal/political self-interest,” the two-term lawmaker tweeted after a video of Pelosi’s remarks went viral. Kim added that lawmakers, presidents, and senior administration officials should be barred from trading individual stocks.
Cracking down appeals to Payne of the Campaign Legal Center. He said that while his group was not limiting its own efforts, it endorsed ethics tweaks in the Ban Conflicted Trading Act, as well as those woven throughout the more comprehensive Anti-Corruption and Public Integrity Act previously introduced by Warren and Rep. Pramila Jayapal of Washington.
Otherwise, Payne said, the status quo will produce more scofflaws.
“If members of Congress who are currently doing the right thing continue to see other members violate the law with impunity,” he said, “you’re going to have more noncompliance.”