Can Congress really use insider information to trade stocks?
Members of Congress use confidential information to make money in the stock market when they should be working for you. Make no mistake, this is institutionalized corruption.
By the way, if you like my daily analyses, comments and drawings, subscribe to my free newsletter: robertreich.substack.com
There is no good reason for elected officials to trade in individual stocks. If you don’t have insider knowledge, buying and selling individual stocks is a terrible way to get rich. These are gambling games, simple and clear. This is why many Americans with retirement accounts choose to invest in index funds. which are tied to the performance of the entire stock market
But many members of Congress continue to invest in individual stocks, and some are doing well. How do they do it?
Consider this: shortly before the economic crash of 2008, severalmanufacturers feverishly moved their assets into “safer” investments. This madness came immediately after private meetings with Treasury officials who warned that economic disaster was imminent.
I believe that most of you were not invited to these meetings – I certainly wasn’t. But these legislators were – and probably chose to act on this information.
When this story became known, people were naturally outraged. After huge public pressure Congress adopted SHARE Law in 2012. The law required lawmakers to disclose sales of their shares and their spouses’ shares within 45 days. By forcing these transactions to be public, it was hoped that lawmakers would stop making dubious transactions.
And it worked. Well… partially.
IJanuary 2020a handful of senators, including Richard Burr, Dianne Feinstein and Kelly Loeffler, made significant deals after receiving secret briefing on COVID-19, long before the full extent of the threat was known to the public.
Few lawmakers have faced serious consequences for violating the spirit or letter of the law, as insider trading notoriously difficult to prove.
Only in 2021 news agencies identified 43 legislators who failed to properly disclose information about their transactions. Their punishment? Nothing. Legislators are supposed to face a paltry $200 fine for not submitting the report on time, but congressional ethics officials routinely waive it.
There is an obvious solution to all this: prohibit members of Congress from trading in individual stocks.
Proposed Conflict Trade Prohibition Act does just that. Legislators will have six months after being elected to sell their individual assets, put them in a blind trust over which they have no control, or hold them until they leave office without trading them.
As usual, keep an eye on the money: most deputies are millionaireswho likely derive a significant portion of their wealth from investments and deals. Thus, they will not support this bill unless there is enough public outcry to do so.
That’s where you enter.
FROM distrust of the government close to an all-time high, even the appearance of a conflict of interest hurts our democracy. Members of Congress are elected to represent the interests of the people, not the money in their brokerage accounts.
Prohibiting members of Congress from trading individual stocks is easy. Let’s do that.