Ukraine shows why members of Congress shouldn’t be allowed to own stocks
If you want to get rich, get elected.
This truism is America’s worst-kept secret. As NPR observed: “Young investors have a new strategy: look to the financial news of sitting members of Congress for advice on stocks.”
This racket was reported six months ago, and nothing has changed since. Members of Congress still enjoy unprecedented access to insider information, and whenever there is a crisis, they take advantage of it quickly. The last example concerns the invasion of Ukraine by Russia.
As Congress debated “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 those of their spouse or child – in sectors that were directly affected by the war in Ukraine”. CNBC estimates total business activity since Feb. 1 at around $7.7 million.
Putin killed Trump’s ‘America First’ movement
“It seems like Congress saw this as a gold rush,” Jesse Watters of Fox News observed last week. “They knew what sanctions could be imposed, and all they had [were] dollar signs in their eyes. Members on both sides of the political aisle poured money into the market…as Ukraine burned, Congress got richer.
Waters pointed out that Florida Rep. Debbie Wasserman Schultz, a Democrat, bought energy stocks in late January that have “exploded” since their purchase. “Maybe she knew something we didn’t?” Watters concludes, “And sadly, she’s not alone.”
The day before the passage of Russian tanks in Ukraine, the representative of the GOP. Marjorie Taylor Greene tweeted: “War and rumors of war are incredibly profitable and practical.”
She’s right. Greene later revealed that just two days before the invasion of Russia, she purchased shares of a major defense contractor, an oil company and an energy company.
In a statement to Business Intern, Greene said his “investment advisor has complete discretion over our accounts.” Guess we’ll have to take her word for it.
This behavior is all too common. When it comes to profit, members of Congress never let a major crisis go to waste.
Consider a bit of recent history.
On September 16, 2008, Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke held a secret conclave with members of Congress. As Business Intern noted in 2011, “Members of Congress aware of this information reacted, not by giving up everything and coming up with a plan to save the economy, but by throwing stocks and avoiding the losses that everyone would suffer in the coming month. Others bought shares in financial companies that would later be bailed out by the federal government.
Many Americans learned this from an episode of CBS 60 minutesfirst aired in November 2011.
“During the 2009 health care debate, members of Congress were trading health care stocks, including House Minority Leader John Boehner,” said Steve Croft of 60 minutes noted. “Just a few days before the [public option] was eventually killed, Boehner bought health care stocks — all of which rose. (As is the case with Marjorie Taylor Greene, Boehner’s spokesperson said the transactions were made through Boehner’s financial adviser “whom he only consults about once a year.”)
the 60 minutes The report led Congress to pass the Stop Trading on Congressional Knowledge (STOCK) Act, which prohibits any member or employee of Congress from using “any nonpublic information derived from the position of the individual…or obtained in performance of his duties, for personal purposes”.
How well has the new legislation worked? 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 to perform suspicious stock market transactions in 2020; exchanges have been made after receive classified reports on COVID-19 but before the general public has become aware of the seriousness of the pandemic.
According to CNBC, on February 13, 2020, Burr “unloaded shares worth $630,000 to $1.7 million, with 33 individual trades made that day. The shares he sold represented a share significant part of its financial portfolio.
A week later, the stock market began to fall.
The FBI seized Burr’s phone and he resigned as chairman of its committee. However, Trump’s Justice Department ultimately decided not to charge him or any of the senators.
We shouldn’t be surprised. It is almost impossible to to prove that someone acted solely on the basis of inside information. And even if someone turns out to have broken the law – and according to Business Intern‘s Dave Levinthal, at least 57 members of Congress have (careful, these are only the ones we know of) – the penalties are minimal.
Biden can’t let Putin draw a red line on Ukraine aid
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 has profited heavily from curious stock market opportunities, has now backtracked on her previous opposition to the idea.
In a perfect world, virtue and a sense of responsibility would prevent most legislators from using their offices to enrich themselves. In the absence of this, something must be done to stop irregularities from occurring, as this contributes to the appearance that the game is rigged.
As the wealth gap between lawmakers and ordinary Americans continues to widen, trust in government has continued to erode. I’m not saying there’s a direct correlation, but anyone who cares about preserving American democracy should be concerned about these trends.
Major problems in government often do not have easy solutions. That’s not the case here. The right thing to do is obvious.
It’s time to ban stock trading by members of Congress and their families.
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