Amanda Andrade-Rhoades/AP Photo
In 2021, House Speaker Nancy Pelosi was one of the top traders in Congress who beat the S&P 500.
Last year, 105 congressmembers bought and sold nearly $290 million worth in stock, according to a report from Unusual Whales, an alternative options alert tool that tracks strange trading activities by lawmakers. In short, Unusual Whales concluded that Congress beat the S&P 500.
As lawmakers oversaw military contracts, infrastructure legislation, and cryptocurrency regulation, some took advantage of their position as elected officials and made trades during these negotiations, yielding absurd gains. While this group of lawmakers is a minority, both Democrats and Republicans in the House and Senate engaged in this sketchy behavior.
The report is imperfect, but it’s a sobering reminder of why public approval of Congress floats between 10 and 30 percent, the early days of the pandemic being a rare exception.
Meanwhile, congressional day trading is not isolated to 2021; right before the pandemic, Sens. Richard Burr (R-NC) and Kelly Loeffler (R-GA) were privy to briefings warning of a mass outbreak and potential stock crash, and almost immediately afterward engaged in furious trading. Loeffler later lost her seat; Burr has decided to retire rather than face voters. But neither has so far faced any criminal sanction, nor have any of 2021’s big winners, as insider trading is difficult to prove.
Last month at a news conference, House Speaker Nancy Pelosi (D-CA), one of the Congress’s biggest traders, was asked about whether Congress should prohibit lawmakers and their spouses from stock trading, due to conflicts of interest between their duties as public officials and their personal finances. “No,” she replied. “We’re a free-market economy. They should be able to participate in that.”
Across Twitter and TikTok, there are entire genres dedicated to following the trades of members of Congress, and perhaps buying what they’re buying as an investing strategy.
Yet with the pressure building, Democrats looking for victories, and Republicans seeking to show off a little populism, there’s more interest in ending congressional stock trading than ever before. And there’s a mechanism to get it done, even if Pelosi doesn’t want to.
As far back as 2018, Sen. Jeff Merkley (D-OR) introduced the Ban Conflicted Trading Act, which would have forced lawmakers to divest their shares six month after passage, to freeze holdings while in office, or to transfer them into an independent blind trust. Merkley told The Intercept in 2018, “As long as you own stocks, it’s hard to rule out of your mind. And the public sees it as a conflict of interest.” But little happened, and the bill lost momentum.
Today, a slew of new bills are floating around Congress, with support from both Democrats and Republicans. Weeks after Pelosi’s comments, Sen. Jon Ossoff (D-GA) introduced the Ban Congressional Stock Trading Act, which would require members of Congress, their spouses, and dependent children to divest or transfer their investments into a blind trust within 120 days. The blind trust would be subject to public visibility and could be dissolved 180 days after leaving office. Axios reports that Ossoff is currently in talks with potential Republican co-sponsors.
Sen. Josh Hawley (R-MO) introduced a similar bill, the Banning Insider Trading in Congress Act. The Hawley bill does not include dependent children, extends the divestiture window when taking office from 120 days to six months, and includes different enforcement standards. House Minority Leader Kevin McCarthy (R-CA), according to Punchbowl News, is interested in similar legislation if the GOP takes over in the upcoming midterm elections. McCarthy’s office did not respond to the Prospect’s request for comment.
In 2020, Reps. Abigail Spanberger (D-VA) and Chip Roy (R-TX) jointly introduced the Transparent Representation Upholding Service and Trust (TRUST) in Congress Act, which has stricter requirements on transferring assets to a blind trust than the Ossoff bill. After the bill’s reintroduction last year, today the bill has 29 co-sponsors, including Republicans like Rep. Matt Gaetz (R-FL).
Despite this growing bipartisan consensus, it’s a long road ahead. Pelosi’s apparent heir, Rep. Hakeem Jeffries (D-NY), whom the Prospect has reported on, was asked by Business Insider about McCarthy’s interest in the issue. Jeffries responded, “With respect to Kevin McCarthy, does anyone take this guy seriously on any issue particularly as it relates to ethics?” and claimed he was unfamiliar with his colleagues’ bill.
Although Jeffries did not make any trades in 2021, Pelosi was one of the top traders in Congress who beat the S&P 500. In a notable trade, Unusual Whales reported, “the U.S. Army first announced a $22B augmented reality deal with Microsoft on March 31, 2021 and reiterated its commitment to this partnership in October. Speaker Nancy Pelosi disclosed exercising 150 calls [on Microsoft] on March 19, 2021 at a strike price of $130. She’s up 160 percent.”
Across Twitter and TikTok, there are entire genres dedicated to following the trades of members of Congress, and perhaps buying what they’re buying as an investing strategy. Notably, the Nancy Pelosi portfolio tracker account has been banned twice by Twitter. The very existence of these accounts reflects the damage the trading scandal has imposed on lawmakers.
Pelosi continues to insist that members should be able to make trades. In a press conference last Thursday, she agreed that the House Administration Committee, which has jurisdiction over such a bill, should “review all the bills that are coming in,” but she downplayed the overall support, and then deflected to saying that Supreme Court justices don’t even have to disclose their trades.
With Pelosi uninterested in a bill, and McCarthy waiting until taking power to move forward, action is seemingly blocked. However, House members have another option to get a bill to the floor. Using what is called a discharge petition, if a majority of members sign a piece of paper asking for a vote on legislation, it must get moved to the House floor. Given the high salience of the stock trading issue, it’s plausible that enough members of both parties would be willing to sign that petition, particularly in an election year.
According to polling from Data for Progress, 67 percent of Americans support a bill banning members of Congress from stock trading. The best way for members seeking re-election to show distance from congressional scandal would be to sign on to force a stock trading ban to the floor.
It’s laudable that the issue has garnered support from both Democrats and Republicans in the House and Senate. But bipartisanship should only matter if a bill is passed. Otherwise, it’s just virtue signaling. And there is an actual path to passage, whatever the House leadership thinks of the issue.
The Prospect reached out to multiple Democratic congressional offices about the potential legislation. Some responded, but none answered questions about the possibility of filing a discharge petition to streamline the bill’s passage. Without such a step, talk of bipartisan agreements and “wait till next year” pronouncements from McCarthy seem to be smoke and mirrors, posturing without action. And action is possible; any other explanation is an excuse.
