We are pleased to note that no South Carolina officials were among The New York Times’ recent list of 97 current members of Congress who bought or sold stocks or bonds that intersected with their congressional work, or had a spouse or child report such a transaction. That should make it easier for members of our congressional delegation to lead on an overdue push for stronger rules to curb this serious conflict of interest and improve the public’s view of congressional ethics.
The Times analyzed transactions between 2019 and 2021 using a database of members’ financial filings, comparing members’ trades with their committee assignments and the dates of hearings and congressional investigations. Many lawmakers defended the trades. Some told the newspaper their trades were made independently by a spouse or their broker. Some have since moved their assets into blind trusts. Two said the trades were accidental.
The potential problem seemed to cut evenly across party lines. For instance, the newspaper noted that Sen. Tommy Tuberville, an Alabama Republican who serves on the agriculture committee, regularly reported buying and selling contracts tied to cattle prices. Another trade by the wife of Rep. Alan Lowenthal, D-California, sold Boeing shares on March 5, 2020 — a day before a House committee on which Mr. Lowenthal sits released its damaging findings on the company’s 737 Max jet, which was involved in two fatal crashes. The newspaper’s analysis found that more than 3,700 trades reported by lawmakers from both parties in three years posed potential conflicts between their public role and private pocketbooks. That is unacceptable.
Under a 2012 law, members of Congress may trade stocks, bonds and other financial instruments as long as they don’t trade on inside information and as long as they disclose within 45 days any transactions by themselves or immediate family members valued at $1,000 or more. We urged Congress to tighten its rules further after earlier exposes of high government officials who have tried to enrich themselves by trading on what looks like inside information. And to be fair, the problem extends beyond House members and senators to federal judges and members of the Federal Reserve Board.
These high officials often come across information that has not been publicly released that could give them an unfair advantage over other investors. Again, as we have noted, at least 54 legislators have violated the 2012 reform, according to Business Insider investigation, while a previous report by The Wall Street Journal found that an astonishing 131 federal judges had heard cases between 2010 and 2018 involving companies in which they or a family member held stock. Sixty-one actually traded the stock in question.
While there have been signs of bipartisan support for further reform, it’s unclear if any bill will reach President Joe Biden’s desk soon. It should, and we support the approach that would require members of Congress to put their individual stocks, bonds and certain other financial assets in a blind trust to be managed by an outside adviser with no involvement by the owner.
A recent Dartmouth College study found members of Congress who reported buying and selling stock between 2012 and 2020 did not, on average, make any more money than they would have made in other, similar stocks. “Our study looked at about eight years of data and returns are similar to what would be expected if monkeys were picking the stocks,” economic professor and study co-author Bruce Sacerdote said. “Stock picking is a very hard business for anybody, whether you’re a professional hedge fund manager or a U.S. senator, so it does not shock me at all that senators tend to get very mediocre kinds of returns.”
But Congress should know full well that this issue goes beyond whether top federal officials are profiting from insider information: It goes to our faith that our nation’s leaders are focused on acting in our best interests, not their own.