House committee members question proposed stock trading bans

Members of the House Administration Committee raised questions Thursday about proposals to ban lawmakers from trading in stocks.

The lukewarm response to the idea indicates a potential struggle to craft legislation, even if a congressional stock trading ban enjoys broad public support.

A few of the Democrats on the panel expressed support or a desire to pursue the proposal further. Some of the Republicans on the committee attacked the proposal, arguing that it would jeopardize the finances of less wealthy lawmakers.

Speaker Nancy Pelosi (D-California) tasked the committee with examining potential revisions to existing stock trading rules after several lawmakers faced insider trading allegations and more than 50 lawmakers have recently failed to disclose their stock trades in a timely manner.

The hearing raises questions about how quickly and aggressively lawmakers will move to restrict their own finances. To date, the two most popular stock trading ban bills in the House each have about 60 co-sponsors.

Rep. Rodney Davis (R-Ill.), a ranking member of the committee, lamented that many stock trading proposals would require lawmakers to divest their shares or place them in a qualified blind trust. He said blind trusts are expensive to set up and maintain, and selling an entire portfolio would result in a substantial drop in taxes.

“The choice for those who aren’t independently wealthy is going to be limited compared to those who are wealthy and can afford a qualified blind trust,” Davis said.

Liz Hempowicz, one of the committee’s witnesses leading public policy for the Government Oversight Project, responded by noting that the executive branch has long had a similar requirement in place for senior officials and that officials who divest are often able to defer capital gains taxes.

Rep. Barry Loudermilk (R-Ga.) said the proposed stock trading bans would deny lawmakers the right to “participate in a free-market society” and argued that new laws would not prevent “bad players” to continue trading stocks.

Rep. Zoe Lofgren (D-California), chair of the committee, described the hearing as an opportunity to learn more about shortcomings in current disclosure rules. She declined to support any specific proposal, but noted that in addition to members of Congress, federal judges have come under scrutiny for conflicts of interest arising from their stock holdings.

“Frankly, several journalists have asked me: what is the work product that will come out of this hearing? And I was honest in saying, we don’t know,” Lofgren said, adding that she had never personally owned any stock and needed to know more about the matter.

Three of Thursday’s witnesses — Hempowicz, Citizens’ Accountability and Ethics Advocate Donald Sherman and Indiana University law professor Donna Nagy — called on Congress to quickly pass a bill banning legislators and their spouses and dependent children to trade individual stocks.

“While some members may be concerned about the harm of these measures or the impact they may have on the trust structures of their dependent children, these concerns do not outweigh the public’s right to know. , with certainty, that the people it chooses to write its laws are acting on their behalf — not in service of their own financial interests,” Sherman told lawmakers.

Jennifer Schulp, director of financial regulation studies at the CATO Libertarian Institute, argued that individual stock restrictions could discourage talented people from running for office, a view some GOP lawmakers have reiterated.

The public outcry over the congressional stock-trading intensified after Sen. Richard Burr (RN.C.), then chairman of the Senate Intelligence Committee, offloaded up to $1.7 million from shares after a classified COVID-19 briefing and just before the pandemic ravaged the market.

A January poll by the conservative advocacy group Convention of States Action found that 70% of Democratic respondents, 78% of Republicans and nearly 80% of independents surveyed said members of Congress should not be allowed to negotiate. actions.

The poll was taken shortly after Pelosi, whose husband is a prolific and highly successful trader, voiced her opposition to a stock trading ban. She has since changed her mind, tasking lawmakers with drafting a stock trading reform bill before the end of the year, but House Democratic leaders remain cautious about a full ban.

Senate Majority Leader Charles Schumer (DN.Y.) voiced support for a ban on stock trading, but said fellow Democrats would need to reach a consensus before introducing a bill.

Fourteen different securities reform bills are circulating in Congress, according to testimony from the head of the Congressional Research Service, Jacob Straus.

The TRUST in Congress Act, sponsored by Reps. Abigail Spanberger (D-Va.) and Chip Roy (R-Texas), would require all members of Congress and their immediate families to place their shares in a blind trust.

The Ban Conflicted Trading Act, a separate measure spearheaded by Reps. Raja Krishnamoorthi (D-Ill.), Alexandria Ocasio-Cortez (DN.Y.) and Joe Neguse (D-Colo.), would focus on lawmakers and their senior Congressional staff members.

The top Democratic sponsors of those bills held a press conference Thursday to urge lawmakers to quickly resolve the differences between the stock-trading proposals and craft a final bill by November’s midterm.

“Let’s not waste this opportunity. Hurry up. Campaign season is upon us. Many bills are in the pipeline for the Senate Majority Leader,” said Sen. Jeff Merkley (D-Ore.), who is pushing for a stock market bill in the Senate. “To compete with that, we have to consolidate the different ideas we have on this bill and then coordinate them with the House and the Senate.”

Garland K. Long