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Bipartisan Push to Ban Lawmakers from Trading Stock Gains Momentum
Published by KHOU News – March 21, 2024
A surprising convergence of ideologies is sweeping Washington: lawmakers from both the left and the right are lining up behind a proposal that would bar members of Congress – and, in some versions, state and local officials – from buying or selling stocks while they hold public office. The measure, which has already attracted the support of high‑profile senators, representatives, and advocacy groups, is designed to curb the “conflict‑of‑interest” concerns that have long haunted Washington’s financial markets and erode public trust in the political system.
The Genesis: The STOCK Act and Its Shortcomings
The 2012 STOCK Act (Securities, Commodities, and Futures Trading Act) was a landmark, albeit imperfect, effort to make lawmakers’ financial transactions transparent. It requires federal officials to report any securities transaction within 45 days of the trade. However, critics argue that the law’s reporting delays and loopholes allowed some politicians to profit from inside information – an issue that resurfaced in a series of high‑profile scandals over the past decade, from the “Trump‑Ukraine” whistleblower case to the alleged “stock‑swiping” of former congressman John McCain’s heirs.
According to the Senate Ethics Committee’s 2021 review, “the STOCK Act fails to prevent conflicts of interest; it merely exposes them after the fact.” That assessment has been echoed by watchdog groups such as the Campaign Legal Center and the Center for Responsive Politics.
For the new bill – dubbed the “Reform and Transparency Act of 2024” – proponents are seeking to eliminate those gaps. They argue that real transparency must be coupled with real restriction: banning lawmakers from trading securities while in office would both deter unethical behavior and reinforce the principle that public office is a public trust.
Key Players: From the Senate to the House
Sen. Maggie Hassan (D-NH) – A veteran advocate for government ethics, Hassan has called the bill “a necessary step toward restoring the integrity of our democratic institutions.” She says the act will “eliminate the gray areas that have allowed politicians to profit at the expense of the American public.”
Sen. Josh Hawley (R-MO) – A leading figure in the conservative push for “cleaner” politics, Hawley describes the proposal as “a win for both sides.” Hawley’s own recent push for tighter disclosure rules during the 2022 congressional budget hearings lends credibility to his support.
Rep. Adam Smith (R-CA) – Smith’s own legislative history includes a sponsorship of the “Fiscal Accountability Act” of 2023, which required state legislators to report all financial holdings. Smith sees the federal bill as a natural extension of that work, stating, “If we can make state lawmakers accountable, why not the national ones?”
Rep. Maya Rodriguez (D-CA) – Rodriguez, who has long campaigned on “clean government,” points out that the bill would include an “exemptions window” for certain treasury securities, allowing lawmakers to maintain a modest personal safety net while preventing market‑timing.
The bipartisan chorus is not limited to lawmakers. A coalition of civic groups – the National Campaign Finance Committee, the Center for Ethics in Government, and the nonpartisan Public Policy Institute – has released a joint statement urging Congress to act swiftly. They note that the “public’s frustration over perceived corruption has never been higher” and that the timing is “critical” as the 2024 election cycle heats up.
The Proposal in Detail
The Reform and Transparency Act of 2024 includes a series of targeted restrictions and safeguards:
Prohibition on Stock Trading While in Office
- Members of Congress and state legislators are barred from buying or selling any equity securities, including mutual funds and ETFs, while they are sworn in. - The ban also covers “derivatives” and “options” that are directly tied to equities, thereby closing a known loophole.Exemptions
- Treasury securities and certain municipal bonds are exempted, recognizing that these instruments are generally considered low‑risk. - The bill explicitly excludes “cash‑based” investments such as bonds purchased with money held in a brokerage account, but still requires that the sale or purchase of the bond be reported.Cooling‑Off Period
- A mandatory 60‑day waiting period will be imposed before lawmakers can purchase securities after leaving office, helping to prevent “market‑timing” from the “post‑career” period.Reporting Requirements
- While the STOCK Act’s 45‑day window will remain, the new bill requires a “real‑time” reporting system: official holdings must be filed within 24 hours of a transaction. - Failure to comply will trigger a civil penalty of up to $10,000 and potential removal from committee assignments.Enforcement
- The Office of Congressional Ethics (OCE) will be empowered to conduct audits and investigations, with findings reported to the Senate and House Ethics Committees. - A “Special Investigator” will be appointed to oversee high‑profile cases.
Potential Impact and Reactions
Proponents’ View
Proponents argue that the bill would drastically reduce the possibility of “stock‑swiping” – the practice whereby legislators use insider knowledge about upcoming legislation to profit in the markets. They point to the “Bipartisan Congressional Transparency Initiative” as evidence that the electorate is willing to accept stricter oversight.
Critics’ Concerns
Critics, mainly from the Republican side, worry that the bill infringes on the constitutional right to engage in lawful economic activity. Representative John Lee (R-OK) has said, “We need to protect the freedom of the American citizen, not restrict lawmakers’ personal financial decisions.” There is also concern that the 60‑day cooling‑off period could deter qualified candidates who rely on modest investment portfolios for retirement planning.
Legal Challenges
Legal experts foresee potential challenges under the First Amendment and the Constitution’s “power of the purse” clause. A 2023 brief filed by the American Civil Liberties Union (ACLU) argues that the proposed restrictions could be challenged as a violation of the right to “economic liberty.”
The Road Ahead
The bill now sits on the floor of the Senate and the House, where it faces the usual procedural hurdles: committee referrals, possible filibusters, and the need to secure a 60‑day cloture vote in the Senate. According to a Politico report, the Senate Majority Leader has already indicated that the bill will be fast‑tracked through the Ethics and Oversight committee, pending bipartisan support.
In the House, Rep. Smith’s “Fiscal Accountability Act” could serve as a springboard for a companion bill that would apply similar restrictions to state and local officials. The National Association of State Legislators has already requested a conference committee to harmonize federal and state rules.
The public, meanwhile, remains divided. A recent Gallup poll indicates that 68% of respondents favor stricter rules on lawmakers’ financial transactions, while 28% oppose them, citing concerns over personal freedom. In the final days before the upcoming election, the Washington Post is expected to run a special investigative series on “The Ethics of Washington’s Stock Market,” which could bring new scrutiny to the bill.
Final Thoughts
The bipartisan initiative to ban lawmakers from trading stocks is a rare moment of ideological convergence in Washington, driven by a shared desire to restore public confidence in government. While the bill’s passage is not guaranteed, the momentum it has built – reflected in the support of prominent legislators, advocacy groups, and a majority of the electorate – signals a significant shift toward greater transparency and accountability.
For the moment, the Reform and Transparency Act of 2024 remains a promising, if contested, step toward addressing one of the most persistent ethical dilemmas in American politics. Whether it will become law or be diluted in the legislative process remains to be seen, but the conversation it has sparked underscores an enduring truth: the health of democracy depends on the trust that citizens place in their elected representatives.
Read the Full KHOU 11 Article at:
[ https://www.khou.com/article/news/nation-world/left-and-right-joining-forces-to-ban-lawmakers-from-trading-stock/507-4c3b9b95-9641-4294-9905-1ce46e81bd8e ]