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Traders work on the floor of the New York Stock Exchange, New York City, Sept. 29.
Photo:
Spencer Platt/Getty Images
After months of moral panic, House Democrats this week released a bill to ban federal officials from owning individual stocks, but its sheer breadth is a reason for second thoughts. The evidence is thin that this addresses any real problem, while it will deter successful people from seeking or accepting public office.
The bill would forbid federal officials from holding individual investments unless they’re in a qualified blind trust. There are some exemptions, such as for “a diversified mutual fund” or “a diversified exchange-traded fund,” as well as for “an interest in a small business concern or family-owned business that does not present a conflict of interest.” But no trading shares in companies famous or obscure.
These stringent terms would apply to Members of Congress, their spouses and dependent children, and some senior aides on Capitol Hill. They’d also cover the President and Vice President, plus any Senate-confirmed “political appointee,” which is a category that potentially reaches something like 1,200 roles. Don’t forget Federal Reserve governors and regional bank presidents and vice presidents. And federal judges, including the Supreme Court.
For many successful people, taking a political appointment is already a sacrifice. Former Attorney General
Bill Barr
told a podcast this summer that he gave up “millions” by going into the Trump Administration. If an investment ban deters smart financiers or doctors from serving, it will be the country’s loss. The reason many Democrats don’t care is that they prefer a government staffed by professional activists and political lifers.
Stock trades by Members of Congress in particular have been scrutinized since the Covid crash of 2020, but transactions over $1,000 are publicly disclosed under current law. The 2012 Stock Act bars any such trading based on nonpublic information. If the reporting rules aren’t working, perhaps they can be stiffened in some way. But where’s the evidence that stock ownership requires a blunderbuss ban?
Bad headline writers shout that Senator So-and-So made a trade that looks canny in retrospect. But there are 535 Members of Congress, and if they were all rolling dice, half would be above average. In 2020 Dartmouth academics analyzed Senate trading back to 2012, and they concluded that America’s elder statesmen are “as feckless as the rest of us at stock picking.”
When politicians are pilloried for trading, many have reasonable explanations. After the Covid crash in 2020, Sen.
Dianne Feinstein’s
office said her assets were already in a blind trust, but that didn’t stop the pitchfork populists. Sen.
James Inhofe
posted a letter from his adviser saying his stocks were being divested over time without his involvement. Voters don’t have to accept evasions or even solid alibis. Georgia Republican Sen.
Kelly Loeffler
lost her election after opponents jumped on her stock trades.
Recently the press dinged Rep.
Angie Craig,
a Minnesota Democrat, for a purported conflict of interest because her son lost money trading
Lyft
and Ford shares without her knowledge while she sat on the Transportation Committee. “As a mom, I would be grateful if my college student son was not allowed to own or trade stocks,” Ms. Craig said. “And as a member of Congress, I’m working to pass a law to force him to listen to his mother.”
Points for humor, but this isn’t a threat to democracy. If voters don’t trust their Senator or Representative not to profit from their office, the answer is to throw the bum out. Disclosure rules are fine, and occasionally a prosecution is required: Former Rep.
Chris Collins
was sentenced to 26 months in prison for insider trading and then lying to the FBI about it.
But to borrow from
Thomas Sowell,
there are no solutions, only trade-offs. It’s hardly a good look for Congress to dump stocks during a pandemic, yet the current rules say politicians may invest under the watchful eyes of voters and the press. The Democratic bill would make government even more of a professional political class with fewer Members who know something about the private economy.
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