Stock Trading in Congress: Limiting Corruption


When looking at the best year-over-year traders, there is a typical pattern among those who perform best. Many would think it is hedge funds with massive budgets, the best mathematicians, market insiders and financial gurus in the world. Alternatively, maybe it is index funds, which track large swaths of the market, like the S&P 500. However, in actuality, the best traders are often not even traders by trade; they are politicians like Dan Crenshaw and Nancy Pelosi and countless other representatives and senators. Year over year, innumerable ‘public servants’ make far better returns in the stock market than the likes of Warren Buffet and George Soros, two of the widely considered best traders in history.

While this is often shocking to many, it really should not be. Congressmen have insight into information that would be seen as insider trading to anyone outside of these select few, giving them the ultimate upper hand.

The COVID-19 pandemic has exacerbated this situation profoundly. Politicians are secretly cashing out big time in a time of incredible wealth inequality, civil unrest and political strife. Prime examples of this are congressmen buying PPE and COVID testing company stocks immediately prior to the economy’s March 2020 shutdown. While most portfolios were sent in a whirlwind to the bottom, these public servants made bank. One famous example of this was former senators David Perdue and Kelly Loeffler. They started selling off stock and investing in coronavirus-related stocks after attending a Jan. 24 COVID-19 briefing while they outwardly dismissed the virus.

Many question the ethicality of this practice, believing that stock ownership in corporations causes congressmen to put aside their promises to their constituents and the American people in favor of maxing out their portfolios. This means that politicians no longer seek office to help their states or districts but instead line their pockets.

Stock and bond trading of politicians has been a point of discussion many times in the history of American politics, but now, more than ever, those from both sides of the aisle are calling for the end to this corrupt practice. Recently, a bill introduced by John Ossoff and Mark Kelly, a five-page “no nonse” bill, has been gaining traction. This has brought calls for Nancy Pelosi, Chuck Schumer and Mitch McConnell to take a stance.

Pelosi has repeatedly been against outlawing trading for congress members, instead she has vied for public disclosure of trades. There are countless flaws with this position, namely that it does not prevent market-driven corruption and profiting off a publicly head position.

“I’ve asked our members to get together and try to come up with one bill… but I would like to see it done,” Schumer said.

A stance that directly contradicts that of colleagues and is a significant step forward in eliminating congressional corruption.

McConnell, a free market, low government interference conservative, has also voiced his opinion on this legislation. Mentioning his preference of buying mutual funds rather than individual stocks, which spread the risks and gains over multiple stocks rather than one.

“That’s what I advise members to do because I think it prevents such suggestions that you are engaged in insider trading,” McConnell said.

House Minority Leader Kevin McCarthy also voiced his support for a bill that would limit trading of stocks in some form or another.

Other congressional Republicans have submitted bills, including one from Ben Sasse. While each bill has variations and different limitations on stock calls, buts, trades and mutual funds, they all have the same goals: to reduce corruption in Congress.

The bipartisan agreement on a major issue is an important and surprising change, especially in recent years, which has been plagued by partisan legislation, with both sides deadlocked on a multitude of issues, like the Build Back Better legislation proposed by Joe Biden and the Trump tax cuts of 2017.

Democratic senator Abigail Spanberger gave an important perspective on new anti-trading legislation in a conversation with the Washington Post.

“If placing limitations on how we can buy and sell stock makes it so that someone trusts us a bit more — Congress doesn’t have a great approval rating — I think that is a quote-unquote sacrifice we should make to positively affirm we are deserving of that trust or to positively affirm we are working for the American people and not our pocketbooks,” Spanberger said.

Loss of trust in the government is one of the key factors of why Trump won in 2016 and how his fan base is still enthralled with him. He was so dominant in the primaries due to his lack of political background, which solidified him as a political outsider in the same way as Ronald Reagan, the most popular Republican president in the history of the Republican Party. By outlawing insider trading by Senators and Representatives, progress can be made towards a stronger belief in our government.

Getting money out of politics has never been more important. With millions of dollars flooding Washington, in both parties, criminalizing insider trading is a pivotal step towards a more just Congress.