A bipartisan group of Senators unveiled a new proposal that would ban members of Congress, their spouses and dependent children from trading individual stocks.
Oregon Democratic Senator Jeff Merkley, Michigan Senator Gary Peters, Georgia Democratic Senator Jon Ossoff and Missouri Republican Senator Josh Hawley are outlining a new version of a measure dubbed the "ETHICS Act," Ending Trading and Holdings in Congressional Stocks. Peters, who chairs the Senate Homeland Security and Governmental Affairs committee, pledged his panel would take up the bill in his committee later this month.
Merkley previewed the new proposal in an exclusive interview with NPR, saying, "if you want to serve in Congress don't come here to serve your portfolio, come here to serve the people."
He argued the the issue cuts across party lines, "The public is absolutely united in saying stock trading is wrong," Merkley said, pointing to a University of Maryland poll indicating 85% of the public backed banning trading by members of Congress.
There current law requires lawmakers to disclose when they trade individual stocks, but critics say it's unevenly enforced and insufficient. The STOCK (Stop Trading on Congressional Knowledge) Act, enacted in 2012, directs members of congress and their spouses to disclose any trades for transactions over $1,000 within 45 days.
Insider trading laws apply to lawmakers, but the push more to require more transparency about their investments came after the 2009 financial crisis. Several lawmakers made large profits after trading financial services stocks before major banks began to fold. Those trades raised questions about whether they were profiting from information they learn on congressional committees.
"The fact that members of Congress do better than a generalized portfolio suggests that there's privileged information that folks hear about — may not be inside information, maybe it's early information, maybe it's an insight that comes from working on a sector through your committee work or so on an so forth, But that is an issue," Merkley said.
The new bill, if passed, would direct lawmakers to stop buying any new individual stocks immediately and at the beginning of the next session of congress in 2027 lawmakers will be required to divest from any individual assets. Previous reform proposals directed lawmakers to shift assets into blind trusts, but this measure specifies mutual funds. Congressional staffers are not covered by the proposal.
"We've struggled for along time whether to include blind trusts, they're complicated and it's really simplification in this case. People will not be holding stocks and that's the cleanest, most pure form of this," Merkley said.
Hawley told reporters, "this is a very tough bill." He said he's talked to House Republicans, and noted that GOP lawmakers in both chambers ran for Congress with a pledge to ban stock trading. "The truth is Congress should not be here to make a buck. Congress should be here to serve the American people."
Ossoff, who sponsored similar bills, called the proposal "a major step forward" and "long overdue."
Peters said he expected the bill to have "broad support" and the framework already has significant Democratic support.
Pressed if enough Republicans would back it to overcome any GOP move to block a vote on the Senate floor, Hawley said he didn't know, but said, "let just call a spade a spade. There are a lot of members who don't want to ban stock trading." He said about GOP colleagues, "they don't want to vote against it, what they don't want to do is to have to vote at all." He said the committee action was a "big deal."
Several House and Senate bipartisan efforts have been introduced in recent years, but none have made it far enough to be considered by committees. Former House Speaker Nancy Pelosi—who doesn't trade stocks, but whose husband is an active trader—initially opposed new reforms, but opened the door to passing legislation around the 2022 midterms. Several amendments to change the law have been pushed unsuccessfully in the Senate, but no panel has moved legislation to address concerns since the STOCK act passed.
The current law includes an enforcement mechanism that experts say is weak, with lawmakers facing a $200 fine for failing to report trades within the required deadline, which advocates say is the only way to track whether investments could be related to official duties. But members of both parties admit they have failed to file reports on time, and some file weeks or even more than a year late.
The Senate proposal would expand penalties. Under the plan, a failure to divest would result in fines of either the value of lawmaker's monthly salary or 10% of the values of each asset that's in violation of the law - whichever is greater.
"The fines are huge in this bill," Merkley said, stressing the penalties are assessed monthly, noting, "a person who is in violation would run up huge impacts very, very quickly."
Under the new Senate proposal all lawmakers and new members elected would have to alter existing portfolios by March 31, 2027. They would be given 120 days to divest all covered investments. The proposal also includes a provision requiring a certificate of divestiture covering both the President and the vice president.
If lawmaker leaves public service there would be a 90 day "cooling off" period during which they would still be barred from investing in individual stocks.
It would also increase the penalty for non-reporting to $500 and require that all disclosures be in a searchable public database.
The disclosures that lawmakers currently file have prompted financial services companies to create products that model lawmakers' investments. Those funds have consistently beat the market — a dynamic that non profit groups pushing for reforms demonstrate that the public doesn't trust their elected officials.
Merkley acknowledged that it's unlikely the proposal would get a standalone vote, but he says he is aiming to get it attached to another must pass bill this year.
He admitted moving the issue has been difficult when pushing a law impacting lawmakers financial portfolios, saying "members of Congress get very twitchy and when you say your family will be covered too, they have concerns."
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