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Dear John,
Insider trading of stocks is illegal for the vast majority of Americans, because inside knowledge confers an unfair advantage upon the person who knows ahead of time how a company or industry is about to suddenly increase or decrease in value.
Yet members of Congress, who in their oversight roles may have as much insider information as the leaders of the companies at stake, regularly trade individual stocks with impunity -- especially stocks in industries which they are responsible for regulating. It seems that when you make the laws, you don’t have to follow them.
Examples of Senators and Representatives benefiting from trading stocks they know too much about are all too common. Fifteen members of Congress who oversee the defense industry invest in defense companies. Over a dozen members who oversee energy policy invest in fossil fuels.
But when 75 lawmakers benefited from investments in vaccine manufacturers Moderna, Johnson & Johnson, and Pfizer made in the early weeks of the COVID-19 pandemic, the role of insider information became shockingly obvious.
Across the political spectrum, 70% of voters are in favor of banning members of Congress from owning and trading individual stocks.
This is what the Ending Trading and Holdings in Congressional Stocks (ETHICS) Act, introduced by Senators Jeff Merkley and Sherrod Brown, would do. Sign the petition to urge Congress to pass this bill now.
A previous law, the STOCK Act, requires that members disclose financial trades within 90 days. However, when 54 members of Congress violated this law in 2021, along with over 150 staff, there were no consequences. As a former investigator in the House's Office of Congressional Ethics told Business Insider, “Enforcement of the financial disclosure requirements is virtually nonexistent.”
A huge amount of information about the economy and individual companies courses through Congress every day. There is no way to guard against the misuse of this information for personal profit. So why allow members of Congress to trade in individual stocks?
Rather than investing in individual stocks, congresspeople can invest in index funds that go up or down based on the fluctuations of the stock market as a whole. It may be less lucrative than using insider information to cherry pick stocks, but it’s a sound investment strategy -- and what a congressperson knows has zero bearing on the index fund’s decisions to buy or sell.
This is easy to implement and fair. It wouldn’t penalize members of Congress or their families. They could still invest in index funds, like any other stock market investor. They just would be barred from trading individual stocks.
With distrust in government near an all-time high, we need to be sure members of Congress don’t make it worse by using insider information to line their own pockets. Sign the petition demanding passage of the ETHICS Act now!
Thank you for working to prevent the misuse of insider information by our representatives, who are elected to serve the people, not to game the system for their own personal benefit.
Robert Reich
Inequality Media Civic Action
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