A bipartisan bill in the Senate would ban members of Congress and the executive branch from owning shares of stock in individual companies.
Sens. Josh Hawley (R) and Kirsten Gillibrand (D) also propose to ban lawmakers and officials from owning individual shares in blind trusts, a long-used way for government officials to surrender day-to-day control of their personal wealth while they hold office.
Unlike existing ethics rules, which are riddled with loopholes and exemptions, the Hawley-Gillibrand proposal has some teeth to it:
The bill includes stiff penalties for government officials who violate the rules. Employees of the executive branch would have to forfeit any profits from stock trading and face fines of $10,000 or more.
The new bill would outright ban ownership of individual stocks by members of Congress and their aides. Lawmakers and their aides are currently permitted to own and trade individual stocks as long as they don’t make investment decisions based on nonpublic information they learn from their jobs in Congress.
Under the new bill, members of Congress would face a penalty of at least 10% of the value of the prohibited investments for not complying with the ban.
The driving force behind this is the unseemly, grifter-like behavior of members, their families and others close to them trading stocks based on official congressional or legal actions (though none dare call it insider trading, which is highly illegal…and also tricky to prove):
A 2022 analysis by the New York Times found that 97 Congress members or their family members had reported trades that could have overlapped with their legislative committee work. In 2021, an Insider investigation identified 78 lawmakers who had failed to properly report stock trades as mandated by the STOCK Act.
When the Covid-19 pandemic hit, the stock-trading activities of multiple lawmakers raised eyebrows. Former Sen. Richard Burr (R-NC) and his brother-in-law dumped stocks before the market tanked in reaction to the health emergency after being briefed on the outbreak. The Securities and Exchange Commission and Department of Justice launched a probe into the matter, both of which ended without charges or other action.
Outright bans on owning individual stock are one way of trying to put an end to such crass self-dealing. But government bans are, at best, imprecise ways of curbing bad behavior. If a lawmaker or federal judge wants to skirt the rules, no ban, no matter how cleverly crafted, will stop them.
And if we care to recall the history of congressional scandals, we would do well to remember the House Post Office scandal of the early 1990s. That was all about members conspiring to launder money through the office that sent out franked mail. And who can forget the 1992 House bank scandal, when the public learned that members were kiting checks at the House bank?
The bottom line: members of Congress, and others in government, will find ways to game systems for personal gain. We can applaud a ban on individual stock ownership. But we should never expect such a ban to end bad government behavior.
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This is a reminder that the public is too often deceived into thinking that the important thing is to elect virtuous and trustworthy people to political office. WRONG. As James Madison said: “If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.” Because of this, we must preserve the many elements of our system – including the electoral college – that pit those who would rule us against each other. And, yes, laws that place restrictions on stock ownership are of the same stripe because the fundamental lesson of history is that OUR LEADERS CANNOT AND SHOULD NOT BE TRUSTED no matter how much we would like to be able to do so.
What do you do about the ownership of non public family owned business?
What is the consequence of politicians with no stake in the Americans economy?
Really? And you don’t think far enough ahead to see the problems this would cause? We would be plunged into Communism or Fascism.