Anger is boiling over at House Democratic leadership for failing to deliver on a bill to ban members of Congress from trading stocks — a key priority for voters on both sides of the aisle — ahead of the midterm elections.
Democratic leaders unveiled draft legislation to tackle the issue Tuesday, just days before Congress was set to leave for an extended recess. That left lawmakers little time to review the bill or offer changes, such as closing loopholes that critics say make the bill toothless, dooming its chances of a floor vote.
Rep. Abigail Spanberger (D-Va.) on Friday issued a scathing statement, accusing Democratic leaders of slow-walking her own stock trading proposal — introduced two years ago with bipartisan backing — and ultimately offering a more complicated bill that was designed to fail.
“This moment marks a failure of House leadership — and it’s yet another example of why I believe that the Democratic Party needs new leaders in the halls of Capitol Hill, as I have long made known,” Spanberger said in her statement.
Speaker Nancy Pelosi (D-Calif.) told reporters Friday that the bill didn’t come to the floor because it didn’t have the votes to pass.
The delay is a momentous setback for the stock trading reform effort, which drew a rare confluence of support from an overwhelming majority of Republican and Democratic voters.
Public scrutiny of lawmakers’ trades intensified when Sen. Richard Burr (R-N.C.) unloaded much of his portfolio after attending a private briefing on the devastating impacts of COVID-19 at the start of the pandemic. Pelosi, whose husband is a prolific trader, also drew backlash when she said she wouldn’t support a ban on stock trading in Congress, a position she later reversed.
“Passing a stock trading bill before the midterms would have been a good faith sign to the voters that Congress takes its responsibility to the public interest seriously,” said Danielle Caputo, an ethics lawyer at the Campaign Legal Center. “And so obviously, that's disappointing.”
The Combatting Financial Conflicts of Interests in Government Act, spearheaded by Rep. Zoe Lofgren (D-Calif.) at the request of Pelosi, aims to prevent insider trading among members of Congress, federal government officials and Supreme Court justices.
The bill is meant to stop insider trading by making officials put any stocks they own into what’s called a blind trust, whereby the stocks are handed over to a third party that manages them without their owner’s knowledge.
But critics of the bill say that it contains a loophole that allows officials to get out of this requirement.
“The problem is that the bill allows people to create a trust that they can claim is blind and diversified, and yet it doesn’t actually have to meet the criteria that are currently in the law for it to officially be a blind trust,” said Dylan Hedtler-Gaudette, an advocate with The Project on Government Oversight (POGO), a nonprofit watchdog organization.
Congressional ethics committees, notorious for failing to hold lawmakers accountable for violating existing ethics rules, would sign off on the blind trusts under the proposal.
“It’s basically a fake blind trust,” he said. “We don’t have that much trust in what the ethics committee is going to do because they’re notoriously weak in doing anything that’s particularly restrictive or robust around what happens internally.”
Critics of Democratic leaders’ approach say that the stock trading bill should have stuck to the legislative branch, and that including ethics reforms to the judiciary and federal government only complicated its chances of passage. Those changes could have come in future bills, they said.
Lawmakers complained this week that the Lofgren bill was not crafted with input from many rank-and-file lawmakers, particularly Republicans.
“This is a complex issue requiring thought, debate, amendment and a full airing in committee to build as much bipartisan agreement as possible rather than the normal cram-down from the top that permeates literally everything we do,” Rep. Chip Roy (R-Texas), who partnered with Spanberger on a stock trading bill, said in a statement Wednesday.
House Judiciary Committee member Hank Johnson (D-Ga.) said in an interview that he suspects that many members of his committee haven’t had time to properly review the legislation.
“I would suppose there are many members who have not actually read the legislation. And it’s certainly an important enough issue that we need to take adequate time to deliberate on it. We know that stock trading by members of Congress and by judges — Article III judges — is unacceptable,” he said, referring to judges who are nominated by the president and can only be removed from office with impeachment proceedings.
A recent analysis by The New York Times found that one-fifth of U.S. lawmakers traded financial assets in industries that relate to their work on government committees in recent years.
A 2012 law called the STOCK Act forbids members of Congress from using insider information when buying and selling stocks, but watchdogs say violations of the law are common.
“We keep seeing STOCK Act violations,” POGO’s Hedtler-Gaudette said. “We see them time and time again. And they’re not even assessing penalties on the people who are violating the STOCK Act.”
The proposed stock trading ban in the House is one of several bills now being debated in the Senate from lawmakers including Sens. Elizabeth Warren (D-Mass.), Steve Daines (R-Mont.), Jon Ossoff (D-Ga.) and Josh Hawley (R-Mo.).
Upon hearing the news of the stalled bill Friday, Hawley tweeted, "Pathetic. This should be a slam dunk."
"Congress AND their spouses from owning stock. But no. Pelosi & Company won’t give up the $$$$," he continued.
The proposals from Hawley and Ossoff allow for stocks to be put into blind trusts, while the bipartisan measure from Warren and Daines is more strict and requires that stocks be sold off outright.
Supporters are still hopeful that lawmakers can finish a stock trading bill in a lame duck session after the election. But they note that there will be less pressure on lawmakers to appease voters, and Congress will already have its hands full with a slew of legislative priorities, including a government spending bill.
The Hill has reached out to Pelosi's office for additional comment.
Updated 4:02 p.m.