The U.S. Senate has voted 96 to 3 to ban insider stock trades by members of Congress. If signed into law, legislators would face criminal penalties for buying or selling stocks based on non-public information given to lawmakers. Our correspondent reports the bill also mandates that members promptly disclose their stock trades in excess of $1,000.
The U.S. Congress has an image problem. Americans overwhelmingly view lawmakers as privileged.
“I feel they have created an aristocracy for themselves, and they are no longer in touch with what is going on with most of us in our lives," said a woman.
Eager to combat record-low public approval ratings, legislators have rallied behind strict rules on their stock trades. Senator Scott Brown:
“At a time when our economy is struggling and the average American family has to make hard economic choices, congressional members and staff should not be lining their pockets on insider information," said Brown.
Members of Congress have access to vast information unknown to the public- information that can affect financial markets. Senator Jon Tester:
“Folks in Congress clearly have advance knowledge of which bills and issues Congress will consider," said Tester. "They know how those bills will affect basic goods and services. And often the legislation we pass impacts how well a company does on the stock market.”
Adding fuel to the fire: lawmakers’ soaring personal fortunes in an era of stagnant U.S. incomes. Nearly half of all members of Congress are millionaires.
And while House Speaker John Boehner and former Speaker Nancy Pelosi have faced media scrutiny for stock trades, the U.S. Securities and Exchange Commission has avoided investigating lawmakers’ financial dealings.
Washington investment manager and author Michael Farr says financial markets are damaged when the presumption of a level playing field for all is eroded:
“When one group suspects that the other group has an advantage, then all of a sudden the balance of power shifts," said Farr. "That changes prices, and it certainly keeps participants away. Fairness encourages more participants.”
But he adds, rather than probing lawmakers’ stock trades, a better route might be to separate legislators from decision-making about their investments.
“I do not think it would be fair to tell [members of] Congress they can no longer invest in America," he said. "We do not tell that to our presidents. Presidents set up a blind trust for their assets, and they do not know what happens for four years, or eight years as the case may be.”
President Obama endorsed the STOCK act in his State of the Union address. And the bill has strong support in the House of Representatives.
About half of Americans own stocks, compared with virtually all members of Congress.