Jan 3, 2022

Congress and stocks.

Congress and stocks.

Should Congress be able to sell stocks?

I’m Isaac Saul, and this is Tangle: an independent, ad-free, subscriber-supported politics newsletter that summarizes the best arguments from across the political spectrum on the news of the day — then “my take.”

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Today's read: 11 minutes.

Our main story is on members of Congress and whether they should be able to trade stocks. Also, we catch you up on the news you missed and I answer a reader question about President Biden canceling student loan debt.

What you missed.

It's been an eventful week since you last heard from us. Former U.S. Senate majority leader Harry Reid (D-NV), who helped pass the Affordable Care Act, died at the age of 82. The CDC cut its quarantine period for asymptomatic people infected with Covid-19 down from 10 days to five days. Holiday sales rose at the fastest pace in 17 years, with clothing and jewelry as top drivers. The James Webb space telescope, which will peer back at the origins of the universe, was launched.

Kim Potter, the suburban Minnesota police officer who said she confused her firearm for her Taser when she shot and killed Daunte Wright, was found guilty of manslaughter. In another high-profile case, Ghislaine Maxwell, the confidant of Jeffrey Epstein, was found guilty of several sex trafficking-related charges and faces up to 40 years in prison.

TikTok surpassed Google as the most-visited website in the world. President Joe Biden signed a bill banning imports of products made in the Xinjiang region of China, where ethnic minorities are being sent to labor camps. He also signed the National Defense Authorization Act, a national defense bill that authorizes $770 billion in spending next year.

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Today's quick hits.

  1. 705 people have now been arrested in connection with the January 6 riots. (The arrests)
  2. Two people are missing, tens of thousands have evacuated and more than 500 homes have been destroyed in Colorado's wildfires. (The fires)
  3. Twitter permanently suspended the personal account of Rep. Marjorie Taylor Greene (R-GA), citing its Covid-19 misinformation policy. (The ban)
  4. Eric Adams, the former police officer, was sworn in as New York City's new mayor, replacing Bill de Blasio. He is the city's second Black mayor. (The new mayor)
  5. Based on data from abroad, the surge of Omicron cases in the U.S. could peak by mid-January. (The latest)

Our 'Quick Hits' section is created in partnership with Ground News, a website and app that rates the bias of news coverage and news outlets.

Today's topic.

Congress and stocks. Shortly before Christmas break, Business Insider published a series that found 52 members of Congress and 182 senior-level staffers had violated the STOCK Act, which requires members and their families to publicly disclose sales or purchases of individual stocks, bonds and commodity futures within 45 days of their actions.

Democratic House Speaker Nancy Pelosi (D-CA), whose husband has a reputation for being a prolific stock trader, responded to a question about whether Congress should ban members and their families from trading stocks by saying "no... we're a free market economy. They should be able to participate in that."

Her comments re-ignited a debate that has existed for years on Capitol Hill. Other members of Pelosi's own party, like Rep. Alexandria Ocasio-Cortez (D-NY), have said it's "absolutely ludicrous" members can sell stock and that it creates incentives for unethical behavior. In March of 2021, a bipartisan bill was introduced in Congress to ban certain stock trading among members of Congress and their families, but it got little traction.

Reminder: In 2012, then-President Barack Obama passed the Stop Trading on Congressional Knowledge, or STOCK Act, which prohibited members from trading stocks based on non-public information (it passed by a 96-3 vote). First-time fines for violations are usually $200 or waived entirely. In 2020, that bill was front and center after Senators Richard Burr (R-NC), Kelly Loeffler (R-GA), Dianne Feinstein (D-CA) and James Inhofe (R-OK) were accused of dumping millions of dollars of stocks after receiving non-public briefings on the threat of Covid-19. Investigations into all four members were eventually dropped.

Since 2012, only one member of Congress — Rep. Chris Collins (R-NY) — has been convicted of insider trading. After a pharmaceutical executive told Collins during a White House picnic that a drug had failed clinical trials, Collins called his son and told him to dump the stock. He pleaded guilty and resigned from Congress.

In August, I wrote a Friday edition about why I believe that members should not be allowed to trade stocks. But now that the debate has once again broken into the public lexicon, I think we should give it another look.

Below, we'll take a look at some arguments from the left and right, and then I'll re-visit my own take.

What the left is saying.

  • Many on the left side with Ocasio-Cortez over Pelosi, saying Congress shouldn't trade stocks.
  • They argue that even if it's all above board, the appearance of corruption damages trust in the public.
  • The STOCK Act, passed in 2012, has not worked.

In The New Republic, Matt Ford said lawmakers have one big advantage over the rest of us.

"They are privy to all sorts of material nonpublic information by virtue of Congress’s legislative and oversight powers. And since their access to that information isn’t always readily apparent to outsiders, it’s also a lot harder to prosecute them for insider-trading violations," he wrote. "Banning lawmakers, their top staffers, and their spouses from buying and selling individual stocks should be as noncontroversial as crop rotation or pulling to the side of the street when an ambulance goes by.

"But no matter how often a lawmaker’s investments make the news—or how much controversy these revelations subsequently court—the status quo remains intact, and excuses that sound very similar to Pelosi’s recent remark sound a shrugging refrain," he said. "Following the Trump era, when government corruption and the ethics of the president and his inner circle often took center stage, you would think lawmakers would be more cognizant of the ways that even an appearance of self-dealing or conflicts of interest can breed cynicism in the electorate. And in an era when the very bedrock of our democracy is under attack, that cynicism can be doubly damaging."

In June, the Bloomberg editorial board said the STOCK Act was meant to stop financial impropriety, but it "hasn't worked."

"With trust in government at a low ebb, nothing is more important than to hold the country’s politicians to the highest standards of financial propriety. Up to now, the efforts of Congress to police itself to the necessary standard have failed," the board said. "In May, Representative Tom Malinowski admitted that he had failed to disclose up to $1 million worth of trades in the stocks of medical and tech companies involved in the pandemic response. Even that sizable admission was minimizing things: His total undisclosed trades were valued closer to $3.2 million.

"Not a single lawmaker has been prosecuted under the STOCK Act," the board added. "It’s reasonable to ask whether it was toothless by design. For one thing, it still allows legislators to trade stocks in industries they oversee (numerous senators responsible for supervising defense spending own stock in defense contractors, for instance). And its standard for wrongdoing — using 'nonpublic information' for private profit — is nearly impossible to enforce."

In December, The Washington Post editorial board said Pelosi is "wrong."

"She should have advocated for tighter scrutiny on congressional trading. Even better would be a full ban on individual stock trades for members of Congress," the board wrote. "When members of the general public trade on nonpublic information, they go to jail for it. It’s theoretically possible to go after members of Congress for trading on insider information as well, but that has proved extremely difficult... A bipartisan group of lawmakers has introduced the Ban Conflicted Trading Act, which would prohibit buying or selling individual stocks and serving on corporate boards while in office. This is a common-sense reform that would go a long way toward restoring trust in Congress."

What the right is saying.

  • The right is split on the issue, with some advocating for a ban and others saying Congressional stocks don't perform that well.
  • Some on the right have pointed to recent studies looking at whether members of Congress outperform the general public in trading.
  • Others agree with the left that the STOCK Act has failed and new reforms are necessary.

In The American Spectator, Addison J. Hosner said Pelosi has given the public "one more reason to doubt the integrity and honesty of our politicians."

"This isn’t a Republican or Democrat issue, it’s an issue of ethics and right from wrong. Members of Congress, particularly the most wealthy, have made fortunes selling out the American people right under their noses in a time of global uncertainty," Hosner wrote. "No matter your political affiliation, this behavior from your elected officials should signal outrage and a demand for accountability.

"What is essentially occurring with congressional members is insider trading, a specific form of securities trading that is outlawed and governed by the SEC," Hosner said. "Don’t let Pelosi or other congressional members pull the wool over your eyes, make no mistake, the information and reports that Congress receives is de facto material insider information and should preclude them from making trades to their own personal benefit. By definition, material insider information is information that, if known, could reasonably be expected to affect the value of a company’s stock, or which would affect the investment judgment of a person deciding to buy or sell the stock."

In May of 2020, The Wall Street Journal editorial board said "trying to treat Senators like insiders raises a few difficulties."

"[Sen. Richard] Burr sold Wyndham Hotels. Does anybody think he had secret information about Wyndham’s business?" the board asked. "If Congress’s virus briefings merely reinforced public speculation about a generalized threat, can it be proved that Mr. Burr relied on nonpublic information?

"Several other politicians are also under attack for their trading, but the public should put down its pitchforks. For one thing, Congress isn’t very good at investing," the board added. "Senators are 'as feckless as the rest of us at stock picking,' according to a study last month from the National Bureau of Economic Research. Dartmouth economics professor Bruce Sacerdote and three students examined trading by U.S. Senators back to 2012. On average, stocks purchased by Senators underperformed for their industry and size. At six months out, the gap was 0.17%. Stocks that Senators sold went on to underperform the benchmark slightly over three months, but they overperformed slightly at a year out."

In The National Review, Caroline Downey noted that members of The Squad are "choosing to stay silent" on Pelosi's comments, despite opposing her position.

"The offices of Representatives Alexandria Ocasio-Cortez, Rashida Tlaib, Ilhan Omar, Ayanna Pressley, and Cori Bush did not respond to a request for comment on what appears to be substantial difference of opinion between the progressive caucus and leadership," Downey wrote. "While Pelosi herself has only reported her home in Napa, California, and a small checking account as assets, her husband’s investment portfolio has included companies like Slack, Tesla, Disney, Visa, Salesforce, PayPal, Alphabet, Facebook, and Netflix, all of which spend tens of millions of dollars lobbying the federal government each year.

"While the 2012 STOCK Act tightened insider-transaction regulations for politicians, members of Congress have historically profited handsomely from equity trading," Downey added. "A 2019 analysis of 61,998 stock trades from 2004 to 2010, conducted by finance professor Serkan Karadas, found that public officials’ portfolios outperformed the market by 20 percent."

My take.

As I said, I've already shown my cards on this issue. Another six months of debate and opinionating hasn't moved my position much. Whether members of Congress out-perform the general public or not is irrelevant to me. The larger issue is the influence trading has on legislating, and the inability for us to track whether insider trading is actually taking place.

Even the politicians who sing the right tune are apparently worthy of scorn. New Jersey Democrat Tom Malinowski is a great example: “This is not the time for anybody to be profiting off of selling ventilators, vaccines, drugs, treatments, PPE, anywhere in the world,” Malinowski said as the Covid-19 pandemic wreaked havoc on the economy. A few months later, he admitted that he failed to disclose $1 million worth of trades in medical and tech companies responding to Covid-19. The real value of the trades was actually $3.2 million. It must have slipped his mind.

Pelosi's position is equally eyebrow-raising. She and her husband Paul own over $46 million in assets. Paul recently made a $6 million bet on Apple, Amazon, and Alphabet (Google's parent company) with short-term, high-risk call options. He bought them in May of 2021 and they expire this June, meaning Pelosi's husband is making a huge bet that those companies will surge in value at a time when Pelosi is overseeing a Congressional majority that is trying to rein in and regulate Big Tech. In what world is this not an issue? And how does our knowing about it make it any better?

Pelosi's office, naturally, repeats the same defense until their teeth fall out: "The speaker has no involvement or prior knowledge of these transactions. The speaker does not own any stock."

I suppose the evidentiary support for this claim is that Pelosi has not emailed her husband from a government computer in ALL CAPS insisting he bet their livelihoods on certain tech stocks. But the idea that Pelosi and her husband don't talk about his portfolio is just as absurd as the idea former President Trump wasn't trying to profit off his position as president or current President Joe Biden never discussed business dealings with his son Hunter.

The difference here is we can actually do something about Congress. The vast majority of Americans say they support preventing Congressional trading. The bipartisan bill in Congress would still allow members to invest in mutual funds, which would be an improvement on what we have now even if I think they could go further.

Pelosi's defense — that we live in a free market economy — might be the best talking point she and other members of Congress have. They have the right to make wealth. But everyone gives up certain privileges based on the work they do (the kinds of ethical issues I run into as a reporter are numerous), and members not being able to trade stocks while they draft laws that regulate corporations and the market itself seems like an all-time slam dunk of a no-brainer.

Have thoughts about "my take?" You can reply to this email and write in or leave a comment if you're a subscriber.

This Friday, I am going to look back on my writing from 2021 and share what I got wrong and what I got right. It's a subscribers-only tradition that I try to partake in every year. If you want to find out how Tangle held up, you can subscribe by clicking here to get Friday editions.

Your questions, answered.

Q: A common refrain I see on the left is that Biden can cancel all student loans by Executive Order, however I have yet to find anything on the matter from a source I can trust not to be biased. Is this true? And if so, what political/legal consequences do you think are keeping that out of his platform?

— Jacob, Indianapolis, Indiana

Tangle: Biden could absolutely take action on student loans, but the idea that he can unilaterally forgive them is a hotly contested legal issue, so stating that he could as fact is a little bit silly. There are several ways Biden could go about forgiving student loans: He could cancel debt up to a certain amount, he could cancel debt that hasn't been paid off after 10 years, he could lower the percentage of students’ discretionary income they have to put toward loans each month, he could make loan cancellation automatic for certain populations (like students with disabilities), or he could set up an income-driven system to apply for student loan forgiveness.

This Forbes article has a good breakdown of the paths available. Anecdotally, student debt forgiveness is one of the most requested topics I get in Tangle, and I suspect addressing the student debt crisis is a huge issue for the base of the Democratic party (it was, after all, a major platform nearly all Democrats ran on). Polling consistently shows more than 60% of Americans support some kind of student loan forgiveness, which makes sense when you consider 43.2 million Americans are holding $1.59 trillion of student debt at an average of $39,351 each.

Ultimately, I think it's very unlikely Biden makes a sweeping reform like student debt cancellation via executive order. First, because it'd be at huge risk of being struck down by the courts. And second, because there is enough bipartisan support for the initiative that he may be able to bring some Republicans along with him. Still, he just extended the pause on repayments until May 1 and has ordered the U.S. Department of Justice and the Education Department to review his legal authority to cancel student loan debt by executive action, so I'd keep an eye on this space going forward.

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A story that matters.

Yesterday, a new federal law snapped into action that will ban many so-called "surprise medical bills." The law prohibits out-of-network medical bills and puts the onus on doctors and health insurance companies to figure out payment disputes, rather than dumping the issue on patients. Out-of-network bills are now prohibited for emergency care in a hospital or emergency room, for elective care at in-network hospitals where some doctors may be out-of-network, and for air ambulances. Importantly, ground ambulances are not included, meaning taking an ambulance ride still puts you at risk of a hefty surprise bill. Axios's Bob Herman has a great breakdown of the new rules.


  • 67%. The percentage of Americans who said they would support a bill banning members of Congress and senior staff from buying and selling individual stocks, according to Data for Progress.
  • 220. The number of representatives and senators who own individual stocks, according to Insider, or a little more than 40% of Congress.
  • $225 million. The estimated collective worth of their assets.
  • 72, 64, 45, 45, 44. The number of members who hold Apple, Microsoft, Disney, Alphabet, or Amazon stock, respectively.
  • $48 million. The amount of money those five companies spent lobbying Congress in 2020.

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Have a nice day.

On December 9th, sixth-grader Davyon Johnson managed to save two lives in one day. First, Davyon performed the Heimlich maneuver on a choking classmate while at school, dislodging the bottle cap they were choking on. Then, later that night, the 11-year-old helped a woman with a walker get off her porch and escape her burning home in Muskogee County, Oklahoma. Johnson's heroics were recognized by the school board with an award for heroism, and by the local police department, which awarded him a certificate to make him an honorary Deputy of the Muskogee County Sheriff's Office. The New York Post has the story.

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