At a time when Congress is poisoned by political animosity and divisiveness on most issues, there’s suddenly conversation that lawmakers should address the issue of the law-breaking they are permitting from many members’ stock-market involvement.
Law-breaking? Well, there’s a law in place, largely the work of former Washington Congressman Brian Baird, called the STOCK Act. The measure, appropriately titled Stop Trading on Congressional Knowledge Act, was designed to make insider trading by members of Congress illegal and force more transparency in their financial dealings.
The issue has stirred some attention in recent weeks, including an intraparty squabble instead of the now-usual partisan shouting. Brian Baird
Unfortunately, there are some compelling issues like hearings on the January 6 insurrection, struggles over voting rights, and discussion over political views on violence that have created gaping divisions almost totally partisan that challenge interparty discussion on other important issues like member financial dealings.
But disclosures by the global online media company Insider of the dozens of violations of the STOCK Act, and thus the law, sparked the exchange among Democrats over stock ownership and maybe created an issue that can attract focus from lawmakers in both parties.
The disclosures prompted Democratic Rep. Alexandria Ocasio-Cortex to suggest members of Congress should be barred from trading and holding stock, even individual shares. That set off House Speaker Nancy Pelosi, who scoffed at the idea, saying “We’re a free market economy and they (members of Congress and spouses) should be able to participate in that.”
It’s worth recalling that it was Pelosi’s ineptitude in 2011 with questions on the stock-ownership issue from a reporter for 60-minutes and a public reaction it caused that helped push Congress to quickly take up and pass the STOCK Act in 2012. That quick action to pass the bill in the face of public outcry came after six years of Baird unsuccessfully pressing for consideration or even support.
So perhaps the 10th anniversary of the passage of the STOCK Act and recalling the manner in which intense public pressure brought about its passage might prompt a revisiting, particularly with a recent focus on its failings in terms of sufficient penalties for violators.
I reached out to Baird, the former congressman from Washington’s third district and now an Edmonds resident, for his thoughts.
“The penalty for insider trading by a member of Congress should be no less than that kind of trading by a corporate insider,” he said. “It is a flagrant abuse of power and trust that not only distorts markets but undermines the public’s faith in their government. That warrants very serious consequences in my judgment.”
Ironically and unfortunately, since Baird, now 65, didn’t seek re-election in 2010, he had been out of office nearly a year when the telling CBS segment aired to set the stage for a rush by Congress to pass the bill.
Here is a section from a November 2011 column I wrote after the CBS program aired. “During the last three of his six terms representing the state's 3rd District, Democrat Baird sought unsuccessfully to pass, or even just gather support for, what he called the Stock Act. It would have barred members of Congress from doing stock transactions in areas they regulate, in essence, prohibiting their investing in a manner that those in the real world call Insider Trading “For ordinary citizens, reaction to Baird's proposal would be a laughable ‘well, of course’ But in a place whose mantra is ‘the rules we make for you don't apply to us,’ seeking to force action by the lawmakers on one small, self-imposed ethical constraint could become a rallying point for a fed-up public. “The thrust of the CBS segment that aired this month is that lawmakers often do make stock purchases and trades in the very fields they regulate. While ordinary citizens could be jailed for engaging in the kind of investment shenanigans that those in Congress involve themselves in, there's not even an ethical concern among lawmakers. “And a sure way to take this worthwhile campaign viral is to share in every possible social-media fashion 60 Minutes reporter Steve Croft's questioning of current House Speaker John Boehner and former Speaker Nancy Pelosi at their respective news conferences. Viewers of the ineptitude with which both Boehner and Pelosi tried to answer Croft's questions about whether their investment practices were at least conflicts of interest were irate. Pelosi was unforgettable, stuttering ‘you…you wouldn’t suggest I’d do anything that was not in the best interest of my constituents?’ The thought that had to occur was ‘Who elects these people?’ The answer, unfortunately, is people like us elect them. Shame on us.”
The kind of stock-market activity that Croft pointed out included Boehner, now retired, having bought a bunch of health-care-related stock during the healthcare reform debate of 2009. And when Boehner's efforts to kill the so-called "public option" succeeded, those stocks skyrocketed.
Pelosi, meanwhile, had gotten in on a series of lucrative stock Initial Public Offerings. One of those involved an enormous number of Visa shares that Pelosi purchased while she was working on legislation that would have hurt credit card companies. Two days after purchasing the stock at $44 a share, and after the bill was put on long-term hold, Pelosi's stock shot up to $64 a share.”
After the program aired and the public reaction to it shocked members of Congress, lawmakers rushed to get their names on the bill once it was introduced in January in both house and Senate.
It was the 2012 bill introduced in the Senate by outgoing Sen. Joseph Liberman that added a name to Baird’s Stock act, Stop Trading on Congressional Knowledge Act. It passed the House in February with only two dissenting votes and in April in the Senate with three dissenters.
I asked Baird this week to reflect on what’s happened since including the impact disclosures under the act’s reporting requirements had on the two Georgia Senate races in 2020 whose outcome determined control of the Senate.
Actually, the role played by the STOCK Act in the defeats of Sens. Kelly Loeffler and David Perdue, both Republicans, that this gave the Democrats Senate control was significant visibility for certain stock trades they made. That visibility came at a time when the suffering caused by the pandemic and the widespread economic hardship of the average Georgians were viewed as playing in the outcomes.
“Unfortunately many members are flagrantly disregarding the STOCK Act,” Baird said. “Rand Paul, for example, did not file in anything near the required time and that fact only became known after the election.”
“This has to change through more stringent enforcement and serious consequences for violations,” Baird added. “Enforcement should be through a combined process of the SEC as an external entity and the internal ethics mechanisms of the Congress. It may be necessary to create an independent review body.”
Maybe the 10th anniversary of the STOCK Act may occasion some focused discussion on how it's doing. Or not doing.