Politicians' trading activity is back in the limelight as lawmakers are working to ban active members of Congress from participating in the stock market.
Limiting stock trading among active members of Congress has some bipartisan support. A proposal from Sen. Jon Ossoff (D-GA) would prohibit members of Congress and their immediate family members from conducting any stock transactions while serving in office.
“People need to be able to trust that their elected leaders are making decisions with the people’s interest at heart and not their own personal financial interest,” Sen. Tina Smith (D-MN), a member of the Senate Banking Committee, said on Yahoo Finance Live (video above). “That is why I think full disclosure is absolutely essential. And then it is up to the constituents of folks in the states that elect those senators to decide for themselves whether they think they’re being represented fairly and honestly or not.”
Under the STOCK Act of 2012, lawmakers are required to report their stock trades within 45 days of the transactions. However, a report by Insider found that 54 members of Congress have failed to properly report their transactions.
House Speaker Nancy Pelosi (D-CA), who has also faced scrutiny for her husband's trading habits, has vocally opposed bills like this in the past.
"We are a free-market economy,” she said during a press conference in December, adding that lawmakers “should be able to participate in that." Pelosi's comments have drawn criticism as her husband, Paul, is an active stock trader, according to reports.
Decisions based on 'the best interest of the people'
In 2020, four lawmakers — Sens. Richard Burr (R-NC), Dianne Feinstein (D-CA), Jim Inhofe (R-IA), and Kelly Loeffler (R-GA) — came under heavy scrutiny after it was revealed they traded ahead of the stock market crash triggered by the coronavirus pandemic at a time when lawmakers were receiving confidential briefings about the severity of the virus.
Burr, then-chairman of the Senate Intelligence Committee, garnered heavy criticism after it was revealed that on February 13, 2020, he and his wife sold $1.7 million worth of shares in various companies, including several hotel companies, which were part of an industry that was hit hard by the coronavirus.
According to an analysis by the Wall Street Journal, those shares were worth at least $250,000 less at the close of the trading day on March 19. Around that time, Burr was receiving daily coronavirus briefings.
Burr denied the allegations, and the Department of Justice ended its inquiry into his trading actions in January 2021, though the Securities and Exchanges Commission (SEC) is reportedly still investigating.
The Federal Reserve is also facing a scandal related to stock trading: Federal Reserve Vice Chair Richard Clarida resigned earlier than initially planned after it was revealed he had failed to properly disclose his trading activities in 2020, raising the question of whether or not he benefited from Fed actions.
“As you think about what’s going on with the Fed, it’s extremely important that we have good disclosure and that we know that people who are making these huge financial decisions are not self-dealing at the same time,” Sen. Smith said, and added that “we should look at what we need to do to make sure that people have confidence in the Senate and in all lawmakers, that they’re making decisions baked on the best interest of the people they represent and not their own personal self-dealing."
Adriana Belmonte is a reporter and editor covering politics and health care policy for Yahoo Finance. You can follow her on Twitter @adrianambells and reach her at email@example.com.