Congress Can’t Quit the Stock Market

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Mary Harris: So, Sam, if I wanted to, how easy is it to figure out what kind of stocks U.S. politicians are trading?

Speaker 2: Oh, it’s very easy.

Mary Harris: Really?

Speaker 2: Yeah.

Mary Harris: Do you know every time Nancy Pelosi trade something.

Speaker 2: I could if I wanted to?

Mary Harris: Sam Brodey reports on Congress over The Daily Beast.

Speaker 2: Some enterprising folks online have actually set up alerts for particular lawmakers and their stock trades. You can now like buy into like an exchange traded fund that’s essentially based on what lawmakers are trading. So it’s it’s gotten you want to get the Nancy Pelosi ETF like, yeah you can you can get that these days.

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Mary Harris: Scroll through the tiktoks and you’ll find a cottage industry of would be financial advisors who are obsessed with the money moves of lawmakers. Sometimes it’s a little hard to tell whether these accounts are looking to scold politicians or celebrate them.

Speaker 2: Shoutout to Nancy Pelosi. The stock market’s biggest whale.

Mary Harris: Many take a special interest in Speaker of the House Nancy Pelosi, who, to be fair, does not trade stocks herself, but her husband does aggressively.

Speaker 3: So I’ve come to the conclusion that Nancy Pelosi is a psychic and she can guess when a stock is going to pop.

Mary Harris: So one tiktoker called her a psychic, Right?

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Speaker 2: And so you get to this sort of like, you know, Yass queen ification of, you know, investing here. But I don’t mean you can separate it from the fact that the optics of this whole practice are pretty uncomfortable and sort of gross from a from a good government perspective.

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Mary Harris: Despite all the cheerleading on TikTok, most Americans do not think lawmakers should be able to trade stocks at all. Which is why some thought this was going to be the year that Congress reined itself in when it came to the stock market. After all, there are multiple bills floating around the Capitol that could ban elected officials from investing in companies directly.

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Speaker 2: There’s not a whole lot of issues that are like talked about on the agenda right now that commands such bipartisan support.

Mary Harris: So why isn’t anything being done about it?

Speaker 2: This is the classic tale of Congress. Congress has an incredible inability, kind of institutionally and on a member level, to understand how its practices erode public trust in the institution. Members of Congress spend all day lamenting the fact that people don’t trust Congress and they want to do things to restore public faith in the institution and so on and so forth. Yet here is something that comes up that is an obvious slam dunk. Get members go. Well, you know, this could be really complicated for me and I don’t know.

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Mary Harris: Today on the show, the public wants them to do it. Many congresspeople themselves want to do it. So why won’t Congress quit stock trading? I’m Mary Harris. You’re listening to what next? Stick around.

Mary Harris: It’s not like there are no rules for how politicians should conduct themselves when buying stocks. It’s just that the rules that exist are pretty loose. In 2012, Congress passed the STOCK Act. It mandates regular disclosure of a member’s investment activity. It also prohibits members of Congress from using private information gleaned from their public job when they invest. But there’s a problem with that.

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Speaker 2: The standard for nailing someone on a Stock Act violation on that, that most important part, using private information for for personal gain, that is really, really hard to do. So a good example here is former Senator David Perdue of Georgia, who was an influential lawmaker on a specific Armed Services Committee subcommittee related to naval ships and submarines. And while he was active on that subcommittee, he had invested heavily in a contractor that makes submarines that got a massive contract to build submarines for the U.S. Navy and ended up increasing the value of the stock that Perdue owned. That is allowed. There is no rule saying that you can’t do that. The.

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Mary Harris: There are plenty of examples like this. Trades that come at a particularly opportune moment and seem to play hopscotch with the ethical line. But the recent push to ban stock trading in Congress, it really picked up steam a couple of years back after a few senators made trades that were hard to ignore. These trades stood out because the politicians involved seemed to be adjusting their portfolios based on information they got at work. Back in January 2020, after an intelligence briefing on the dangers of the novel coronavirus, senators from Georgia and North Carolina seemed to dump vulnerable stocks. Senator Richard Burr averted $87,000 in losses and then became subject to a lengthy investigation by the Securities and Exchange Commission. Several lawmakers are under fire for selling major holdings at the beginning of the stock market sell off well ahead of the drastic escalations in this pandemic.

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Speaker 4: Senators Inhofe, Feinstein and LaFleur all of those lawmakers had access to information about the coronavirus.

Speaker 5: The chairman of the Senate Intelligence Committee temporarily stepping aside from his post as the feds investigate whether he used insider information to sell stocks and save big money.

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Mary Harris: That’s when a few members of Congress started pushing for reform. Democratic Representative Abigail Spanberger and Republican Representative Chip Roy introduced a bill in June of 2020 that quickly drew bipartisan support.

Speaker 2: Members from across the political spectrum and both parties have written and gotten behind these bills because the politics are so good. And it gives basically anybody, I think, a ready made and compelling political message, whether that’s I’m fighting the swamp or you can even work out some kind of Pelosi message into it if you want.

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Mary Harris: An anti Pelosi message.

Speaker 2: Exactly. Exactly. Or if you’re Abigail Spanberger and you’re in a tough district and you can say, look, I’m fighting to clean up Washington, I mean, that’s that’s a tried and true message that we’ve seen over the years. You know, pretty effective. So what ended up happening in 2021 and some of this year, too, was, you know, because the politics of it were so good, we saw lots of members introduce various proposals related to stock trading on both sides of the Capitol. And so, you know, they shared the same goal, which was to severely curtail or outright ban members of Congress from trading stocks. But because members are so sensitive to this, because it affects them.

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Speaker 2: Right. There was a lot of debate and discussion about the finer points of how these bills were actually going to work. The Spanberger ROI bill had, you know, required members to put their assets into blind trusts, and others said no like that. That would be too onerous for some members. And then other proposals were like, Well, we should just have this apply to across the government. Let’s have this apply to the judicial branch. And then you had members go, Wait, wait, wait, we’re kind of losing the plot here. We’re just trying to focus on Congress. So what ended up happening? There were a lot of proposals. And then the problem became reconciling those proposals to arrive at one bill that could get consensus support.

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Mary Harris: Well, it’s interesting because Nancy Pelosi assigned one of her top deputies, Zoe Lofgren, to work on this bill. Right. To kind of hash it out. That’s my understanding. Is that.

Speaker 2: That’s correct. That is correct.

Mary Harris: It seems like a good sign that she would do that, like, oh, you’re putting someone that you trust in charge of this. But was it.

Speaker 2: Yeah.

Speaker 2: Well, so let me let me take us back to a day in February of this year when the House is in session. And there had sort of started to be kind of a critical mass on on stock trading. People like Spanberger were getting really bullish about their ability to to to move this thing quickly. Sometimes in Congress, stuff just happens fast. And it wasn’t unreasonable to think that perhaps this could get done in a pretty short span. So there’s all this hype and the hill tip sheets, the Capitol Hill tip sheets are going. Pelosi’s going to make a big announcement of this. And then she goes to her weekly press conference amid all this hype and she gets up there and she says.

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Speaker 4: What matters to me is what my members think and.

Speaker 2: Well, we’re going to consider doing this, but we need we need to get members to support it. And we have to look at expanding this, too, to the judicial branch and the Supreme Court.

Speaker 4: The Supreme Court has no disclosure and it makes important decisions every day.

Speaker 2: So what we’re going to do is we’re we’re going to see if the members want to do this and get to. Yes.

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Speaker 4: What we’re trying to build is consensus. Consensus.

Speaker 2: And people are like, wait, that was an announcement of anything that was an announcement of we’re going to take a look at this.

Mary Harris: So she’s pumping the brakes.

Speaker 2: So, yeah.

Speaker 4: Thank you all very much.

Speaker 2: Pelosi punted on that one.

Speaker 4: We’ll be in touch.

Speaker 2: And then ultimately. She handed the ball to Zoe Lofgren, a close ally of hers who chairs the House Administration Committee, which sets the rules for for members of Congress. So this bill was in Lofgren jurisdiction. And, you know, there was a there was a sense that Pelosi and her senior team, not just her, but, you know, Steny Hoyer, the second ranking Democrat in the House, they were not supportive of this, didn’t really see the political upside and were really reflecting the concerns of their closest allies, the senior members who have been there for a long time, kind of in the cool, you know, lukewarm bathwater of Capitol Hill when you start to lose touch with reality, who are saying, why should I have to do this? You know, who cares? I have to restructure my portfolio. It’s going to take forever.

Mary Harris: There seems to be a generational gap here where you have people who’ve been there for a long time, been in Washington a long time, and the newer members who maybe have less to lose, who want reform. Is that a fair assessment?

Speaker 2: I think that’s generally right. There are exceptions that are that are notable here in there. But yeah, it’s just something that if you are newer to Congress, it makes a lot of sense for you to do. And you see, this is sort of an obvious slam dunk. And it really it really the bulk of the resistance, as we understood it was, was from senior long serving members.

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Mary Harris: I’m trying to figure out who Nancy Pelosi is in the stock ban conversation because she, of course, has a husband who’s heavily invested in the stock market. And, you know, that raises a lot of red flags for folks. And she definitely doesn’t seem warm on the idea of stock ban legislation. Do you have theories here about what’s going on? Because he certainly has the power to block legislation if she wants to.

Speaker 2: Sure. Of course, the optics are not good. And Nancy Pelosi’s husband is a prolific trader. Stocks. But what people miss in this conversation is how Nancy Pelosi operates and what ultimately has made her probably the most effective Democratic legislative leader in history. What Nancy Pelosi cares about is the unity of the Democratic caucus in the House. They have a narrow majority. This is her strength. She she avoids issues that split her caucus. Always has. That’s what makes her effective. This is an issue that, for better or for worse, splits her caucus.

Speaker 2: And oh, yeah, the people who are the most opposed to this are the people that Nancy Pelosi has served with for ten, 20, 30 years and are her closest allies. So she goes, okay, I know that the politics of this are good. I know my members who are in vulnerable races want to run on this. Yet so many of my long serving committee chairs, close allies, don’t want to see this happen. And if this came up for a vote, they would be under immense pressure to vote yes just because the optics are so bad and this would end up being a headache and potentially split the caucus and give Kevin McCarthy and the Republicans something to beat us up with. And I don’t want to do that. I think that is a theory as to why she has been so reluctant to move the ball forward.

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Mary Harris: We’ll be right back after a quick break.

Mary Harris: When did it become clear that a stock ban was not going to happen? At least not in the next few weeks. Yeah, maybe not in this term.

Speaker 2: So there’s been sort of a stewing sense for a few weeks that it was not going to happen before members left for the October pre midterm campaign recess.

Mary Harris: Thus denying folks something to run on.

Speaker 2: Exactly. And I’ve been told by operatives like we would love to cut ads talking about how Democrats did this. So, you know, over the span of months, they had a kind of long delayed hearing. And then there were all these really incremental developments like hour where we’re briefing members about the potential text. And there’s a we have an announcement about a potential framework. I mean, it got kind of ridiculous to the point that you’re like, okay, how many announcements about announcements are going to happen here? So September happens. They’re about to leave for the midterms. They need to avert a government shutdown and there’s still no bill to be in stocks. And so at this point, people are like, okay, this isn’t going to happen. And so what ultimately ended up happening was the final week that the House was in session before leaving for the recess, they finally dropped text for Bill. That was the product officially of the House Administration Committee. And Lofgren Process, ostensibly blessed by leadership.

Mary Harris: Feels a little bit like turning in your term paper like right before the deadline and be like, Sorry.

Speaker 2: Yeah. I mean, it sort of is and it’s it came across so obviously to proponents of the push that this was never designed to happen. They drop it three days or four days before they’re supposed to leave. This is fairly complex. I mean, people had ideas of the broad strokes, but they didn’t have any text, so they had to evaluate the text. So it gives everyone a perfect out to say, well, you know, this is a really complicated bill and we should have a robust debate about it. That’s always that’s always a toll on Congress, robust debate. And, you know, we just got to do this right. So we don’t have the time to do it right now. And you have people like Spanberger and others sort of tearing their hair out, going we’ve we’ve been talking about this since February. And now now we don’t have the time to do it because this bill dropped three days before we’re supposed to leave.

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Speaker 2: And I think another important thing is that the bill, in the eyes of a lot of folks who are close to the process is pretty flawed. You know, it cast a very broad net saying that not only members of Congress and senior staff would be subject to this, which is what most people supported, but also brought in the judicial branch, which was not really something that proponents were super interested in tackling in this context. And so a lot of the outside kind of activist groups and like good government groups that had been involved here, they they panned the bill progressives fault. It didn’t go far enough. You know, it probably wouldn’t have ultimately gotten a ton of support. And so now here we are and the members have gone back for further recess and perhaps this could get done in the lame duck session. Weirder things have happened, but they do need to resolve some substantive issues in the bill and they’ve got to find the time to do it. Which leadership to this point has not really seemed like they wanted to do.

Mary Harris: You know, part of the reason this legislation to ban stock trading died, according to the official narrative, is that the votes were not there, as far as you can tell. Is that true? Because if this got to the floor, I’m just wondering, would the votes materialize?

Speaker 2: This was never whipped in any formal sense because there was no bill to whip until three days before they left. So there was never a tally of who who supports this and who doesn’t. Theoretically, this particular bill that came out of the Lofgren sort of leadership endorsed process would not have been the bill. A lot of these folks who are supportive of a ban wanted to see, however, if it had come up for a vote and it was like, all right, this is it, vote on it or don’t vote on it. I do think it would have been really hard for a lot of Democrats and and I think some Republicans to to vote against it just because the optics are so bad throughout the whole year when this process was going on of hammering out this bill and Democrats considering this.

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Speaker 2: I heard and reported and other publications reported that there was just members were opposed to this, just members of a big blob of members were were opposed to this push. We never got any names or even an inkling of who the people were who opposed it. And that’s because most members did not want to be even close to on the record opposing this because the optics are so bad. So that tells me that the legislation had come up on the floor. It would have had a pretty decent chance of passing.

Mary Harris: One of the interesting factoids you’ll stumble across if you dig into the stock trades of politicians is that. People who have studied them don’t think they’re market geniuses. Like there’s a professor at Dartmouth who basically said politicians would be better if they were just in index funds. When you look at the actual trades they make. It’s a weird thing to know because then you really do start to wonder why this group wouldn’t police themselves.

Speaker 2: Yeah, the vast majority of members who trade individual stocks, yes, they’re getting information that much of the public does not. But they’re out there making dumb trades like your average American. You know, the problem is a lawmaker cannot see why an average member of the public would say, wait, like, sure, I can do that, but how the hell are you able to do that? And the fact that this has been allowed for so long just kind of calcify, as in the culture of Capitol Hill, to the point that it’s just accepted.

Mary Harris: You mentioned that there were a bunch of members of Congress who were waiting to be able to craft ads for this latest midterm election where they said, we’ve done this, were put in this stock trading ban for politicians. Look what we did for you. And now they can’t do that. I sort of wonder if instead those same politicians, members of Congress. Are crafting ads saying, I’m going to go back to Washington and make sure this happens and I’m going to be fighting against Nancy Pelosi and Democratic leadership. And whether that opens up a whole new rift that, as you’ve said, Nancy Pelosi was trying to avoid by shunting this issue to the side.

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Speaker 2: I think that’s exactly right. I would I would not be surprised whatsoever if a Democrat running in a tough race cut an ad saying I fought to ban members of Congress from trading stocks. I fought against corruption. Nancy Pelosi stopped me from doing that or whatever, however you want to phrase that sent me back to Congress and I’ll keep fighting. Yet something that’s been a through line for Nancy Pelosi is her attitude is, to quote the the great Al Davis of Raiders football fame. Just win, baby. That’s what Nancy Pelosi cares about.

Mary Harris: So she doesn’t care if you use her as a tagline.

Speaker 2: She never has. Right. Because Republicans have always made her into this bogeyman in campaign season. And Democrats in those races have had to distance themselves from Nancy Pelosi. Many of them said that they would not vote for her for speaker. That is a you know, once every two years ritual, a Democrat in a tough race says, I’m not going to vote for Nancy Pelosi for speaker. Well, guess what? They show up and they have a change of heart and they vote for Nancy Pelosi for speaker, because that’s just what happens.

Mary Harris: So Nancy Pelosi shrugs their shoulders and says, you do you.

Speaker 2: She says, you do, you you get here and then we’ll see what it looks like. And what does she care about at the end of the day? She she cares about holding the gavel. Whatever gets her to 218 seats in the house, that’s just fine with her. So, look, if somebody has to win by saying that, they’ll go back to Congress and fight Nancy Pelosi to get a stock trading ban done. I can’t imagine that if that ends up helping them win, that Nancy Pelosi would be tremendously upset about that.

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Mary Harris: Sam, I’m really grateful for your reporting and for you joining the show. Thanks.

Speaker 2: Yeah, thanks so much for having me. It was fun.

Mary Harris: Sam Brody is the congressional reporter for The Daily Beast. And that’s our show. What next is produced by Elena Schwartz, Carmel Delshad, Madeline Ducharme, and Mary Wilson. We are getting a ton of support right now from Anna Phillips and Jared Downing. We are led by Alicia montgomery and Joanne Levine. And I’m Mary Harris. Go track me down on Twitter. Say hello. I’m at Mary’s desk. In the meantime, I’ll get you back here tomorrow.