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Wednesday, December 7, 2022

House GOP pushes back after McCarthy mulls stock trade rules

A suggestion by House Minority Leader Kevin McCarthy (R-Calif.) that he may seek to limit lawmakers’ ability to trade individual stocks if the GOP takes the majority this November is going over like a 500-point Dow drop among his members.

McCarthy told Punchbowl News that he is considering a range of ideas, from restricting members to only holding professionally managed mutual funds to barring lawmakers from owning stocks of companies overseen by their committees. He added that deliberations are still at an early stage and no final decisions have been made.

McCarthy cited the case of House Speaker Nancy Pelosi (D-Calif.), arguing her husband trading millions of dollars worth of tech stocks potentially poses a conflict of interest. (Pelosi herself does not own any individual stocks, but supports members’ ability to trade.)

“I just think if you’re the Speaker of the House, you control what comes to the floor, what goes through committee, you have all the power to do everything you want — you can’t be trading millions of dollars,” McCarthy told The Post Tuesday.

But GOP critics say their leader is proposing a solution in search of a problem. They argue that most lawmakers and staff are not abusing their positions for personal profit. Some members also say restrictions could negatively impact public officials by limiting their ability to prepare for their retirements while performing their duties.

House Speaker Nancy Pelosi is known for having a portfolio that outperforms the S&P 500.
AP Photo/J. Scott Applewhite

“It’s short-term political gain against Pelosi, while making members worse off for the long term,” one Republican lawmaker told The Post. “Pelosi’s stock portfolio isn’t representative of 98 percent of House members’ net worth. Members should live by the rules every American lives by, not remove us from the economy.”

“I think it is a stupid idea,” another member added. “We don’t increase our wages so we lose income every year to inflation. If you start to penalize folks who have stocks in retirement funds, it’s crazy.”

Critics also noted that there are safeguards aimed at providing transparency and outlawing insider trading in Congress. Lawmakers and staff are already prohibited from using non-public information for financial gain and are required to publicly disclose stock and bond transactions within 45 days under the STOCK Act of 2012.

House Minority Leader Kevin McCarthy
GOP lawmakers claim House Minority Leader Kevin McCarthy’s proposal is “crazy.”
CQ-Roll Call, Inc via Getty Images

The disclosure requirements have led to numerous Justice Department investigations into lawmaker trades.

In 2020, Sen. Richard Burr (R-NC) stepped down from his role as chairman of the Senate Intelligence Committee after facing allegations of insider trading at the outset of the COVID-19 pandemic. The DOJ ultimately did not pursue charges.

The House Ethics Committee has also launched probes into two members — Reps. Mike Kelly (R-Pa.) and Tom Malinowski (D-NJ) over trades during the current Congress. 

One lawmaker worried the change could hurt both the recruitment of qualified candidates and the retention of valued members — as well as prevent individuals who are not independently wealthy from running or staying in Congress.

Senate Health Education, Labor, and Pensions Committee ranking member Sen. Richard Burr
Sen. Richard Burr drew controversy after selling $1.7 million in stocks before the COVID-19 pandemic.
AP Photo/Susan Walsh, File

“I just think the more that you try to limit, it just reduces the pool of quality people that are serving,” the member, who does not own any individual stocks, told The Post. “I think that there are enough laws right now to send people to prison for doing that [insider trading].”

McCarthy dismissed that notion Tuesday.

“Do you think I’m recruiting somebody to run for Congress so they can get an advantage or some knowledge of what they can bring to the floor, and then make options so they can make millions of dollars like Paul Pelosi and Speaker Pelosi did?” he said. “I don’t think those are the people I want to recruit.”

Rep. Kelly Armstrong, R-N.D.
Rep. Kelly Armstrong says stock regulation is necessary right now in order to “restore voters’ confidence” in congress members.
Tom Williams/Pool via AP

Pelosi’s office has asserted that she nor her husband have violated any laws or House rules with their financial dealings, with spokesman Drew Hammill stating that “the Speaker has no prior knowledge or subsequent involvement in any transactions.”

Other members voiced openness to new rules, but cautioned there are caveats that should be considered before a new policy is implemented.

“I made a decision that that buying and selling individual stocks inherently made you subject to conflict questions, and my middle ground was, I’ll do the electronic trading funds, I’ll do the mutual funds, and those are currently all exempt from the STOCK Act, so when the Stock Act passed it had absolutely no effect on me,” Rep. Darrell Issa (R-CA) said. 

“The reality is that there will be some people who, for example, come here owning public stock that their families control and so any leadership decision has to recognize that element. But other than that, I never saw the need or the merit in that [trading individual stocks].” 

Exterior view of the New York Stock Exchange and Wall Street.
Congressmen are mandated to disclose their stock transactions.
Corbis via Getty Images

Rep. Kelly Armstrong (R-ND) argued that “people’s trust in government is at an all-time low” and additional action could help restore voters’ confidence in public officials.

“I think that no matter how hard we try to silo information, we simply have access to a lot of things early, and we need that info to do our jobs,” he said. “The devil to this stuff is in the details, but requiring better guardrails is a good idea.

Rep. Darrell Issa, R-Calif.
Rep. Darrell Issa warns the congress members could easily find loopholes into stock regulations if they are implemented.
Ting Shen/Pool via AP

“I’m open to it. I don’t want to see unrealistic timelines or requirements. But professionally managed and/or blind trusts make some sense,” Armstrong added. “I always think about judicial ethics. Impropriety or the appearance of impropriety are both reasons for recusal.”

Proponents of the move on both sides of the aisle have been working to craft legislation, with Sen. Jon Ossoff (D-Ga.) slated to introduce a measure to ban individual stock trades and likely require members to place their assets in blind trusts. Rep. Chip Roy (R-Texas) and Abigail Spanberger (D-Va.) have also teamed up to introduce the TRUST in Congress Act, which will also call for members to utilize blind trusts.

“As Speaker Pelosi’s recent transactions make clear, decisions made for the people should be separate than decisions made for personal enrichment,” Roy said in a statement. “We should be having a reasonable debate about the conflicts of interest that arise or are perceived to arise from trading stocks while making policy decisions.

Rep. Abigail Spanberger, D-Va.
Rep. Abigail Spanberger has set forth a bill allowing lawmakers to only trade blind trusts or mutual funds.
AP Photo/Jacquelyn Martin

“Contrary to what some other Members say, putting assets in a blind trust or broadly traded mutual funds doesn’t prohibit that.”


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