A small, bipartisan group of U.S. senators on Wednesday announced a proposal to ban trading of individual stocks by members of Congress and certain of their immediate family members, drawing praise from watchdog groups.
Sens. Jeff Merkley (D-Ore.), Jon Ossoff (D-Ga.), Gary Peters (D-Mich.), and Josh Hawley (R-Mo.) brought forth the bill, which would tighten rules on holdings of individual stocks and establish what Merkley described as "huge" penalties for noncompliance—the equivalent of a member's monthly salary, or 10% of the value of the improper investment, whichever is greater.
"If you want to serve in Congress, don't come here to serve your portfolio, come here to serve the people," Merkley toldNational Public Radio.
In response to the announced deal, Citizens for Responsibility and Ethics in Washington, a watchdog group, wrote on social media: "Great news. Let's get it done!"
The American public, across the political spectrum, overwhelmingly supports banning stock trading by members of Congress, as a University of Maryland poll showed last year.
Members of Congress have access to a great deal of insider information, or at least publicly unavailable information, that they can use to trade advantageously. They significantly beat the market in 2023, according to a watchdog report.
U.S. lawmakers have hesitated to rein themselves in. Several proposals to restrict the trading have been put forth in recent years, though no bill has made it all that far. Assessing the chance of success at an effort last year, Politicosaid, "Don't hold your breath."
Congress did pass the Stop Trading on Congressional Knowledge (STOCK) Act in 2012, but that law is widely considered weak and ineffective.
Some Democrats tried to push through reforms to the STOCK Act when they controlled both houses of Congress and the presidency in 2022, but they were stymied by the top two House Democrats at the time, then-Speaker Nancy Pelosi (D-Calif.) and then-Majority Leader Steny Hoyer (D-Md.), who expressed opposition to reform of the act.
Pelosi, whose husband Paul Pelosi trades stocks, said during that congressional cycle that the U.S. was a "free-market economy" and members of Congress should be able to "participate in that."
Pelosi was one of the inspirations for what The Washington Post recently called "tongue-in-cheek financial products." The investment vehicles copy the holdings of well-known members of Congress by buying and selling the same stocks they are buying, per public disclosures. Members of Congress can make the disclosures anytime within 45 days of a trade, so the vehicles can't trade along with them in real time. Autopilot, an app, has a popular vehicle called the Pelosi Tracker, according toThe New Yorker.
Attempts at reform haven't fallen on neatly partisan lines—Rep. Matt Gaetz (R-Fl.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.) teamed up last year—but have been largely pushed by Democrats.
Wednesday's announced proposal comes under the same name, the Ending Trading and Holdings in Congressional Stocks (ETHICS) Act, as a bill introduced by Merkley in April 2023. However, if it's the same bill, it appears to have been modified in negotiations with the other three senators, as media descriptions don't seem to match the text of last year's bill.
Hawley's inclusion in the group is notable—last year's bill had gathered the support of 23 senators, but no Republicans. At the time, Hawley criticized ETHICS for being too full of exemptions, and was pushing a similar bill he'd named the PELOSI Act. Ossoff also had his own effort to ban insider trading on Capitol Hill last year.
But now the senators have joined forces.
The newly announced ETHICS Act would require members of Congress, as well as their spouses and dependent children, to divest from holdings in individual stocks and place them in mutual funds. The law would apply to the U.S. president and vice president. It would also establish a publicly searchable database for all disclosures. It would go into effect in 2027, according to media reports.
The Senate Homeland Security and Governmental Affairs committee, chaired by Peters, is scheduled to mark up the bill on July 24.
