S2 E2: Anything Goes

Speaker 1: Friends, have your investments failed to pan out? Has life as a working stiff got you down? Got a case of the mopes? Wouldn’t it be nice to have access to insider information and still be allowed to trade stocks?

Speaker 2: Would it ever.

Speaker 1: Impossible, you say?

Speaker 2: I didn’t say.

Speaker 1: Well, turn that frown upside down, my friend. Have I got a deal for you! It’s a little thing I like to call Congress.

Speaker 2: What?

Speaker 1: That’s right. Anyone can run for Congress. When you join Congress, you get secret, closed-door congressional briefings, good, old-fashioned insider information. What’s more, you get to trade all the stocks you want.

Speaker 2: But aren’t there ethics rules?

Speaker 1: Laughs

Speaker 2: No?

Speaker 1: Listen, chum, members of Congress write their own rules and those rules allow trades galore.

Speaker 2: This seems shifty.

Speaker 1: Of course it does. It’s shifty as hell.

Walt Shaub: Welcome to The Continuous Action. I’m Walt Shaub, and today we’re talking about something that probably bugs you as much as it bugs me: members of Congress trading stocks.

Shortly after the pandemic erupted, the public became aware that a number of members of Congress had gotten confidential briefings on what was coming. They knew before we did that a pandemic was headed our way and was going to have massive effects on the health and economics of our nation. And a number of those members of Congress made very suspiciously timed trades that may or may not have been influenced by the information they had access to. The government ultimately dropped any investigation into them and didn’t press charges, but who knows what the truth is. More importantly, the appearance is really bad, and members of Congress are supposed to report their stock trades.

A law passed in 2012 forced them to file those disclosures shortly after the trades. But news story after news story has broken, showing these members of Congress are not complying with the law. They’re missing deadlines; they’re forgetting to report things. And the public is left scratching its head, wondering whether insider trading is going on based on information that they get directly from the government. That’s just an untenable situation. We live in a country that’s so polarized right now, we can’t seem to agree on anything. And yet, you’ve got polls showing that as much as 70% of Americans from across the political spectrum support a ban on congressional stock trading. It should be so simple.

Representative Abigail Spanberger of Virginia’s seventh district has been leading the charge to prohibit members of Congress from trading stocks. She’s a Democrat, but she’s assembled a bipartisan coalition of members who agree with her that change is overdue. So, I sat down with her for this episode to talk about her efforts. I think you’re going to really enjoy this discussion. Let’s go to the interview.

Walt Shaub: So I know the answer to this, but I’m going to ask it anyway so we can vent together. What do you think about members of Congress being allowed to buy and sell stocks?

Representative Abigail Spanberger: Well, I don’t think members of Congress should be able to buy and sell stocks, but importantly, it doesn’t seem like the American people really think that either. Across our district, and frankly, I hear from people across the country in response to the legislation, the TRUST in Congress Act, that I introduced with Rep. Chip Roy from Texas, people love the idea of saying, “OK, my representative is on Capitol Hill and they’re working for me. They’re not calling their broker, they’re not buying or selling stocks. I’m tired of seeing these headlines. Just focus on your job, which is representing us.”

Walt Shaub: And you’ve really been the face of the movement to ban stock trading in Congress. You’re sort of the OG of stock trading bans. How did you come to draft a bill addressing this problem?

Representative Spanberger: It’s pretty straightforward. I was on the House floor in early 2020. Chip Roy, again, Republican from Texas, we get along well, we have the same birthday. We both went to UVA and we befriended each other when UVA had a really good basketball year. And so, we were just talking, and at that time there were all these headlines about so-and-so bought stocks in Clorox and so-and-so bought stocks in this pharmaceutical company and so-and-so bought stocks in the early days of COVID. Right? In January, February timeframe when there was news that there might be this, people are getting sick and what was it? And then all these stories started coming out in the spring about these stock sales and stock purchases that people were making.

And Chip and I were saying, “This is ridiculous. Right? We have a global pandemic and somebody’s calling their broker.”

It seems ridiculous to us. No wonder there’s a headline about it. No wonder the American people think it’s ridiculous. We know what that time was like from a member of Congress standpoint. We were afraid for our constituents. We were focused on, “How do we continue doing work if literally this building shuts down and everybody has to go home?”

Right? It was such a crazy time. And we said, “It’s just unbelievable that you can leave a classified briefing and buy stocks based on what you were told.”

And we had the, “That shouldn’t be allowed.”

And then we realized, “Oh wait. We could actually write legislation that would make it so it’s not allowed.”

And we went through that process from there.

Walt Shaub: And you know, one of the things about this effort to ban stock trading is that we live in such a polarized society, and Congress reflects that, and it’s so hard to come to agreement. But what was it like to build a bipartisan coalition of members in this otherwise polarized environment? And what does that tell you about this bill?

Representative Spanberger: The bill has, as you mentioned, really broad, bipartisan support from the left of the left to the right of the right, and everybody in between. But it also has members who have been in Congress for years and years and years. It does have members of Congress who just got here. We have some new members who campaigned on, “When I get to Congress, I’m going to support this legislation.”

One even did a TV ad on it.

And so, what I do know to be true is that people who either are all in on issues of ethics reform support this legislation, or people who think this institution is meant to do right by the American people. And we might have different ideas of what that means. But the fact that the American people think that Congress isn’t working for them, or Congress is this, or Congress is that — that should change. And so there’s a lot of people who, regardless of what their other legislative priorities might be, think that overall this is a step in the right direction to making sure that during the time that we are here (I say here because we’re sitting on Capitol Hill) during the time that we are here, we’re focused on the needs of our constituents and that they can know that, based on actions that we’ve taken and, in this case, quote-unquote limitations that we’re choosing to put on ourselves.

Walt Shaub: One thing that really gives me some hope in this is that you still have so much fight in you for this issue. I came close to a moment of despair when it all fell apart last fall, and I’m glad to see you picking up the fight again this year. It really did feel like last year was the year when Congress was going to finally do something. It started the December before, in 2021, when then-Speaker Nancy Pelosi had said that members of Congress should be able to participate in the market. Here’s what she said:

Then-Speaker of the House Nancy Pelosi: Because this is a free market and, people, we are a free market economy, they should be able to participate in that.

Walt Shaub: And there was an enormous amount of blowback. And so she eventually came around and said, “Well, if that’s what members want to do, then that’s what we will do.”

Not exactly a ringing endorsement, but it sounded like something was going to happen. And then there was suddenly a proliferation of bills. And the bill that you had proposed had always been out there, and suddenly everybody either wanted to sign onto that or introduce their own. And then ’22 came and went, and we still don’t have a stock ban. What do you think happened?

Representative Spanberger: Well, I think I saved myself some of your despair because I had lower expectations, or maybe a healthy level of cynicism. I think what we saw, so here are the positive things. We saw a real awareness, and even some of my colleagues who came to me and said, “Oh, I don’t like this bill. You’re saying that members of Congress are corrupt. You’re saying we’re insider trading. We’re not insider trading.”

To which I would say, “No, I’m not saying you’re insider trading. And no, I’m not saying we’re corrupt. I’m saying the American people think that there’s corruption on Capitol Hill. The American people don’t think that we’re doing right by them. And I’m saying that it frankly doesn’t pass the smell test that some people do leave a briefing about COVID or leave a briefing about Ukraine and go and buy stocks in companies that are either going to do well or sell stocks that are going to clearly have some troubles based on these circumstances.”

It doesn’t seem appropriate. And we again, talking to my colleagues, “We have meetings with CEOs of large companies, we have meetings with people who provide us tremendous background information on issues because it’s meant to inform the votes that we take, which by the way, those votes can move markets. So there’s just a level of what is proper and that’s what the American people are responding to. And so, no, I’m not saying that there’s massive misdeeds on Capitol Hill. I’m saying that the American people think that that’s what we have. And that’s enough for me to say, ‘What can we take as an action?’ To say, ‘OK, you know what? You may not like the decisions I make, but at the very, very minimum, every American deserves to know that their members of Congress are thinking through those decisions based on facts, evidence, maybe their political persuasion, maybe their political opinions and partisanship, but not their stock portfolios.’ Right?”

And what’s been interesting is even over the last year, while we didn’t get it to get a vote, there were quite a few members who had started out with pretty significant consternation about even the premise of the legislation, who ultimately decided to get onto it. And not only get onto it, but also put themselves in compliance or make very public that they were on their way towards putting themselves into compliance. And that’s been a real shift.

And I think that it was also an issue that many newer members faced on the campaign trail. And so coming to what your expectation of this place should be, I think many arrived here saying, “Yeah, you make all sorts of strange sacrifices.”

Again, quotes on the sacrifices, but lifestyle changes in order to take this job. This is just one of many.

Walt Shaub: Yeah, and I think one of the things baked into what you just said there is the idea that even the appearance of insider trading can be damaging to faith in Congress. Do you agree with that idea?

Representative Spanberger: A hundred percent. So I’m the oldest of three daughters, and I remember my entire childhood growing up, anytime I would offend my younger sisters by being as they saw it bossy or dictating what they should do in all aspects of their lives, my mother would kind of reprimand me. Sorry about the buzzing in the office. My mother would reprimand me for saying, “You’re being bossy” or whatever, I guess.

And I would say, “Oh no, I’m simply trying to help,” and everything an older sister would say.

And my mother would always say, “Well, their perception is their reality. Remember that.”

And it’s actually been an interesting life lesson, that people’s perception is their own reality.

And so if people are perceiving across the board that members of Congress are out just two cell phones calling brokers and buying and selling stocks and making money hand over fist, that’s not actually happening. But there’s enough like, “Ugh, that doesn’t pass the smell test,” headlines of the real stock trades that do occur that frankly, the perception that the American people have is their reality. And I think we owe it to them to avoid even the perception of impropriety.

And frankly, it’s why in the executive branch, not only do they avoid actual acts of impropriety, but they have major parameters, and certainly, you know better than anybody, in terms of what they’re allowed to do from an ethics standpoint, not just to avoid unethical behavior, but even the perception of unethical behavior. The same is true for some financial reporters, for Wall Street brokers, for many CEOs of companies. There are parameters put on people’s financial transactions so that yes, they can avoid inappropriate or illegal behavior, but also so that they can affirm that there’s a trustworthiness there. So you don’t have to worry about impropriety because it’s not even, like, “Couldn’t do it if I wanted to.” Right.

Walt Shaub: Not an option.

Representative Spanberger: Yeah.

Walt Shaub: Yeah. Just a note for our listeners, the buzzer you heard is the vote buzzer. So it’s actually good that that happened because this authenticates and proves that I’m really talking to Representative Spanberger on Capitol Hill. So now we have proof for you that this interview’s real. Now, I don’t want to just pick on Democratic leadership, the Republican leadership hasn’t stepped up to the plate either. Before he was Speaker, Kevin McCarthy seemed to suggest that if Republicans took the House in 2023, they’d add a stock ban to the rules of the House of Representatives. Here’s what he said.

Speaker of the House Kevin McCarthy: This is something that we will do in the majority, putting new rules forward to make sure this, that you have trust in this House, knowing that people is not investing in a place that they have influence.

Walt Shaub: And that didn’t happen when they passed the rules package in January. You feel like there’s still enough bipartisan support that possibly he could come around and actually make good on that pledge?

Representative Spanberger: Well, I’ll just note also for the record, Walt, that he also gutted the Office of Congressional Ethics with that rules package. Important thing to note, but I will maintain my optimism that we can move this piece of legislation forward. Certainly, we know that House leadership last year did not want it to move forward. And either to demonstrate a contrarian opinion or to differentiate himself from then-Speaker Pelosi, then-Leader McCarthy certainly said that he supported it in principle. And I am willing to hope that it wasn’t just an effort at sort of partisanship and trying to poke at the then-Speaker, but indeed, that he was conveying that in principle, he supported this idea and in principle, he supported our legislation. So, I do maintain hope that we’ll see it move forward.

I mean, notably, we have continued to garner tremendous movement forward in adding additional co-sponsors. It can, at times, be a slow process. This year, we said we were going to introduce it, we had more original co-sponsors than ever, and people continue to add once we put out a press release that we’d reintroduced it. We got a lot of outreach from additional folks who wanted to get on it. So, I think there continues to be a real movement forward on this. And I’m going to continue my optimism that we might see Speaker McCarthy bring this for a vote.

And it’s something that is important to people; it’s important to the American people. It’s a piece of legislation that I care deeply about. But ultimately, at a time when we have so much division, what a lovely piece of legislation. Many people love it; many people don’t. But certainly there’s bipartisanship in support and bipartisanship in opposition. But bipartisanship among the American people, we actually recently got outreach from someone saying that they didn’t vote for me, they don’t like much of what I do, but that piece of legislation about banning members of Congress from trading stocks, that they like. And if that’s all you like in terms of the things I’m doing, I’ll take it. Because I think if that broadly, if someone will take the time to say, “I didn’t vote for you. I don’t really like you that much, but this piece of legislation is important.” That says something.

Walter Shaub: Yeah. Yeah. Congress doesn’t actually have anything that I would consider government ethics rules. And I feel like this would truly set us in a new direction. And along those lines, there’s really two issues here. The appearance of insider trading and conflicts of interest. Ultimately, I think both need to be addressed with a ban on ownership. But I’m not sure that’s this moment in history. And right now, we have nothing. No kind of ethics. I would be very excited about a ban just on the trading. I think that’s a down payment on ethics that Congress has never made, and it really would be a step forward.

And the truth is, you hear people criticize the idea of a blind trust, “Oh, it’s not really blind.” Well, it actually really is. Sure, you know what you put in it, but you don’t know what the trustee sells and buys anew. And so, until the trustee sells what you own, maybe you still have a conflict of interest with the thing that you put in there, but what you don’t have is any opportunity for insider trading. And so, I’m not really sure what the question there is, but it just seems like that’s why it’s so important what I think you’re doing.

Representative Spanberger: Well, and I agree with you completely. My goal is that nobody, the principal of this legislation, nobody should leave a meeting with a CEO, nobody should leave a committee hearing knowing we’re going to take up a vote on a particular piece of legislation, nobody should leave a briefing and say, “Oh, you know what’s going to do really well on the market? XYZ stock. I’m going to go buy it.” Or, “Ooh, this might be bad for ABC stock. I’m going to go ahead and sell it.”

Right? It’s actually that action where you could be enriching yourself or hedging potential losses that is the action that I am trying to stop. And so, for me, it’s the buying and selling of individual stocks that is the problem.

Now, what we came to with this legislation was, plenty of people come to Congress with individual stock holdings, maybe their business background or whatever the reason. So, what steps can we take? OK, well, they can put it in a blind trust. They can put it in a blind trust so that, as you say, when it goes into the blind trust, maybe they knew what’s there, but if they know that a stock that they had is potentially going to tank because of some briefing they had, they can’t take an action. And so that’s the goal, is that we’re not taking actions based on information that we have. And so, people have the option to divest, just put their money in mutual funds, diversified funds, meaning that they’re not able to respond to a piece of information knowing how it’s going to impact a particular company. Or if they want to maintain individual stock holdings because that’s how they prefer to have their money, that they put it into a blind trust and let somebody else make the purchases, make the sales and it’s never based on information they have.

Walt Shaub: And just to be clear, under your bill, nobody in Congress would be required to have a blind trust, right?

Representative Spanberger: That’s right. Nobody in Congress would be required to have a blind trust. And full disclosure: Blind trusts can be lengthy to set up, they can be expensive to set up. And so, I have had members of Congress who had extensive stock holdings say, “You know what? It looks like too much of a headache. I’m maybe not that great in the stock market anyway. I’m going to put everything in mutual funds. I’m going to put everything in ETFs,” and that’s their choice. Some have said, “I want to put it in a blind trust,” and so they’ve chosen to do so. But no, it’s not mandating a blind trust, which I would never, never do because it can be expensive. It can be time, a high usage of someone’s time, depending upon what they own, to put it into a blind trust.

Walt Shaub: Less anyone think the idea of moving into mutual funds is unreasonable, there are currently no blind trusts in the executive branch, and haven’t been any since Henry Paulson created his in July, 2006. And I know because I worked on that one with Henry Paulson. And the reason for that is everybody just moves into diversified mutual funds. It’s much cheaper. It’s an easy solution. And so I don’t have a lot of sympathy when I hear members of Congress say, “Oh, blind trust is too expensive, so you’re unreasonable.” Because they can do what 2.1 million executive branch employees do.

Representative Spanberger: That’s right.

Walt Shaub: Move into diversified mutual funds.

Representative Spanberger: That’s right.

Walt Shaub: So my final question for you is, “What’s the pitch?” If you’re talking to a member of Congress and maybe they’re listening to this right now, why should they sign on? What’s the pitch for this bill?

Representative Spanberger: I would say the pitch for this bill is: We’re at a real challenging time in American history. Congress has an abysmal approval rating. A lot of people don’t believe that our system is working or working for them. And we have the ability to say, “You know what? When we go to Capitol Hill, we’re there working for you. When we go to Capitol Hill, we’re there focused on you. When I take a vote, I’m doing it because I think it’s right. You may not like it, but I think it’s right.”

And one of the ways that we can demonstrate to people that that’s kind of our function, that’s our purpose, is by removing from the discussion how we might be benefiting.

And a decade ago, the Stock Act was put in place, which was a tremendous step forward, where we have transparency, we have financial disclosures. Right? We now know what members of Congress hold, what they sell in terms of their financial holdings. But it’s also then kind of lifted up the curtain, so now we see, oh my gosh, members of Congress are selling this and they’re buying that and they’re holding this.

And so the next step in our efforts at ethics reform, and to some degree, is this ethics reform or is it just improving people’s ability to believe in Congress? I think you could say it’s either. Here’s an opportunity for us to say, “You know what? If me selling individual stocks is enough for you to think, ‘Ugh, I’m going to turn away from government. I’m going to turn away from politics. I’m not going to vote. The system doesn’t work, it doesn’t care about me, et cetera, et cetera, et cetera.’ If I can take one step to affirm for you that I am really working for you and you might have a problem with my votes, and you might have a problem with this or you might,” all the complaints that people have about their members of Congress, we’re taking one of them off the table. And this is something that we have the ability to control. And the vast majority of the American people don’t own individual stocks. The vast majority of American people can’t afford to own individual stocks.

And so to my colleagues who might say, “Oh, but it’s limiting us.” Mutual funds are great, ETFs are great. The fact that we, many members of Congress and not all, the fact that many members of Congress have the ability to save for their retirement with mutual funds, that’s great. Right? Let’s make sure that people know that every choice we’re making is because we’re doing what we think is right or what we’re choosing to do, but it isn’t ever focused on what benefits us. And that’s my pitch.

And I’ll just add one more thing. I had a colleague come to me really rather distressed last year because there had been an article about this colleague’s spouse’s financial investments, and it related to what this colleague was working on on their subcommittee. And there was a big article because of course, the stock trades and purchases are all put out there through financial disclosures. And this colleague was kind of really very unhappy about being in the middle of this news cycle in their magazine or newspaper back home. And I said, “This bill will guarantee you never have that headline. I hear you. You’re saying you didn’t do anything wrong. You’re saying somebody else handles your spouse’s money anyway. You’re saying it’s just their retirement funds and et cetera, et cetera, et cetera. Great. Then if you are so disconnected from the individual stock purchases made on behalf of you and your spouse, let’s just go all the way. Right? Put it in a blind trust or diversify it totally. And you will never have to deal with a headline that you find so ...”

And it was a terrible headline. It made it look as though this person had done something wrong, and arguably they hadn’t. But it was the appearance of potential impropriety that got a news story back home and was really very upsetting to this member, who I know to be incredibly ethical and incredibly hardworking and incredibly fantastic. And it was funny because by the end of the conversation, that person was sort of nodding their head saying, “Oh, I see your point.” I said, “Yeah, let’s take it all off the table. And you even get to say to your constituents like, ‘No. You know what? I am too busy representing you and attending to the needs of my hundreds of thousands of constituents to make time in the day to call my broker.’”

Walt Shaub: Amen. I think that’s the best case I’ve heard anyone make for banning congressional stock trading. This needs to happen. And I hope other members are listening. I hope this coalition she’s building, this bipartisan coalition continues to grow. Right now, the lowliest entry level executive branch employee, fresh out of school, is covered by strict government ethics laws, and the Speaker of the House and Senate Majority Leader are not. Think about that. Powerful members of Congress who can influence every aspect of our lives are free to run around buying and selling stocks, while 2.1 million executive branch employees who have far less power and authority are covered by incredibly strict government ethics laws. This is ethics turned on its head. The standards should be higher the more power you have, the more ability you have to do harm. But it’s just the opposite. The further up you go in government, the less you’re held accountable to the people. That makes no sense whatsoever.

And who’s mad about that? The American people. So come on, Congress, let’s be real. Being a member of Congress is not an immutable personal characteristic. If you can’t put your constituents’ interest before your own personal financial interests, maybe you’re in the wrong job. But you know what? If you agree that public service is a public trust and that you’re there to serve your constituents, then you’re already most of the way there. Come join this coalition and let’s get it done. It’s time to show that you understand that this institution is not for your own personal profit. Congress exists to serve the American people.

That’s it for this week’s episode of The Continuous Action. I’m Walt Shaub, and as always, The Continuous Action is sponsored by the Project On Government Oversight, POGO.