Lawmakers struck it rich in stock market last year
Federal government employees are bound by law to refrain from engaging in any activity that may affect the financial interests of a company in which they or their family members hold stock. Violation of this law carries hefty penalties of up to five years in jail and a $50,000 fine. Surprisingly, members of Congress are exempt from these restrictions and are allowed to actively trade stocks with minimal constraints.
While federal employees are prohibited from participating in matters affecting companies they have financial ties to, members of Congress regularly make decisions impacting publicly traded companies without repercussions. Given the freedom to trade stocks, lawmakers have taken advantage of this leeway, resulting in substantial gains. In 2024 alone, over 100 members of Congress actively traded stocks, with many realizing profits far exceeding the market average.
Despite restrictions on insider trading, proving a lawmaker’s intent behind a stock transaction is challenging. This loophole allows members of Congress to sidestep accusations of insider trading, as no legislator has ever been prosecuted for this offense. Unusual Whales, a retail trading data platform, reported that 13 members of Congress saw their portfolios surge by 60% or more in 2024, with both Democrats and Republicans reaping substantial gains exceeding the S&P 500’s performance.
Investing in prominent tech stocks proved lucrative for many members of Congress, coinciding with the passage of bills favoring these companies. Congressman Michael McCaul’s holdings in Meta, a competitor to TikTok, saw a rise after he supported a bill banning TikTok. Similarly, Senator Markwayne Mullin purchased Meta stock before voting to ban TikTok, signaling a conflict of interest.
Lawmakers are only required to disclose broad ranges for their stock trades, and reports must be filed within 45 days, although some delay or ignore this obligation. Given the upcoming legislative agenda, involving crucial bills that could sway stock prices significantly, the potential for conflict of interest is alarming. The close division within Congress amplifies this issue, as a single member can influence the outcome of critical bills, potentially benefiting personal investments.
Despite claims by lawmakers that their stock trades are unrelated to their official duties, the lack of transparency and oversight raises concerns about inherent conflicts of interest. Legislation has been proposed to curb these conflicts, such as the Bipartisan Restoring Faith in Government Act, aiming to ban members of Congress, their spouses, and dependents from owning or trading individual stocks. Another proposal, the ETHICS Act, seeks to prohibit lawmakers from trading individual stocks and mandate divestment from such assets.
Efforts to mitigate conflicts of interest and uphold ethical standards are gaining traction among legislators, recognizing the need for enhanced accountability and transparency in stock trading by members of Congress. Addressing not only actual corruption but also the perception of corruption is crucial to restoring public trust in the integrity and fairness of decision-making within the government.
