The Case Against Members of Congress Participating in the Stock Market

By: Danielle Lane  |  February 13, 2022

By Danielle Lane, Managing Editor

The past few years have highlighted the stark inequalities that exist in our country. While some families spent the early days of the pandemic comfortably enjoying unexpected family time, learning how to make bread, and doing home improvement projects, others spent it battling poverty and food insecurity. The discrepancy between the “haves” and the “have nots” became even more apparent and well defined. This divide was not exclusively between families of various socioeconomic statuses, it was also evident between those with power and those without. 

For years, the debate over whether members of congress (MOC) should be allowed to invest and participate in the stock market has been a contentious topic. There are those who believe that all people should be allowed to trade in the stock market due to the fact that the stock market is a part of our open economy and should be available to everyone. While this is understandable and may seem like a good rule of thumb, it’s not as simple as it seems. MOC have an extremely unfair insight into the future ebbs and flows of the market as well as an unequal dependence and interest in the stock market doing well.  MOC’s reelection is often influenced by how well the stock market is doing and by extension the economy.  Additionally decisions made by MOC impact the stock market.

There are many examples throughout history of MOC’s using their unfair insight into the stock market for their advantage.

According to research done by Serkan Karadas, MOC receive abnormally high returns on their stock investments. This is due to a few reasons. The main reason being the insider information MOC’s are privy to regarding future policies that would influence the economy. While this practice of unfair insider information being used in MOC’s portfolio has been going on since the creation of the stock market, in recent years it has grown to an unacceptable level and must be dealt with.

In his January 2022 New York Times article, David Leonhardt highlights a few of the larger examples of the unfair advantage MOC have in the stock market. A few of the more notable examples are:

  • Republican congressman, Tom Price, bought health care stock that only he was able to access.
  • In the months leading up to the outbreak of the COVID-19 pandemic, many high ranking senators sold various stocks in their portfolio after being briefed on the predicted toll the pandemic would take on the economy. 
  • Republican senator, David Perdue, bought stock in companies that saw huge gains during the pandemic such as Netflix and Pfizer.

While some MOC have been vocal about their desire to see more restrictions placed on MOC regarding their participation in the stock market, many high ranking MOC’s have been outspoken in their desire for the stock market to remain open and accessible to everyone. House speaker Nancy Pelosi, a democrat whose husband works in venture capital, has publicly said many times that she feels that “[w]e are a free-market economy… [and we] should be able to participate in that.” It is important to note that as a result of congresswoman Pelosi’s position and her husband’s job, her family receives massive financial advantages from the stock market that are not available to anyone else in the country. 

The good news is that in the past few months there has been a large push to introduce new legislation that would limit MOC’s ability to participate in the stock market. Some suggestions that have been floated include a total ban on MOC and their close family members ability to trade in the stock market or the requirement that MOCs place all their investments in a blind trust that would be monitored by a third party.  

The idea that our elected officials and their families are able to benefit financially in such a dramatic way as a result of the privy knowledge they are given in their role is deeply troubling and unethical. How can we ensure that they are making the decisions that are best for the country and their constituents when a simple vote could result in a massive payday?

The last few years have seen some of the largest socioeconomic divide in American history. The continued growth between those who are barely getting by and those who are swimming in excess is an embarrassment. Luckily, small steps are being taken to address this issue. Recently, on February 9, 2022, Pelosi finally relented and removed her opposition from legislation that would regulate MOC’s activity in the stock market.