Members of Congress and their families can trade individual stocks, but these legislators have access to stock information that others don’t—leading some to argue they have an unfair advantage in the market.
Key Details
- Members of Congress can trade individual stocks, however, they are not permitted to use inside congressional knowledge to help decide their trade decisions.
- Data shows many members of congress outperformed the general public in stocks, with the top five companies invested in by Congress in 2022 being Nvidia (NVDA), Alphabet (GOOG), Tesla (TSLA), Disney (DIS), and Apple (AAPL), according to InvestorPlace.
- The members of the House and Senate traded up to $788 million in volume for 2022, a dip from roughly $918 in 2021, according to data from Unusual Whales.
- Although Congress cannot use inside information, a report by The New York Times shows that at least 97 current members of Congress reported trades that were influenced by their committees.
- Last month, Representative Abigail Spanberger (D-VA) and Representative Adam Schiff (D-CA) introduced a bill to ban members of Congress and their families from trading individual stocks during their time in office.
Why it’s news
Although it is legal for Congress members and their families to trade individual stocks during their term, it has been a hot topic of conversation to ban the allowance as many believe members are using insider knowledge to trade the stocks, although that is not permitted.
The latest data on legislators trading stocks reveals that many outperformed in 2022, with the top stocks being invested in including Nvidia, Alphabet (Google), Tesla, Disney, and Apple, according to InvestorPlace.
Data from Unusual Whales shows that Representative Patrick Fallon (R-TX) earned 51.6% on his investments in 2022, while Representative Debbie Wasserman-Schultz (D-FL) reported gains of 50.8%.
Other members of Congress reported gains of 10% or greater as the benchmark S&P 500 index declined 19% on the year, and the technology-laden Nasdaq Index fell 33%, according to InvestorPlace.
Despite it being controversial, some Congress members trade stocks very actively, including Representative Michael McCaul (R-TX), who made more than 1,600 transactions worth as much as $176 million last year.
Former House Speaker Nancy Pelosi is also heavily into the stock market as her venture capitalist husband, Paul Pelosi, continuously buys and trades stocks, with a current net worth of around $50 million, according to Business Insider.
“Former U.S. House Speaker Nancy Pelosi and her husband have participated in at least eight IPOs,” reports Steve Kroft on the CBS News show 60 Minutes. “One of those came in 2008, from Visa, just as a troublesome piece of legislation that would have hurt credit-card companies, began making its way through the House. Undisturbed by a potential conflict of interest, the Pelosis purchased 5,000 shares of Visa at the initial price of $44. Two days later it was trading at $64. The credit-card legislation never made it to the floor of the House.”
Pelosi denies the allegations.
U.S. Senator Josh Hawley (R-MO) re-introduced a bill in January titled the Preventing Elected Leaders From Owning Securities And Investments (PELOSI) Act, which prohibits members of Congress and their spouses from holding or trading individual stocks.
“For too long, politicians in Washington have taken advantage of the economic system they write the rules for, turning profits for themselves at the expense of the American people. As members of Congress, both Senators and Representatives are tasked with providing oversight of the same companies they invest in, yet they continually buy and sell stocks, outperforming the market time and again,” says Senator Hawley. “While Wall Street and Big Tech work hand-in-hand with elected officials to enrich each other, hardworking Americans pay the price. The solution is clear: we must immediately and permanently ban all members of Congress from trading stocks.”
The New York Times notes that at least 97 current members of Congress reported trades influenced by their committees. It is not illegal for them to invest in aligned companies, but it is not permitted to use insider information which many speculate is being done.
If the bill were to be passed, the Transparent Representation Upholding Service And Trust (TRUST) in Congress Act and the PELOSI Act would ensure members are not using insider information to invest in stocks and make money.