Congress’s stock trading bill doesn’t solve the real problem

Americans should never have to wonder whether their elected representatives are serving the public interest or their own investment portfolios. Yet that question has become increasingly difficult to ignore as reports continue to emerge of members of Congress buying and selling stocks in companies affected by the very committees on which they serve.

To its credit, the House of Representatives recently passed legislation intended to curb congressional stock trading. But the bill leaves the central problem untouched — conflicts of interest.

That problem is hardly new. Concerns about congressional stock trading stretch back decades, but they have become so pervasive that investment firms now offer funds designed to mirror lawmakers’ trades. As the Harvard Law School Journal on Legislation observed, “investors are betting on the untrustworthiness of Congress.” That is a damning reflection of how serious the problem has become.

Consider Sen. John Hickenlooper (D-Colo.). His trust recently purchased stock in companies affected by two Senate committees on which he serves. His situation is hardly unique. A recent analysis found at least nine senators from both parties disclosed stock transactions involving companies in industries overseen by their committees. A 2022 analysis found that 97 lawmakers or their family members traded assets in industries that could have been affected by their committee work.

The question Congress should be asking is not whether lawmakers can legally trade stocks. It is how to eliminate the conflicts of interest that inevitably arise when legislators own individual companies affected by their official actions.

Unfortunately, several reform proposals miss that point. One popular idea is requiring members to place their investments in blind trusts. That sounds appealing, but it falls apart under scrutiny. Blind trusts may reduce concerns about insider trading, but they do not eliminate conflicts of interest. Lawmakers still know what assets they own. As long as they retain financial interests in companies affected by their legislative or oversight responsibilities, they can still take official actions that benefit their own investments.

Hickenlooper’s defense of his blind trust illustrates exactly why blind trusts are not the answer.

Another ineffective proposal is requiring lawmakers to disclose stock trades before they occur. Pre-disclosure may increase transparency, but transparency alone does not resolve the underlying conflict. It merely tells the public when lawmakers engage in conduct that should not be permitted in the first place.

Congress is trying to have its cake and eat it too — appearing to strengthen ethics rules while allowing members to retain investments that create real or perceived conflicts of interest. The House-passed bill suffers from the same flaw. While it would prohibit members from purchasing additional individual stocks, it allows them to keep the stocks they already own. In other words, it leaves existing conflicts of interest intact.

Congress already knows how to solve this problem because it has imposed the solution on thousands of executive branch employees. Many federal workers are prohibited from owning individual stocks that conflict with their official duties and can be required to divest those holdings in favor of diversified mutual funds.

As a former federal ethics investigator and inspector general, I enforced those rules . They are not suggestions. They are mandatory safeguards designed to protect the integrity of government decision-making.

Yet Congress has exempted itself from many of the very standards it requires of others. Members can still participate in the stock market through broadly diversified mutual funds, allowing them to benefit from the strength of the American economy without owning individual companies that create conflicts with their public responsibilities.

A meaningful ban also requires meaningful enforcement. The current law’s $200 penalty for certain ethics violations is hardly a deterrent. Congress should adopt sanctions substantial enough to discourage misconduct, including meaningful financial penalties and other disciplinary measures.

This is not about one politician or one political party. It is about whether Americans believe their government is acting in the public’s interest rather than lawmakers’ personal financial interests. If ordinary citizens traded stocks while possessing material, nonpublic information or while facing comparable conflicts of interest, they could face serious legal consequences.

Members of Congress should not be held to a lower ethical standard than the public they serve.

Mark Lee Greenblatt is a former inspector general of the U.S. Department of the Interior and chair of the Council of Inspectors General, as well as the author of “ Valor: Unsung Heroes from Iraq, Afghanistan, and the Home Front. “