In 2023, members of the United States Congress significantly outperformed the stock market, according to a revealing report by Unusual Whales, a financial watchdog group. This performance has reignited debate over the ethical implications of lawmakers engaging in stock trading, particularly those whose portfolios include companies impacted by their legislative actions. The report, which meticulously analyzed trading activities of numerous Congress members, disclosed that several lawmakers achieved returns surpassing the S&P 500 Index, a standard benchmark for measuring market performance.
The study by Unusual Whales compared lawmakers’ portfolio returns against the SPDR S&P 500 ETF (SPY), a common benchmark for stock market performance. It found that 32 members of Congress, evenly split between Democrats and Republicans, surpassed the SPY’s growth of 24.81% in 2023. Democratic representatives, on average, saw a 31.18% return, while their Republican counterparts realized a 17.99% increase. Notably, Representative Brian Higgins (D-N.Y.) led with a staggering 238.9% gain, followed by others like Rep. Mark Green (R-Tenn.) and Rep. Garret Graves (R-La.), who also secured significant financial returns.
The revelations in the Unusual Whales report have sparked a flurry of criticism and concerns about potential conflicts of interest. Melanie D’Arrigo, a former Democratic congressional candidate, emphasized that lawmakers should not be permitted to trade stocks in companies they regulate. Nina Turner, a former congressional candidate and senior fellow at the Institute on Race, Power, and Political Economy, echoed this sentiment, labeling such activities as corrupt.
Members of Congress should not be allowed to trade stock. It’s corruption. https://t.co/PTlEAuicrV
— Nina Turner (@ninaturner) January 2, 2024
Despite the Stop Trading on Congressional Knowledge (STOCK) Act of 2012, designed to prohibit insider trading by Congress members, lawmakers are still legally allowed to trade stocks. This legal leeway has been a catalyst for calls to enact stricter legislation, such as the Bipartisan Restoring Faith in Government Act, proposed to prevent members of Congress, their spouses, and dependent children from trading individual stocks.
Amidst growing scrutiny, Congressman Ken Buck (R-Colo.) advocated for the Bipartisan Ban on Congressional Stock Ownership Act, which he co-introduced with Reps. Matt Rosendale (R-Mont.) and Pramila Jayapal (D-Wash.). Buck emphasized the importance of Congressional integrity, stating, “Members of both parties have misused their influence to buy and trade stocks. This is an issue which hurts all Americans.” The proposed legislation aims to ensure Congressional decisions are made in the best interest of constituents, not personal financial gain.
Highlighting specific instances of Congress members’ trading activities, Unusual Whales pointed out that numerous members traded war stocks before the conflict between Israel and Gaza. This period saw a significant increase in the stock value of defense companies. The report also drew attention to transactions made during the banking crisis, suggesting possible insider knowledge.
In an interview with ABC News, a representative from Unusual Whales stated, “One thing people always say is that members are very good at picking stocks… but to be quite frank, members were also quite good at avoiding losses.” This statement references trades made by members of Congress sitting on committees regulating the financial industry, who sold stocks in Silicon Valley Bank and others before significant market declines.
Amidst these revelations, Unusual Whales also highlighted trades by Nancy Pelosi and Sen. Tom Tuberville (R-Ala.), noting Tuberville’s active trading status. Unusual Whales hopes this report, alongside its history of research, will be sufficient to end debates about Congressional trading and influence policy changes.
In response to the report, U.S. Rep. Majorie Taylor Greene (R-Ga.) told Fox News host Jesse Watters that she doesn’t own any stocks and hasn’t throughout 2023. She attributed any reported trades to her son’s account, established years ago by her and her ex-husband. This statement was met with skepticism on social media, with some accusing Greene of using her son to cover up her trading activities.
As lawmakers continue to navigate the complexities of stock trading while in office, the call for reform grows louder. Senator Jeff Merkley, alongside 23 House and Senate legislators, has reintroduced the Ending Trading and Holdings in Congressional Stocks (ETHICS) Act. This bill would require lawmakers, their spouses, and dependent children to divest from individual stocks, securities, commodities, or futures. Violators would face fines equivalent to at least their monthly pay.
Senator John Fetterman (D-Pa.), a co-sponsor, emphasized the importance of focusing on constituent needs rather than personal financial interests. Representative Raja Krishnamoorthi (D-Ill.), leading the House version with Representative Michael Cloud (R-Texas), stressed the potential conflicts of interest arising from securities trading by members of Congress.
The ETHICS Act aims to address these concerns by mandating divestiture or the establishment of a blind trust for existing holdings. This legislation is a response to findings that nearly 100 members of Congress reported trades in companies directly related to their congressional work or similar transactions by their family members.
Despite previous efforts to regulate Congressional stock trading, such as the STOCK Act signed by President Obama in 2012, the issue remains unresolved. The push for stricter laws continues as public trust in government is tested by these financial revelations.
Dylan Hedtler-Gaudette, senior government affairs manager at the Project On Government Oversight (POGO), expressed support for the ETHICS Act, calling it “long overdue.” Hedtler-Gaudette believes that banning Congressional stock trading is crucial for restoring faith in government and preventing ethical breaches.
As the debate over Congressional stock trading continues, the potential for significant legislative change looms. The outcome of these discussions and proposed reforms will likely have far-reaching implications for transparency, accountability, and public trust in government.
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