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Bear market for congressional stock trading ban

A group of embattled House Democrats is pressuring a reluctant party leadership to move a bill to prevent stock trades by members of Congress.

The House lawmakers, led by Rep. Abigail Spanberger (D-VA), argue it’s a simple case of preventing federal elected officials from self-dealing — that is, going to Washington, D.C., and enriching themselves rather than focusing exclusively on helping their congressional districts and the nation as a whole.

“This moment marks a failure of House leadership. This moment is yet another example of why I believe that the Democratic Party needs new leaders in the halls of Capitol Hill — as I have long made known,” Spanberger tweeted Sept. 30.

The intraparty tension comes as House Democrats try to hang on to their narrow majority. House Republicans would only need to net six seats to win control of the 435-member chamber.

Spanberger, first elected to the House in 2018 in a swing district running from the North Carolina state line to the Washington, D.C., exurbs, has another tough race on her hands this year. Spanberger is running in the new 7th Congressional District and faces Republican Yesli Vega, a Prince William County supervisor and former police officer. The new district would have voted in 2020 for President Joe Biden over Donald Trump 52.6% to 45.8%. But with Biden’s approval ratings on the low side and House Democrats on defense, the race could go either way.

An even more politically endangered House Democrat, Rep. Tom O’Halleran (D-AZ), also is bashing House Democratic leadership for not moving aggressively on a stock trading ban.

“Last week, House leadership failed to bring a stock ban proposal to the floor,” O’Halleran wrote to constituents on Oct. 3.

O’Halleran is running in the new northeast Arizona 2nd Congressional District against Republican Eli Crane, a businessman and retired Navy SEAL. The new district would have backed Trump over Biden 53.2% to 45.3%. So, it’s not particularly surprising that O’Halleran is parting ways over a congressional stock ban with House Democratic leaders, all of whom have safe seats.

“I cannot fathom why we’ve allowed Congress to leave Washington before voting on a commonsense, bipartisan measure to ban members from trading stocks — a proposal with broad bipartisan support, and huge buy-in from hardworking families nationwide, who want lawmakers held accountable,” O’Halleran said in his constituent newsletter.

Conflicting signals

Months of bipartisan momentum for a congressional stock trading ban seemingly came to a whimpering halt in late September.

With Congress likely adjourned until after the midterm elections, progressives fretted the initiative was dead after the House failed to vote on legislation for it before heading to recess. Although the clock is ticking and Republicans appear poised to reclaim the House, there may be a narrow path forward for the stock ban.

Spanberger was perhaps the loudest House Democrat to slam House Speaker Nancy Pelosi, but she and O’Halleran were far from alone. Rep. Pramila Jayapal (D-WA), who heads the House Progressive Caucus, lamented that rank-and-file members had not been brought into the process and bemoaned that it was “difficult for us.”

House Speaker Nancy Pelosi of Calif., right, poses during a ceremonial swearing-in with Rep. Abigail Spanberger, D-Va., right, on Capitol Hill in Washington.

(AP Photo/Cliff Owen)

A myriad of Democratic candidates in competitive races, such as New Hampshire Democratic Reps. Chris Pappas and Annie Kuster, promoted their work on crafting legislation to ban congressional stock trading on the campaign trail. In some instances, they touted their work in ads.

“Our theory is that Speaker Pelosi and her allies in the House just didn’t really want to do anything on this,” Dylan Hedtler-Gaudette, a government affairs manager at the Project On Government Oversight, told the Washington Examiner. “So what they did is they basically ran the clock out. They slapped a bill together, and they didn’t get input from experts and things like that the way they would if they were really trying to get something done.”

Late last year, when clamoring for a congressional stock ban began to intensify, Pelosi initially balked at the suggestion.

“We’re a free market economy,” the speaker said. “They should be able to participate in that.”

The Pelosi family touts an estimated nine-figure net worth, driven in large part by adept stock trading by her husband. Last year, for example, Paul Pelosi purchased millions of dollars worth of Microsoft shares before its price went soaring due to a lucrative government contract it received shortly after his purchase, per Fox Business. During the COVID-19 pandemic, Pelosi’s net worth spiked nearly 60% from $106 million in 2019 to $171.4 million in 2021, the Washington Free Beacon reported.

Pressure began to mount from progressives in both chambers, unsatisfied with Pelosi’s excuses. Even some Republicans began chiming in, backing different iterations of a stock ban. In January, Sen. Josh Hawley (R-MO) introduced legislation on the matter. Senate Minority Leader Mitch McConnell (R-KY) and House Minority Leader Kevin McCarthy (R-CA) have also signaled openness to a ban.

Seeking to quell the uproar, Pelosi began to change her tune. Her ally, Rep. Zoe Lofgren (D-CA), who heads the Committee on House Administration, helped draft the Combating Financial Conflicts of Interest in Government Act, which would ban members of Congress, high-ranking officials in the executive branch, and members of the federal judiciary, as well as spouses and dependent children of all those types of officials from trading stocks.

The 26-page bill, which was the culmination of months of negotiations, was released just days before Congress adjourned, much to the chagrin of supporters of the ban. Now the measure joins a growing litany of hot-ticket items, such as defense and spending provisions, that have been relegated to the already jampacked lame-duck session of Congress.

“The kind of sad reality of how Congress works these days is they tend to bump things to the lame-duck period,” Jordan Libowitz, the communications director for Citizens for Responsibility and Ethics in Washington. “In the last Congress, 44% of all laws they passed were in the lame duck period. Over the last four, it’s been 36%. So we’re kind of at a point where Congress is the kid finishing his essay on the way to class.”

Banning congressional stock trading is immensely popular with the general public, with polling pegging support at around 80%, according to Forbes.

“One of the key sorts of pressure points that was helping drive this to actually potentially seeing a vote and maybe passage was that members of Congress were on the campaign trail, and they had to face voters,” Hedtler-Gaudette added.

Momentum for a ban had been further buoyed by a flurry of news reports on well-timed stock trading by members of Congress. A recent in-depth analysis by the New York Times found that 97 members of Congress or their spouses and/or dependent children made stock trades involving companies that conducted business intersecting with their work in Congress.

“Congress doesn’t love policing itself. So it’s the kind of thing that is not going to be a high priority unless there is a lot of public pressure,” Libowitz said.

Critics of the House bill argue it contains a “giant loophole” by permitting blind trusts with lax provisions. A blind trust is an arrangement where one turns over their assets to be managed independently. Many backers of a congressional stock ban have voiced similar concerns.

Now that the pressure point of the midterm elections is seemingly out of the equation, Hedtler-Gaudette, who backs a congressional stock ban, is more optimistic about the prospects of getting a well-crafted ban across the finish line in the Senate than the House.

“The working group that they have in the Senate [has] been trying to pull together a compromise unity bill. They are negotiating with Democrats and Republicans,” he said. “I think the idea there is to have an actual bipartisan bill that they can hope to roll out pretty quickly after the election.”

Meanwhile, Libowitz, who like Hedtler-Gaudette backs a congressional stock ban, is holding onto hope that the House will pass something. Even if it doesn’t before the next Congress is sworn in, Libowitz believes a similar ban could get enacted in the future regardless of how power is divided in Washington, D.C.

“People want their legislators to pass this, regardless of whether they are Republicans or Democrats,” he said. “This is not a partisan issue. This is a good government issue. And because so many people across America support it, we hope whoever’s in control of Congress does the right thing and passes it.”

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