There’s a stir on Capitol Hill as bipartisan legislation, which could reshape the financial activities of the country’s elected officials, has recently been introduced. This proposal aims to ban members of Congress from engaging in stock trading, a practice that has drawn considerable criticism over the years due to its potential conflicts of interest.
Recent data showing that Congressional members beat the S&P 500 Index in 2022 only underscored the ongoing controversy and prompted swift legislative action from New York Democrat Sen. Kirsten Gillibrand and Missouri Republican Sen. Josh Hawley. The proposed bill, introduced on Wednesday, would prohibit not only Congressional members but also the President, Vice President, and executive branch employees from owning stocks in individual companies, even those held in blind trusts.
In a bid to maintain public trust and prevent elected officials from using their roles to personal advantage, the bill allows these parties to own mutual funds and index funds only. As reported by the Wall Street Journal, this proposed legislation has the backing of the public, with polls indicating substantial support for the ban.
Senator Gillibrand, in her statement, reiterated the need for such a bill: “It is critical that the American people know that their elected leaders are putting the public first, not looking for ways to line their own pocket.”
To ensure compliance, the proposed legislation stipulates penalties for those who breach the rules, including forfeiture of any trading profits and fines of $10,000 or more.
Previously, Senator Hawley introduced the PELOSI Act, a cleverly-titled piece of legislation aimed at preventing elected leaders from owning securities and investments. This bill would have similarly prohibited members of Congress and their spouses from holding and trading stocks and options.
“There’s an inherent conflict when Senators and Representatives are entrusted with overseeing the very companies they invest in. This cannot continue, as they consistently buy and sell stocks, repeatedly outperforming the market,” Senator Hawley stated.
Former House Speaker Nancy Pelosi has been in the spotlight concerning her stock trading activities, given the frequency and timing of her trades, often made ahead of legislative action related to the stocks being traded. Pelosi has denied any conflicts of interest and assured that her venture capitalist husband does not receive insider information from her.
The monitoring of Congressional trading activities by platforms like UnusualWhales, which produces an annual list of top-performing traders, has helped shed light on potential conflicts of interest and the effects of lobbying on political actions.
In light of these events, two Exchange Traded Funds (ETFs) were developed in collaboration between UnusualWhales and Subversive Capital. The Unusual Whales Subversive Democratic Trading ETF (BATS: NANC) and the Unusual Whales Subversive Republican Trading ETF (BATS: KRUZ) were created to “allow investors to secure returns that their elected representatives enjoy by law.”
The ongoing monitoring of Congressional trading activities has proven useful in revealing many unusual trades, including those made amidst the collapse of several regional banks that involved government participation. As it stands, the proposed bipartisan bill may be a step toward ensuring greater transparency and fairness in the halls of power.
