Congressional Stock Trading During Pandemic Diminishes Public Trust

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A woman wearing a homemade coronavirus mask carries a box that has "Disaster Relief" printed on it
A Central Texas Food Bank volunteer works to load 28-pound boxes of staples into vehicles during a food giveaway in Austin, Texas. Almost 1,500 families picked up boxes in response to extensive coronavirus pandemic job losses and general Texas economic fallout. Photo by Bob Daemmrich / Alamy Stock Photo.

Campaign Legal Center (CLC) reviewed financial disclosure reports between Feb. 2, 2020 and April 8, 2020 of congressional stock transactions. We found that as COVID-19 cases began to increase throughout the country in the weeks before the first three rounds of legislative relief packages, Senators and Representatives from both sides of the aisle traded securities – many related to the pandemic itself.

Thanks to the 2012 STOCK Act amendments to the financial disclosure laws, this is the first economic downturn in history where federal officials are required to disclose their securities trades within weeks of such trades. 

This unprecedented transparency begs the question: do Americans want their elected legislators to avoid potential conflicts of interest by divesting themselves of individual stocks, or place them in blind trusts where they are not allowed to communicate with the independent trustee? 

Executive branch officials more commonly divest of their securities that present a conflict, but Congress has avoided this approach.

When it came to light that several senators made lucrative stock trades shortly before the recent market crash, and after some received classified intelligence briefings about the imminence of the pandemic, severe public backlash ensued. It turns out they may only be the tip of the iceberg.

In the Senate, there were at least 227 purchases or sales in securities, ranging up to a total of $98.3 million by 12 senators. In the House, there were at least 1,358 transactions, ranging up to a total of  $60.5 million by 37 House representatives. Of those transactions, some members of Congress were strategically buying stocks in companies that might see a boost during the crisis, as well as selling stocks that seemed likely to tank.

Public servants made purchases in remote work technologies, telemedicine companies, and car manufacturers that were shifting their production to ventilators. Sales were made in companies in the restaurant and hospitality industries.

The stock trading was bipartisan—27 Democrats, 21 Republicans, and 1 Independent were making trades as the devastation that COVID-19 would exact on the U.S. crystalized.  More transactions are reported daily. At one level, this is not surprising because members of Congress are on average far wealthier than average Americans.

Most congressional members are millionaires and a number have investments in the tens of millions and far more likely to have investments in the markets. To date, Congress has so far exempted itself from the ethics requirements for personal investments imposed on senior officials of the executive branch. 

Although these transactions have not been tied to allegations of insider trading, as Sen. Richard Burr’s transactions were because of intelligence briefings he received, the volume of trading during this short time period highlights a serious problem. 

Even if officials rely on financial advisors to make trading decisions on their behalf, the perception of conflicts of interests remains because the public does not know the back and forth behind those communications.

The financial disclosure laws were created after a congressional ethics study over 50 years ago found that “much distrust of government flows from ambiguous circumstances where there is ground for suspicion that officials are promoting their own welfare rather than the public’s.” 

Today, that ground for suspicion remains as members of Congress buy and sell stock for their personal portfolios, while simultaneously picking winners and losers in the market as they craft economic stimulus packages. 

The onslaught of public disclosure in the next few months coupled with the increased financial hardship of Americans creates an opportunity for constituents to unite and demand a change from their elected representatives.

Disclosure is the first step towards government accountability, but to rebuild public trust in government, Congress needs to go further and restrict trading of certain individual stocks. Their constituents deserve it.

See the report of the stock transactions.

Kedric specializes in government ethics, lobbying law, and election law.
Delaney's work focuses on government ethics, accountability, and transparency.
Congressional stock transactions during the COVID-19 crisis

Financial disclosure reports for dates between Feb. 2, 2020 and April 8, 2020