Members of Congress continue to profit from their positions in ways that ought to raise eyebrows.
Earlier this month, the market analysis service Unusual Whales released its annual report on congressional stock trading.
“Congress blew the market out of the water,” the report read.
Above all, the findings suggested that elected officials have no qualms about profiting from trades — at least until someone notices.
Should Government Officials Profit from Stock Trades? The Context
Alas, the concept of public service has long since disappeared from the catalog of American ideals. In fact, it was a doomed ideal from the beginning, but it was also a sincere one.
At the Constitutional Convention on June 2, 1787, for instance, Benjamin Franklin proposed that the nation’s new chief executive — not yet called “president” — should have his expenses paid but otherwise receive “no salary, stipend fee or reward whatsoever.” Delegates did not debate the proposal, but they honored the sentiment.
Five years later, Secretary of State Thomas Jefferson bemoaned the rage for “paper speculation … like that on a gaming table” that seemed to have gripped many members of Congress. [paragraph 3]
“Of all the mischiefs objected to the system of measures beforementioned, none is so afflicting, and fatal to every honest hope, as the corruption of the legislature,” Jefferson wrote to President George Washington in 1792.
In short, well-meaning Americans have always tried to insulate their elected officials from financial temptations. It has seldom worked.
Nonetheless, in recent years the chasm between ordinary Americans and governing elites has seemed wider than ever. One manifestation of this growing divide is the popular outrage over congressional stock trading.
At the beginning of the COVID scare, for instance, the public learned that some senators had made advantageous trades in the weeks preceding the lockdowns.
Obvious questions arose. What did members of Congress know that the public did not?
It is no accident, therefore, that Unusual Whales began tracking congressional trades and publishing reports in 2020.
“We hope … this report (with the history of our previous research) will be good enough to end the argument about Congress and trading,” the 2023 report concluded. “Over the last four years, we have shown that numerous in Congress continue to trade and outperform equity markets.”
The 2023 Unusual Whales Report: Seven Major Takeaways
For those (like yours truly) who lack market expertise, the report’s voluminous details can be distilled into seven major takeaways.
First, the total number of disclosed congressional transactions has fallen from near 17,000 in 2020 to approximately 11,000 in 2023. The report cited the “defeat/retirement of prolific stock traders from years past” as a “contributing factor.”
Unusual Whales also noted that its 2021 report “went viral.” Could heightened scrutiny have contributed to diminished trading activity?
Second, members of Congress seem to care not about right conduct but about public perception.
For instance, Unusual Whales found that, in general, “if they’re up for re-election in 2024, then they’ve severely decreased and/or stopped their trading activity in the last year.”
Indeed, successful traders enjoy the profits but — tellingly — not the attention.
Should members of Congress be allowed to trade stocks?
Republican Rep. Mark Green of Tennessee, for instance, saw a staggering 122.2 percent return on stocks in his portfolio. That ranked second among all his colleagues, behind only Democratic Rep. Brian Higgins of New York, whose investments produced a gargantuan 238.9 percent return.
This should be cause for celebration, right?
“I have no insight into how trades are made, and am only notified after they occur,” Green said in a statement, according to the Washington Examiner.
“In fact, in my first year in Congress, to go above and beyond even the hint of impropriety, I instructed my broker in writing to manage my family’s investments and to disregard any instructions from me should I try to provide input (which I have not).”
Republican Rep. Garret Graves of Louisiana ranked third on the list with a 107.6 percent return.
“Let’s hope ‘UnusualWhales’ isn’t a math teacher. Their calculation couldn’t be more wrong,” a Graves spokeswoman said in a statement, according to the Examiner. “Garret has largely stopped trading stocks and this has resulted in UNDER-PERFORMANCE of the market average.”
Everyone understands the impression such statements make. In short, if congressional stock trading presents no moral dilemma, then why would beneficiaries issue statements downplaying their successes?
Third, members of powerful congressional committees regularly traded stocks in sectors “legislated by their very committees.”
The report highlighted the huge volume and value of stock purchases by members of the House Oversight Committee, the House Armed Services Committee, the House Homeland Security Committee and the House Foreign Affairs Committee.
Fourth, congressional Democrats saw a 31 percent average return compared to only 18 percent for their Republican colleagues.
Republicans tended to invest in the struggling energy sector, while Democrats gobbled up tech stocks, including Apple, Microsoft and Google (Alphabet).
How do readers feel about Democrats heavily investing in tech companies that have acted as agents of censorship? Probably the same way I do.
Fifth, members of both parties have invested in war.
“Numerous members in Congress traded war stocks before the [Israel-Hamas] conflict,” the report read.
The same thing happened when war broke out between Russia and Ukraine in February 2022. In fact, Unusual Whales devoted a portion of its 2022 report to that distressing development.
Sixth, members of Congress took advantage of the banking crisis in early 2023.
Democratic Rep. Lois Frankel of Florida, for instance, “sold First Republic Bank, FRC, on March 16th, avoiding the remaining 80% drop that happened as the bank itself was liquidated.” Then, Frankel “bought JPMorgan, JPM, the bank buying FRC on March 22nd, before the deal was announced.”
Finally, the report devoted an entire section to Democratic Rep. Nancy Pelosi of California, the former speaker of the House, who came in ninth place on the list of lawmakers who beat the stock market in 2023.
After what the report called “a history of unusual trading,” Pelosi defended her behavior in December 2021.
“We are a free market economy. Congress should be able to participate in that,” she said at the time.
Then, in the summer of 2022, the public learned that Pelosi had traded millions of dollars in the software company Nvidia “before voting on a US semiconductor bill.” Shortly thereafter — no doubt in response to public outrage — she “reported that she sold out of her Nvidia position.”
By late 2023, however, she was back at it in a most brazen way.
“One week after Chinese President Xi [Jinping] visits her home state of California, and before Biden announces new US semiconductor focuses, her husband decides to buy two million dollars of deep in-the-money Nvidia calls, the same company she divested from due to conflicts a year earlier,” the report read.
What to Do About It
Lawmakers introduced legislation last year to either ban or restrict congressional stock trading in both the House and the Senate. In fact, according to Roll Call, members had introduced eight such bills by early May.
Predictably, none of these bills has passed.
Perhaps the only meaningful solution would be constitutionally imposed term limits and a strict ban on all government officials enriching themselves during their time in office. They would receive a small salary and expenses paid, but nothing more.
In that way, public service would amount to actual “service” in the same way military service does.
Plus, it would make Franklin and Jefferson smile.
