EP. 34 — TRADING THE PUBLIC’S TRUST

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Weston Wamp: I'm Weston Wamp, and this is “Swamp Stories,” presented by Issue One. 

Former President Barack Obama: That’s why in my State of the Union I asked members of the House and the Senate to send me a bill that bans insider trading by members of Congress and I said that I would sign it right away. Well, today I am happy to say that legislators from both parties have come together to do just that.

Weston Wamp: In 2012, President Obama signed the STOCK Act into law. The intent was to ban insider trading from members of Congress — a subject that gained attention on both sides of the aisle in the months and years after the financial crisis.

But it did not do quite what it was supposed to.

Ryan Grim: According to Insider, the 36 members are in violation of 2012’s Stop Trading on Congressional Knowledge Act, also known as the STOCK Act, which requires they publicize their and their families’ investments in a timely manner.

Weston Wamp: The apparent failure of the STOCK Act’s disclosure requirements has reignited bipartisan outrage over the broader question of why members of Congress are allowed to trade individual stocks in the first place, which, on the surface, seems like insider trading.

Alexandria Ocasio-Cortez recently said that it is “absolutely wild” that members of Congress can freely trade stocks.

But it is not a partisan issue. Tucker Carlson of Fox News said that the trading of stocks by members of Congress and their staffs based on insider knowledge is “transparently corrupt” and that it “subverts the whole idea of government.”

This is Episode 34 — Trading the Public’s Trust

Rep. Chip Roy: Bottom line, what you want is transparency. But I think in this case, what you've got is a situation where the American people have appropriately lost faith, that their elected leaders are in it for, shall we say, the right reasons and that they're making good decisions.

And sometimes that's fair and sometimes that's not. But what is absolutely true, and what the news that we've seen over the last several years, is the number of elected representatives, members of the House and Senate, that are making trades, have investments that have clear conflicts of interest with the policy choices they're making. It raises lots of red flags.

Weston Wamp: Republican Congressman Chip Roy of Texas stepped off the floor of the U.S. House to speak with me about the lack of trust people have in Congress and how it can be addressed. Recent Gallup polling showed 63% of Americans said they would rate the honesty and ethical standards of members of Congress as low or very low. Only 1% of Americans said they would rate them very high. Self-dealing, or the appearance of it, is a big reason.

Kedric Payne: So you have all these conflict of interest laws that are intended to stop, not only an actual conflict, but an appearance of a conflict, because they both have the same effect of the public losing faith in the government. So when you go to the specific issue of stock trades, it just looks like a conflict of interest at the least. Sometimes it actually is a conflict of interest. If a person is trading a stock where they are also the official who takes actions that could impact that industry, or even that actual company.

Weston Wamp: Kedric Payne is the senior director of ethics and the general counsel of the Campaign Legal Center. His career has taken him from serving as the editor-in-chief of the University of Pennsylvania Law Review to the Department of Energy and the Office of Congressional Ethics.

He and Congressman Roy agree that even the perception of conflicts of interest further diminishes trust in Congress. 

Rep. Chip Roy: We need to clean this place up, but we also don't need to have stupid rules that don't do anything. Let's just make it to where people can have trust that people aren't enriching themselves in the back of public policy. 

Weston Wamp: So what is a very conservative member of Congress, who previously served as Ted Cruz’s chief of staff, doing about the problem at hand? Well, he teamed up with a colleague from across the aisle to address the issue. Earlier in 2021, Roy and Virginia Democrat Abigail Spanberger reintroduced the TRUST in Congress Act in an encouraging display of bipartisanship that could finally put an end to the controversy over members of Congress actively trading stocks.

Rep. Chip Roy: Abigail, a Democrat in Virginia, and I introduced this legislation because we thought it was important for members of Congress to do one of two things. Either have your investments in broad index funds, that are not one that you can really game. If you've got a Vanguard S&P 500 index fund, well, that's fine. Or if you've got specific stock or investments then it’s in a blind trust, you're not the one making the decisions on those trades. Whether it's Tesla, or a pharmaceutical company, or a defense contractor or whatever it might be.

I think that would be a good change. And I'm glad to do that on a bipartisan basis.

Kedric Payne: The TRUST Act focuses on restricting members of Congress from trading stocks by requiring them to have a qualified blind trust, which simply means that the members give all control of their stock trades over to a trustee and the members have no involvement or even knowledge of what their assets are and how they are traded. So that allows them to maintain their wealth, but it restricts any involvement. So you maintain the public trust.

Weston Wamp: Kedric Payne explained to me that the steps proposed in Roy’s and Spanberger’s legislation are necessary because past attempts to legislate congressional stock trading have failed.

Kedric Payne: A key part to understand is the evolution to why this TRUST Act is the logical next step. If you look 40 years ago to when there was the first piece of legislation that dealt with disclosure, stock trades uniformly across all three branches, it was an Ethics in Government Act. It was created in the wake of Watergate. 

And the purpose was to have the public see: This is what people are trading. This is any potential conflict. You can see it. It was also so the public could see all the people who did not have conflicts.

Weston Wamp: But after the financial collapse in 2008, members on both sides of the aisle were revealed to have been trading stocks after closed door meetings with federal reserve officials.

The annual disclosure requirements of the Watergate-era legislation were not providing timely information to voters. Fast forward to the end of President Obama’s first term and the clip that we heard at the beginning of this episode, and the STOCK Act had gained bipartisan support to bring timely transparency to congressional stock trading. 

Kedric Payne: We see that the STOCK Act, which was the law that was passed 10 years ago in wake of these stock issues and trading right before the economic slowdown. This STOCK Act is not working the way it should. Just recently we have about 40 members who are not complying with the STOCK Act. You have about seven members who are subject to ethics complaints, and there's no real enforcement of that. So the next question is if disclosure isn't working, what should we do next? 

Weston Wamp: And that’s what inspired the TRUST in Congress Act that would take the boldest steps yet to eliminate even the perception of conflicts for members of Congress.

Rep. Chip Roy: I think it's better if you just clean it up. For example, we had antitrust hearings in the Judiciary Committee, on which I serve, where you've got questions involving Google, Amazon, Facebook, Twitter, Apple. A lot of Americans own those stocks. I talk a lot about oil and gas in Texas and hit a lot of issues involving those important companies in Texas, important for the whole country. And so all of those things can pop up.

Rep. Chip Roy: And then now if you really want to layer on it with this vaccine stuff, Pfizer and all of the different pharmaceutical companies and what we're doing or not doing there. I mean, and there's a lot of money, federal money, flowing to buy these vaccines. And look, I might be benefiting from that in an S&P 500 fund, but I just think it'd be better if we just cleaned off everybody's investments so that there's no obvious conflict of interest.

Weston Wamp: To better understand the types of specific conflicts that members of Congress find themselves in, I asked Payne for an example.

Kedric Payne: One conflict is part of what's going on with a congressman who was heavily involved in lobbying the Department of Commerce to engage in this investigation of people who were violating tariffs. He always knew that if the Department of Commerce started this investigation into the tariff violations, it could positively impact — that is, help — a business that was in his district. Well there's a report that just came out that the day after his office learned that the investigation was going to happen his wife purchased a stock in that company. And the return on investment was 400%. So if you have a blind trust, so that there's no way that someone could take information that's learned within your official capacity to start a trade, you will have the public not at least think that a member is simply using his or her official position to make stock trades.

Weston Wamp: Conflicts like this one could exist on nearly every committee in Congress. And they often do.

Congress appropriates trillions in federal funding and regulates many aspects of the world’s largest economy. Asking that members of Congress not actively trade stocks is not a big sacrifice considering the high stakes in the longest running self-governed country in the history of the world. Serving in Congress is supposed to be public service, after all.

Roy and Spanberger’s partnership gives hope that some Republicans and Democrats understand that restoring confidence in Congress is going to require us to work together. 

Rep. Chip Roy: I don't view things through the lens of party. Party is a necessary evil. And we got a two party system in order to sort of coalesce and have the ability to represent. I hate using the term govern because we don't govern, we're representatives. But in order to function, parties allow you to organize, to build coalitions.

I view things through the lens of my value system and wanting to ensure a limited constitutional government that frees the American people up to prosper according to their hard work, their faith and value system. 

Weston Wamp: Roy’s unusual and refreshing approach has led him to partner with Democratic colleagues like Spanberger, Dean Phillips, and Hakeem Jeffries in his first two terms in Congress. He wrapped up our conversation with these words of wisdom for our fellow conservatives. 

Rep. Chip Roy: And the last point I'll make is, Republicans need to stop running away from that which they ran on. And then maybe be less concerned about party and being in power, and rather just stand up for what they believe in and then let the American people decide. That's how this place is supposed to work.

Weston Wamp: Truth is, that advice applies to both parties. Ending stock trading by members of Congress is one area where Republicans and Democrats agree for the exact same reason. We should claim that common ground and look for more.

On the next episode of “Swamp Stories,” we’re going to have a conversation with Michigan Republican congressman Peter Meijer. We’ll discuss lessons learned from his first year in office and get his thoughts on the state of democracy heading into 2022.

Weston Wamp: Thanks for listening to “Swamp Stories,” presented by Issue One, the country's leading political reform organization that unites Republicans, Democrats, and independents to fix our broken political system. Please subscribe to the podcast and share it with your friends. Even better, rate and review it on iTunes to help us reach more listeners. You can find out more at swampstories.org. I'm your host Weston Wamp. A special thank you to executive producer, Ethan Rome, senior producer Evan Ottenfeld, producer Sydney Richards, and editor Parker from ParkerPodcasting.com. “Swamp Stories” was recorded in Tennessee, edited in Texas and can be found wherever you listen to podcasts.

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