Loading summary
Transcript33 lines
- [00:00]
A
Foreign.
- [00:05]
B
Hi everybody, it's Cheryl Akisson. Welcome to another edition of Full Measure After Hours. Today, the Stock act did not end the controversy over some members of Congress trading on their access. Way back In April of 2012, President Obama signed the Stop Trading on Congressional Knowledge act, the Stock Act. It seemed to be a simple fix for a problem. No member of Congress, their staff, or even the President under this law can trade stocks based on non public information they get on the job and every trade that they do make has to be publicly disclosed within 45 days. The idea was to provide some oversight after some suspicious cases, shall we seem, of members of Congress getting very rich and trading stock on sometimes companies that they're regulating. Well, the Stock act we thought meant no more congressional insider trading. But members of Congress over the years since have continued crushing the market, somehow beating the S&P 500 by double digits year after year. How does that happen? Some examples of the most gifted investors in Congress in recent years include now retired Republican Richard Burr. He's from North Carolina. You may recall some news that made headlines for a little while just after he got some classified briefings on the emerging COVID pandemic. On February 13, 2020, before we all knew what was coming, Burr and his wife sold stocks in companies that were expected to hit hard. Guess what? The market crashed the next week and Burr reportedly netted a $164,000 advantage to for having sold his stock early. Then, after Republican Kelly Loeffler of Georgia got a classified Covid briefing, she also sold stocks, she and her husband reportedly avoiding millions of dollars in losses. Both Burr and Loeffler were investigated and cleared of any wrongdoing, but it sure didn't look good to the public. But by far the biggest talent when it comes to growing profits in the stock market is, is Democrat Nancy Pelosi. She and her husband have boasted a 16,930% return over her nearly four decades in Congress. That's according to estimates based on records that they filed in 1987, their stocks were worth no more than $785,000. Today they're estimated at upwards of $130 million. Far better somehow than if they had invested their money in the S&P 500, which does pretty well over time. But again, many members of Congress or their husbands or spouses seem to do far better. We did call Nancy Pelosi to ask if these numbers were accurate or did she have any modifications or explanations. And the Pelosi office would not answer our questions. Issued sort of a flat comment that said she doesn't own any stock. In any event, now there are revived bipartisan efforts to try to limit or ban individual stock ownership and trading in Congress. Everybody in Congress, it seems, agrees something should be done about this. But perhaps not surprisingly, so far nothing is getting done. Sunday, April 26 on full measure, I'm going to explore the whole controversy. You will hear from Democrats and Republicans in Congress. But in today's podcast, I'm speaking with Dylan Hedler Gaudette at the watchdog Project on Government Oversight.
- [03:57]
C
The top line here is that members of Congress who occupy a privileged position of access are allowed to make investments for their own personal financial portfolios and their own personal financial interests in stocks and other financial assets that present a clear conflict of interest with their duties as members of Congress, including the committees they sit on, the powers they have to investigate, to conduct oversight, to pass laws that will have a direct impact on the industries and companies that they are invested in. So there's a clear conflict of interest and avenue of corruption here, and it's really a black stain upon the entire institution of Congress.
- [04:36]
A
Does this help explain why we hear about some members coming into Congress with modest financial records or financial portfolio but getting wildly rich during the time they're serving and earning a public servant salary?
- [04:50]
C
I think it absolutely does. The salary of a member of Congress is $174,000, which is a very nice salary for the vast majority of Americans. But when you kind of run all the numbers, that salary does not explain the sort of wealth patterns you're talking about.
- [05:06]
A
When it comes to people who may be frustrated with Congress, seeing that happen. How does it impact them, though? Are members of Congress because of conflicts of interest, do you think? Sometimes making decisions that impact us, not just padding their own financial bank accounts, but are they making policy decisions based on their own financial interests that impact us in ways that we shouldn't be impacted?
- [05:32]
C
Absolutely, yes. I think when a public servant and the operative word there is public, when a public servant is doing their job and they're not doing it in the interest of the public and specifically of the people who elect them, their constituents, then they are doing us all a disservice and we all lose out in that process. And it could be because a specific industry or company is being advantaged over another, which could have direct impacts on your 401k or my 401k, or it could have impact in our local, local industries and local economies because members of Congress are not keeping the public in mind. They're keeping their own portfolios in mind,
- [06:05]
A
are there any examples or anecdotes that you have that you can think of as you've learned about this issue over the years that sound like maybe not obviously not illegal on its face necessarily. So we're not alleging violation of law at this point, but are there ethical conflicts that you see and examples you could cite?
- [06:24]
C
Certainly, yeah. So a couple years back, I actually wrote, researched this and wrote about it, that one committee in particular, the Armed Services Committee, which is the committee that handles the National Defense Authorization act every year, which is the Defense Policy bill, but it also authorizes the almost trillion dollars we're now spending on the Department of Defense every year, half of which goes to contracts to private defense companies. And so we ran the numbers and we saw that a number of people who were on those committees, members of Congress who were on those committees with direct power over the defense industry and companies in that industry, were also invested in those companies via their own stock portfolios and were also receiving campaign contributions from that industry. So you see how it's just a kind of a vicious feedback loop of corruption and conflict of interest there. That's just one example. But you could kind of play that example out across a bunch of different industries and a bunch of different committees.
- [07:16]
A
So hypothetically draw a straight line for us because you're so entrenched in this, you understand, and I understand with what you're describing. But for people who haven't studied this, let's say someone sits on the Defense Committee or Armed Services Committee, an example could be a defense contractor has stock and the member invests in that defense contractor stock. And then we're trying to decide whether that defense contractor should get a contract with the US army for some big equipment that may or may not be good. But that member will vote now on whether money goes back to the company that they're going to. Can you just describe that better than I did?
- [07:56]
C
Sure, absolutely. Well, I think you actually described it quite well there. The problem is that when a member kind of crafts a particular kind of legislation, what it does is it says we're going to buy X number more of Y. Let's just say fighter jet. And they know which companies are responsible for making those fighter jets. And so they can, even if that company's name isn't included in the legislation, which obviously it never is, they know who's making that fighter jet. They know where they should put their money if they want to make sure that that company receiving those contracts and that order of those fighter jets is going to directly benefit them because the stock price for that company is going to go up the more it receives contracts and the more orders it gets from the government. So it ends up being this kind of virtuous, or I'd say not so virtuous feedback loop between Congress, industry and the Department of Defense.
- [08:46]
A
In this example, how has this ever been legal? It seems so obvious that members of Congress should not be making policy decisions on companies that they're invested in.
- [08:58]
C
It does seem obvious. And unfortunately, some of the worst kind of corruption in Washington is actually the legal kind of corruption. The laws and the rules and the regulations have not kept up with the pace of the economy and with the sophistication of how, how industry does a really good job of influencing Congress, of influencing agencies. And the laws just are not sufficient and not strong enough to keep up with that. And until we do something about that in terms of reform, I think that pattern is going to keep playing out and corruption is going to continue to be legal.
- [09:30]
A
Can you summarize what reform is on the horizon and what chances it has?
- [09:34]
C
Sure. So for years now, there have been efforts to try and address one aspect of the broader issue of corruption, and that is as we've been talking about members of Congress being able to trade stocks and other financial assets while they are members of Congress. And so we've seen some real positive momentum recently, including a couple months ago, there was a really strong bill called the Restore Trust in Congress act that was negotiated and brought together a number of leading members of Congress who had their own individual bills on this issue. It brought them all in the same room. They hammered out a compromise and they came up with a really good bill that has strong, solid bipartisan support. And so we're really optimistic that we may actually see this get done. And it would end up with members of Congress and their immediate families being prohibited from trading stocks and other assets while they are, while they are members of Congress. But it would still allow them to remain broadly invested in the economy through widely held, diversified investment funds like, like exchange traded funds or 401ks and things like that.
- [10:38]
B
Are there.
- [10:38]
A
I know you guys have done some in depth investigations. Are there any individual members or cases that you want to call out?
- [10:46]
C
There are plenty of cases of members. Congressman Bresnahan from Pennsylvania comes to mind, people whose rhetoric, be it on the campaign trail or elsewhere, does not match how they act when they get into Congress in terms of continuing to trade stock while claiming that they want to ban stock trading. One thing that every member of Congress has the ability to do right now, if they so choose, and some members do choose this is to just not trade stocks at all, or to transfer their assets into a blind trust while they are in Congress to make sure that they, at the very least, can't insider trade. Each member of Congress could make this choice proactively if they wanted to, but they choose not. To.
- [11:24]
A
Do some of them do that?
- [11:25]
C
Yes, some of them do do that.
- [11:34]
A
And then there's been a lot of discussion and suggestion that former leader Nancy Pelosi, Former Speaker Nancy Pelosi and her husband have gotten rich. Well, they definitely got richer while on public service. But was some of this due to stock trades that are the kind that you're talking about?
- [11:51]
C
I suspect so, yeah. Yeah. Former Speaker Pelosi was very resistant to anything like this happening when she had the gavel when she was in power. And, you know, he's among the wealthier people in Congress right now, along with her husband. And so there has always been a bit of a strange connection there between this issue and Speaker Pelosi. CONGRESSWOMAN pelosi, FORMER SPEAKER so leadership has always been a bit of a problem here. And in fact, you know, there's a recent analysis that has been released by the National Bureau of Economic Research that has shown that when members of Congress get into congressional leadership, they magically begin to outperform even their peers, who they used to be kind of on par with in terms of how they performed in the stock market. But once they become leaders in Congress, they end up outperforming by quite a bit. And so there is kind of some smoke there, and I think there's probably some fire there as well.
- [12:42]
A
We were told by people who support the legislation, reforms in both parties that this is very popular, that this would pass pretty easily. How do do you see that? If it comes to a voter, if this petition, the discharge petition forces it, what do you see as the disposition, understanding that then has to go to the Senate and the president?
- [13:01]
C
One good thing is that Speaker Johnson, Minority Leader Jeffries, President Trump, some of the Trump administration's cabinet officials, they have all expressed support for or banning members of Congress from trading stocks. So I do think that if this did finally come to the floor and everyone were forced to vote up or down on it, I think between people who genuinely believe in this in good faith and people who just wouldn't want to be caught voting against it, I think between those two groups of people, I think this bill would pass Congress and get to the president's Desk.
- [13:32]
A
Did you ever read about or get briefed about one case in particular, like that's son of a gun, you know, like. Or you heard that someone was doing a trade on a particular committee that just seemed totally obviously wrong. It's okay. If not, I'm just trying to. I'll read all the reports and poke around too.
- [13:48]
C
Yeah, yeah. There have been some examples. One example that recently actually spurred the House Ethics Committee to weigh in with a public statement was that of Congressman Mike Kelly of Pennsylvania, whose wife actually was making some suspicious looking transactions into a steel company in like, right around the same time as steel tariffs were being announced. And so things like that happen quite regularly and they provide a real sort of, kind of clear, sort of crystallized, I think, case study and why this is so problematic. When transactions like that happen a lot and they're suspiciously timed in advance of a major announcement on policy or a major vote or something like the COVID briefings that were happening before the public broadly knew that a pandemic was about to hit our shores. A lot of people in Congress were hearing about it. And then we saw some suspicious transactions from people like Senator Richard Burr, Senator Dianne Feinstein, and Senator Kelly Lefler at the time that looked like they had advanced knowledge and tried to beat the system.
- [14:49]
A
So what were you. What would you be investing in? I forgot I remember hearing that. But what kinds of things during COVID would benefit them if they knew?
- [14:56]
C
Zoom, Clorox, things that were going to be in the pharmaceutical industry broadly.
- [15:02]
A
Well, then think about this. Okay. Policy wise, when I was asking for the tie, then it benefits them if they keep it going. So let's say you're gonna now decide on shutdown, things that impact all of us. And, you know, you've invested in Clorox or Zoom, you kind of want the shutdown to go on.
- [15:18]
C
Right.
- [15:19]
A
Interesting. Do we only know about these things or mostly know about them because of the Stock act or.
- [15:25]
C
Yeah, yeah. In some cases the Stock Act. Well, in, I'd say in one way, the Stock act is actually really important because it does shine some sunlight onto. Onto the transactions of members of Congress, where we didn't have that before 2012. So it has been helpful in that regard. But we haven't seen it act as much of a disincentive for members of Congress to stop doing it. And they also very routinely violate the pretty meager reporting requirements under the Stock act because they don't face any real penalty for doing so. So the Stock act is. We basically run a 1012 year kind of pilot program with the Stock act being how we try to regulate this and it doesn't work. So this is why we need to move to the next step and really, really do something robust here and ban stock trading in Congress once and for all.
- [16:14]
B
For more on this story and to hear what members of Congress are saying, believe it or not, some Democrats and Republicans are working together on this issue. You can watch full measure Sunday, April 26th. To find a station near you, go to cheryl Atkison.com and click the Full Measure tab. Or if you're listening to this after the fact, you can always go to FullMeasure News and watch replays online. Or visit our YouTube channel, FullMeasure with Cheryl Akkeson on YouTube and watch a replay of this program and all of our programs over the past 11 years. I hope you enjoyed the podcast today and that you will share it with your friends. Leave us a great review and subscribe. Subscribe and check out my other podcast, the Cheryl atkison Podcast. Do your own research. Make up your own mind. Think for yourself.