We’re feeling the heat of summer in Washington, DC, but hell is freezing over anyway.
Why? Because veteran stock market wizard Rep. Nancy Pelosi (D-CA), has come out in support of a bill that will ban members of Congress from trading in stocks or options.
For late arrivals, former House Speaker Pelosi has for more than a decade been the poster child for members of Congress who became rich by trading on inside information to predict the movement of the stock market. Pelosi has long tried to deflect criticism by saying that her husband makes all the stock moves, but the numbers don’t lie: While the S&P index is up by 240 percent over the last 10 years, Pelosi and her husband are up an eye-popping 745 percent.
Peter Schweizer, who wrote about congressional stock speculating in the 2011 book Throw Them All Out, notes on the latest episode of The Drill Down podcast that when she first came to Congress, Nancy Pelosi was worth “a couple million.” Today, “she and her husband are worth about $260 million.”
Schweizer and the Government Accountability Institute (GAI) documented her fortunate efforts in the stock market, which is detailed in a clip in today’s show. She managed to stop a bill from coming to the House floor that would have harmed Visa, Inc. She subsequently was part of that company’s initial public offering and, in two days, watched her shares go from $44 to $64 a share.
“This is ‘peak Schweizer’ today, folks,” quips co-host Eric Eggers. “He gets to talk about two of his favorite things – the stock market, and other people’s money.”
Unexpectedly, Pelosi recently announced her support for pending legislation that would completely bar members of Congress from trading in single-company stocks or in stock options, limiting them to mutual funds and broad-based exchange-traded funds (ETFs). This bill, drafted by Missouri Republican Josh Hawley, recently advanced from a Senate committee. Pelosi’s change of heart, though, might also have to do with a renaming of the legislation.
“The Honest Act” was originally called the “Preventing Elected Leaders from Owning Securities and Investments,” or PELOSI Act. Former Speaker Pelosi told reporters she “strongly” supports the bill and looks forward to voting for it when it reaches the House floor.
“I guess it gets easier to say things ‘with a straight face’ when not all your facial muscles can move,” Eggers offered.
Schweizer was more diplomatic: “I have to say, this does have bit of ‘I’ve now got mine, so I’m ready to change course’ to it.”
In 2011, it was Schweizer’s book that documented the abuses of many members of Congress who were making stock trades after emerging from closed-door hearings where they learned inside information. Following the book and a 60 Minutes segment dramatizing the book’s facts, then-President Barack Obama highlighted the issue in his 2012 State of the Union address and Congress enacted the STOCK Act. That law did not prevent Congress members from participating fully in the stock market, only requiring them to disclose all their stock trades in a timely and searchable manner.
However, even this partial reform was undercut a year or so later when Congress quietly “amended” the law to slow the notification requirements and allow the records to be submitted on paper, thus preventing them from being easily accessed or searched. That move was spearheaded by former Sen. Harry Reid (D-NV) and a Republican member named Eric Cantor. Cantor was later defeated in a primary and once out of Congress moved to… Wall Street.
“The system incentivizes this kind of behavior,” Schweizer says. “The reason you have people saying we should ban stock trading – but then doing it – is because they know how valuable it is. If you weren’t gaining an advantage from doing it, you wouldn’t be doing it. You would just be consistent.”
Hawley’s bill appears ready to pass the Senate after the recess. Prospects are less certain in the House, though Rep. Anna Paulina Luna (R-FL) said three weeks ago she will try to force a floor vote on the bill when it comes before the House. Schweizer and Eggers noted that there are more activist-minded members now, on both the left and the right, than there were back in 2012. Those members are more willing to buck party leadership and support these kinds of reforms.
President Trump has so far said he doesn’t think Hawley’s bill, which would apply to the president and the vice president as well as Congress, is a good idea. “I don’t think real Republicans want to see their President, who has had unprecedented success, targeted because of the ‘whims’ of a second-tier Senator named Josh Hawley,” Trump wrote on his social media platform.
“I hope President Trump signs it,” Schweizer said. “These same rules should apply to the president. They should apply to the Treasury secretary, to anybody in a senior area of responsibility. If you’re somebody who works for the Medicare and Medicaid systems, like Dr. Oz, … they have enormous effect on stock prices because they decide which pharmaceuticals are going to be covered by Medicare and Medicaid and which ones are not. Those guys should not be trading stock. It’s just a basic rule. And I think this is one of those issues that’s a 90-10 issue with the American people.”
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