Congress' stock trades draw more scrutiny

A day after a news analysis detailing extensive stock trading by members of the US Congress — some of which involved companies their committees investigate — House Speaker Nancy Pelosi said Wednesday that proposed legislation to tighten trading rules should materialize later this month.

On Tuesday, The New York Times published an analysis that found that at least 97 current members of Congress "bought or sold stock, bonds or other financial assets that intersected with their congressional work or reported similar transactions by their spouse or a dependent child".

The Times described one trade by the wife of Representative Alan Lowenthal, a California Democrat, as "especially striking". She had sold shares of aircraft maker Boeing on March 5, 2020 — a day before a House committee on which her husband sits released damaging findings on the company's handling of its 737 MAX jet, which was involved in two fatal crashes.

Representative Bob Gibbs, an Ohio Republican on the House Oversight Committee, reported buying shares of the pharmaceutical company AbbVie in 2020 and 2021, while the committee was investigating AbbVie and five rivals over high drug prices, the analysis found.

Representative Rick Allen, a Georgia Republican, reported trades in the pharmaceutical companies Merck and Johnson & Johnson while serving on an education and labor subcommittee that was considering prescription drug price legislation, the Times reported.

Representative Cindy Axne, an Iowa Democrat, and her husband, reported four purchases of Wells Fargo stock while the House Financial Services Committee, on which she sat, was investigating the bank over fake accounts.

Family members of Representative Michael McCaul, a Texas Republican, bought and sold shares of IBM and sold Accenture, both major Department of Homeland Security contractors, while he was on the Homeland Security Committee.

Between 2019 and 2021, more than 3,700 trades reported by lawmakers from both parties "posed potential conflicts between their public responsibilities and private finances", the Times found.

The Stop Trading on Congressional Knowledge (STOCK) Act of 2012, signed into law by President Barack Obama, prohibits the use of nonpublic information for private profit, including insider trading by members of Congress and other government employees.

Pelosi, a California Democrat, characterized the current unfinished legislation as "very strong".

A House vote on the legislation would follow months of committees trying to craft a bill. Lawmakers will go on a long break next month in the run-up to the Nov 8 mid-term elections.

"The American people don't want us day trading for profit and engaging in active trading of the very equities that are connected to the policies that we are deciding on and voting on every day," Representative Chip Roy, a Texas Republican, told the Times. Roy is co-sponsoring a House bill that would require members to put individual stocks, bonds and many other financial assets in a blind trust.

On Monday, MSNBC anchor Stephanie Ruhle accused Pelosi of "slow-walking" the trading legislation.

Ruhle made the comments during a conversation with Democratic Representative Abigail Spanberger of Virginia, one of several lawmakers who has submitted proposals that would ban congressional stock trading.

"It's legal to be sleazy, especially in this case for members of Congress," Ruhle said. "Nancy Pelosi has had months and months and months to bring this thing to the floor."

Ruhle noted that Congress will go on recess Sept 30, giving lawmakers little time to consider a stock-trading ban before the current session ends.

"You've got a little over two weeks. Is there any chance Speaker Pelosi brings this thing to a vote? You can't blame Republicans on this one," she added.

Spanberger noted her bill has bipartisan support and "more than 67 co-sponsors, Democrats and Republicans, across the ideological spectrum".

In July, some stock trades executed by Pelosi's husband, Paul Pelosi, drew scrutiny when he sold shares of chipmaker Nvidia Corp days before the House was expected to consider legislation providing subsidies and tax credits worth over $70 billion to boost the US semiconductor industry. The CHIPS Act is now law.

He sold 25,000 shares of Nvidia for about $4.1 million, sustaining a loss of $341,365.

Representative Ro Khanna, a California Democrat, is the member of Congress with the highest number of possible conflicts of interest stemming from stock trades.

The Times found that Khanna had 149 possible conflicts of interest from trades in 897 companies because trusts in the name of his wife and children made trades involving many companies being investigated by congressional committees of which Khanna was a member. The companies include AbbVie, defense contractor Lockheed Martin and pharmaceutical giant Johnson & Johnson.

Khanna's office told sfgate.com that he will vote for any of the proposed stock trading bans if they come up for a vote on the House floor.

"Khanna supports a stock trading ban and will vote for what comes to the House floor," a spokesperson told sfgate.com. "For spouses, he believes that a highly diversified trust managed by a third party, which is functionally similar to an index fund, is an ethical solution."

Representative Josh Gottheimer, a New Jersey Democrat, had 43 potential conflicts, second-most among Congress, stemming from his 326 stock transactions, according to the Times. A senior manager at Microsoft before joining Congress, Gottheimer has frequently bought and sold stock and options in the software giant.

The Times cited a Dartmouth College study published earlier this year that members of Congress' portfolios did not perform any better or worse than other similar stocks.

"You cannot rule out that there's some serious insider trading going on," said Bruce I. Sacerdote, an economics professor who was a co-author of the Dartmouth study. "What you know for sure is on average they don't do particularly well, and these House members and senators would be better served if they were just in index funds."

A January poll by Morning Consult found that 63 percent of Americans believe Congress members should not be allowed to trade stocks, including 58 percent of Republicans and 69 percent of Democrats.

Reuters contributed to this story.