STOCK Act is ‘ready to go a step further’ by banning Congress members from trading: Lobbyist

Craig Holman, Public Citizen’s Capitol Hill lobbyist on ethics, lobbying, and campaign finance rules, joins Yahoo Finance Live to discuss probable amendments to the STOCK Act, Congressional insider trading, and Speaker Pelosi's comments on Congress being viable "free market" participants.

Video Transcript

- You know that scene in "Casablanca," where the police officer is shutting down the casino, and then they hand him his winnings, and he says-- he's shocked to find gambling here? And then the guy says, here are your winning.

Kind of like Congress sometimes when it comes to trading stock. I share that with you because, let's bring in Craig Holman, Public Citizen's government affairs lobbyist. Knows firsthand, going back almost 20 years, trying to get a hold of how to fix this problem.

And, I guess, where do we stand right now? Because we were just talking about a Federal Reserve governor-- clearly not Congress. But last year, we saw members of Congress and the year before, it appeared to have traded on news they got before the pandemic. And the rest of us get left out in the cold. So where do we stand? Because we know Jon Ossoff is trying to change the law.

CRAIG HOLMAN: We still have a big problem ahead of us here. Members of Congress and senior congressional staff are uniquely positioned to get inside material, non-public information that can affect the stock markets. They go into confidential briefings with government authorities who have been studying what's about to happen to the economy, and they've got that access to inside information that you and I don't have.

And many members of Congress actively trade on the stock market. You know, it's unbelievable, but prior to 2012 when we first passed the Stock Act, it was actually legal for members of Congress to do insider trading. What was illegal for you, and I, and Martha Stewart was perfectly legal for members of Congress.

We passed the Stock Act in 2012 that made it clear that insider trading is illegal for members of Congress as well as the rest of us, and set up a disclosure system so we could monitor what's going on. Members of Congress have to report their stock trades within 45 days.

I thought that would solve the problem, you know? And quite frankly, it did have a significant impact. I did an analysis of congressional stock trading activity three years prior to the Stock Act and three years after. And found that the Stock Act, the disclosure requirement alone, actually reduced stock-trading activity by members of Congress by two-thirds.

- Right.

CRAIG HOLMAN: The problem is, we see--

- Right. Craig, I want to interrupt really quickly, just to ask a little bit more about this reported legislation coming out from Senator Jon Ossoff. Because what is the likelihood that this reported legislation or something like it actually gets passed, especially when you have House Speaker Nancy Pelosi saying in a press conference last month that we're a free market economy and that family members shouldn't be facing trading bans, even for those who are related to those in Congress?

CRAIG HOLMAN: I think we have a very good, real chance of getting this type of legislation passed. The Stock Act was very popular, not only among the public, but even Congress almost unanimously approved the Stock Act.

We now know from the pandemic, there's some insider trading going on by Senator Richard Burr-- or allegations of insider trading by Richard Burr, Kelly Loeffler, David Perdue, and others, that really leaves a bad taste in the public's mouth.

So we're ready to go a step further. The Stock Act was good. But it isn't enough. We actually have to go so far as to ban stock trading activity by members of Congress and senior staff. And that's what the Ossoff legislation would do.

- We hear everything you're saying. I think you're right. A lot of us do get a bad taste. But then you get Nancy Pelosi-- not in the Senate, but a very powerful woman, she's Speaker of the House-- said, quote, "we are a free market economy." "They--" members of Congress-- "should be able to participate in that," stock trading.

I mean, this is the top woman in Washington DC, other than the vice president, saying what sounds like dead on arrival.

CRAIG HOLMAN: You know, I was very disappointed to hear Nancy Pelosi say that. Ever since I've been working here on Capitol Hill, I have been working hand in hand with Nancy Pelosi. She's been the big champion of ethics legislation, including the Stock Act.

So when she came out and said that she's not ready to go that final step of just banning stock trading activity by members of Congress, it was disappointing. And I'm hoping she will change her tune as we go along. Because, quite frankly, this legislation just to ban stock trading activity, it's going to happen, with or without her. This is getting bipartisan support. And there's very, very rare do we get bipartisan support for anything now.

Democrats and Republicans alike realize that when they play on the stock market, they are taking a huge political risk. You know, it appears as if it's insider trading. And in many cases, it probably is. So members of Congress are coming around the corner thinking, let's just get out of the stock market altogether. And so I think this is going to happen with or without Pelosi. But I do hope Pelosi comes around and supports it as well.

- What specific rules or enforcement would you want to see included in any new legislation on congressional trading activity to potentially build on that Stock Act of 2012?

CRAIG HOLMAN: There are three different key legislative efforts going on. One is the ban conflicted Trading Act by Senator Merkley and Representative Krishnamoorthy. And that would just prohibit members of Congress themselves from trading on the stock market. Then we've got the Stock Act 2.0 by Senator Gillibrand that would increase the disclosure requirements for any stock trading activity.

Both of those, you know, I support. Public Citizen is behind them. Then there's this third measure, the strongest one yet, and this is what Ossoff is talking about. It would require members of Congress to get rid of their stocks and actually just plow everything into mutual funds if they want to keep up, hang on to any of their investments. And it would also apply to spouses of members of Congress.

So those are the three legislative efforts. The strongest one to-date is the one that Ossoff is talking about.

- Right, when you talk about it applying to spouses, you think of Nancy Pelosi's husband. And the next time you're back, we need to have a discussion about why blind trusts sometimes have 20/20 vision. Unfortunately, we are out of time.

Craig Holman is Public Citizen's government affairs lobbyist. And perhaps we will learn that we do have the best Congress money can buy, as Will Rogers once said.