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We, the undersigned organizations, are a broad and diverse group of good government organizations committed to ensuring that our institutions and elected officials act on behalf of the people they serve. It is with this purpose in mind that we write to urge you to prioritize advancing the Ending Trading and Holdings in Congressional Stocks (ETHICS) Act, legislation that would ban members of Congress from owning or trading individual stocks, bonds or other similar financial investments. The ETHICS Act is the result of years of policy development and cooperation between numerous senators, members of Congress, and civil society groups and experts, and its policies are overwhelmingly popular across partisan lines.1 The public is demanding action to ensure that members of Congress act in the interest of the people they serve, rather than their own financial interest. It is time to listen to the public’s collective voice and pass the ETHICS Act.

https://www.citizensforethics.org/wp-content/uploads/2023/10/Coalition-Stock-Ban-ETHICS-Act-Letter.pdf

What's the biggest hurdle preventing the passing of a law prohibiting elected officials from trading or owning stocks in the U.S.? The proposal is overwhelmingly popular across partisan lines, and yet the proposal has yet to pass and be made into law. I am wondering what's the biggest hurdle preventing it from being enacted as law in the U.S.


Identical bills in the Senate and House:

S.1171 - Ending Trading and Holdings In Congressional Stocks (ETHICS) Act

H.R.2678 - Ending Trading and Holdings in Congressional Stocks (ETHICS) Act

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    Could you edit the title to clarify, are you asking specifically about the Ending Trading and Holdings in Congressional Stocks (ETHICS) Act, or did you mean to ask about what the hurdle would be to a law that would ban any elected official in the US, whether in Congress or at the local level, from trading or owning stocks? Joe W's answer seems to be based on interpreting the title as asking the latter question
    – sumelic
    Commented Mar 12 at 0:45
  • Lesser proposal: all stock positions of all congresss members are public with no publication delay.
    – Joshua
    Commented Mar 12 at 18:40
  • Owning stocks isn't the problem: trading stocks while in possession of insider information is the problem. And there is good evidence that this happens: skeptics.stackexchange.com/q/16947/3943
    – matt_black
    Commented Mar 13 at 11:48

3 Answers 3

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What's the biggest hurdle preventing the passing of a law prohibiting elected officials from trading or owning stocks in the U.S.?

The law would need to be passed by the very elected officials who currently benefit from owning stocks

Obviously, these officials have a great deal of incentive to convince themselves that such a law would not be of sufficient benefit to the public to be worth their time and attention.

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    Term limits and election reform have the same problem.
    – Barmar
    Commented Mar 12 at 14:15
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    It has been speculated over the years that this is a reason stringent DUI laws aren't passed. However, as obvious as this may seem, it's illogical logic. It assumes the majority of legislators actively own/trade stock. It would be interesting to know if that's true.
    – JBH
    Commented Mar 12 at 19:03
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    @JBH No such assumption is needed. Actual ownership of stocks today is not the only reason for someone to not want their ability to buy such stocks in the future taken away. Nobody likes having their future options limited.
    – barbecue
    Commented Mar 12 at 21:44
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    @JBH: Note also that Congress members are already required to disclose ownership of large assets (1000+ USD in value or generates 200+ USD in revenue) including significant amounts of stock. You can look up those disclosure forms here and here.
    – Kevin
    Commented Mar 12 at 21:49
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As Arcanist Lupus posted the big issue is that those elected officials are the ones who would be required to pass the vote but there are other issues as well.

It would be unconstitutional to prohibit someone from owning/trading stocks just because they are an elected official. There is a much larger number of elected officials in the country that have no power over stock prices then those that do. Most officials at the state and local level don't have the same issues around stocks that members of congress have.

Did you know that there are over 500,000 elected officials in the United States - and that less than 1% of them are at the federal level?

This also ignores the that unelected officials can have the same problems associated with owning/trading stocks that an elected official can have. There are government agencies who make decisions that can have a large impact on stock prices.

Finally it should be remembered there are people outside of government that could also have this sort of impact on prices and take advantage of the market.

If you really want to tackle the issue it should be limited based on the ability to impact things rather then just being elected. It should also include a ban on talking talking about/giving advice on stocks as well as they can just pass that benefit on to others even if they can't use it themselves.

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    – Philipp
    Commented Mar 14 at 10:53
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Well, one problem is that stocks are a significant part of the average richer American's investment strategy (provided they have any significant savings, that is).

What would you replace that with, how would you regulate it, what effect would that have on the political candidate pool (already not known for the quality of many of its constituents)?

It sure sounds catchy and populist enough, but how much of a problem doest it actually solve that can't be addressed with existing insider-trading laws (possibly leavened with stricter enforcement)? How much extra costs would it be to manage possible alternatives like blind trusts? Who would benefit, besides those pocketing the legal and financial fees?

Better said here: Unintended consequences plague bill to bar Congress from insider trading Putting the idea on hold was a good decision. Now let’s hope it’s buried for good.

Despite headlines to the contrary, there is little evidence that unlawful insider trading — misusing nonpublic information to trade stocks — is widespread on Capitol Hill. Recent research disseminated by the nonpartisan National Bureau of Economic Research found that lawmakers reap no outsize return on their stock investments, including those made in areas in which lawmakers hold committee assignments.

For one, it might limit the pool of people who are willing to run for office. A trading ban might require people to upend their financial plans while serving terms as short as two years. This can have significant tax consequences, including capital gains taxes to be paid on earnings, unless lawmakers are afforded special tax treatment.

There also seems to be an existing law, Stock Act to make insider trading specifically illegal for congress:

The Stop Trading on Congressional Knowledge (STOCK) Act of 2012 ) is an Act of Congress designed to combat insider trading. It was signed into law by President Barack Obama on April 4, 2012. The law prohibits the use of non-public information for private profit, including insider trading by members of Congress and other government employees. It confirms changes to the Commodity Exchange Act, specifies reporting intervals for financial transactions.

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    Only about 20% of American families directly own individual stocks, which is the only thing targeted by ETHICS - individual stocks are actually a non-existent part of the average American's investment strategy. Most people hold diversified index funds, which are still fine under the proposed legislation. That said, I'd certainly wager that Congress people hold individual stocks more often than the average American. Commented Mar 11 at 19:08
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    "We have investigated ourselves and found ourselves innocent of all wrongdoing." And yet somehow they have far better returns on their stock investments then the best stock investors...
    – Questor
    Commented Mar 11 at 19:55
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    @NuclearHoagie I agree with you. I think that congressmen/women/senators/presidents/state senators/state governors (IE influential persons) should be restricted to indexed funds like the S&P 500.
    – Questor
    Commented Mar 11 at 19:56
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    Re: "existing insider-trading laws (possibly leavened with stricter enforcement)": My understanding (which could be wrong) is that existing insider-trading laws don't cover cases where members of Congress receive material non-public information as part of their work.
    – ruakh
    Commented Mar 11 at 20:50
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    @ruakh Not so sure: Stock Act signed into law by President Barack Obama on April 4, 2012. The law prohibits the use of non-public information for private profit, including insider trading by members of Congress and other government employees. It confirms changes to the Commodity Exchange Act, specifies reporting intervals for financial transactions. Which, to be honest, I am even surprised had to be specified in the first place: it should obviously have been illegal already, unless there was an exemption beforehand. Commented Mar 12 at 0:18

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