In the final days of his presidency, Joe Biden has endorsed a truly bipartisan cause: barring members of Congress from trading on Wall Street using privileged information. If Congress truly aims to represent the American people and not a public- and private-sector ruling class, they must bar themselves from using their positions of power to line their own pockets.
The STOCK Act, which since 2012 has prohibited this type of insider trading while mandating strict financial disclosures, is toothless and therefore flouted. Multiple measures under consideration in Congress would strengthen the feeble law. Besides being good policy in themselves, they’re also a good test of Congress’ ability to truly represent their constituents, and not just their own financial interests.
Members of Congress have privileged access to information about government policy (both their own and the executive branch’s), emerging economic and national security threats, and a variety of other matters that affect publicly traded businesses, and their stock prices. It’s like knowing what the halftime score of the Super Bowl will be before the game has started, and then placing bets based on that knowledge.
Perhaps the most egregious example of this kind of political insider trading occurred in the leadup to the 2008 financial crisis, when many members of Congress got their money to safety before everyday Americans knew what was going on. This ultimately led to the creation of the STOCK Act.
At least as awful was what happened in 2020, when top senators ditched stocks they knew were going to crash once the COVID pandemic, on which they received secret briefings, swept the planet.