When the Federal Reserve introduced a raft of restrictions on its senior officials, which included banning them from purchasing certain funds, shorting stocks, and holding cryptocurrencies, commodities, and foreign currencies, it didn’t have much choice. This was a response to not only the 2020 congressional insider trading scandal, but the recent revelations of potential insider trading by Fed officials Eric Rosengren and Robert Kaplan.Â
Despite public anger, both officials faced zero punishment, apart from what appeared to be involuntary early retirement, which just so happened to coincide with the peak of the greatest stock market boom in U.S. history.
Fast forward to today, and fresh scandals are emerging. With insider trading in crypto also rife, it comes as no surprise that tomfoolery in conventional markets remains rampant. Though cryptoâs unregulated state allows any deviant authority figure to bet on the known outcomes of key decisions without a trace, this hasnât stopped them from openly making suspiciously timed bets in traditional, regulated markets.
As this viral tweet noted, the latest stock options filings screenshotted by congresstrading.com (one of the countless semi-parody services to emerge in recent years that track the trading activity of Washington insiders) showed how the husband of Congresswoman Nancy Pelosi had bought millions in Apple and Microsoft stock options on May 24th, 2022. By doing so heâd called the latest bottom in the U.S. stock market, not only increasing the couplesâ ever-increasing wealth but also the publicâs scepticism surrounding the Pelosi familyâs conveniently timed trading performance.
But as with other politicians who have built fortunes in the stock market, even if Pelosi and her husband did intend to illegally trade on hot tips from Wall Street connections, proving foul play remains an arduous task. Before more recent regulations came into force, Congress, following an insider trading scandal in the 2008 financial crisis, enacted the Stock Act to prevent people in power from committing foul play in financial markets.Â
Yet, after Business Insider published a damning record of 63 Stock Act violations by members of Congress, this also failed to create widespread support for banning insider hijinks.
That, however, could be about to change. In mid-December last year, feeling the heat from the public and fellow Congress members, Pelosi changed her stance from rejecting a ban on stock trading â at one point saying, âwe are a free-market economy. [Politicians] should be able to participateâ â to enabling lawmakers to craft bills and conduct public hearings around the subject. These are now stalling, but underway.
The increasingly popular idea among Americans to ban members of Congress from trading individual stocks could be the starting moment in a revival of public trust in institutions, which remains at historic lows.Â
Whether or not Pelosi and other people in power are just getting lucky or have devised an insider trading ring similar to the bucket shops of the early 1900s, the damage has already been done. Until democracies figure out how to stop the powerful from profiting from their positions in both regards, growing mistrust of public institutions and those who lead them will not only continue but heighten. An outright stock trading ban, at this shaky stage, may be the only path to recuperation.
Greg Barker is an independent journalist and quant, who also writes under the name Concoda. You can find him on Substack and Twitter at @concodanomics.
Join the discussion
Join like minded readers that support our journalism by becoming a paid subscriber
To join the discussion in the comments, become a paid subscriber.
Join like minded readers that support our journalism, read unlimited articles and enjoy other subscriber-only benefits.
SubscribeSounds worth while. But as long as US politicians require huge sums for campaigning and there is no limit on spending or fund raising – good luck get things cleaned up!
I laughed out loud at the headline. âWeâ havenât banned anything because âTheyâ run everything.
I cannot think of no other US politician who has so sullied the name of the United States as this Nancy Pelosi has done. Where did you find her?
Donald Trump? Richard Nixon? Jefferson Davis?
No to the first two, but the third is close.
No to foulmouthed lawbreaker Nixon? Sets the bar a bit high.
From the Adams Family.
She reminds me of Rider Haggardâs characterâSHEâ.
Margorie Taylor Greene, Mitch McConnell, Joseph McCarthy……
Any private person who played the market with insider information would be in jail – see Stewart, Martha (who was wrongly convicted, btw). Politicians are permitted to use insider info! Could the system be any more corrupt?
But whom among them will stand up and call this out and risk losing their own gravytrain? None so far.
Whatâs the purpose of selling your soul to become a politician besides the lifetime pension and unfair advantages?
Term limits.