An epidemic has infected all three branches of the federal government. Judges, lawmakers, and bureaucrats have recently been implicated in scores of illegal or otherwise dubious stock trades, prompting calls for new reforms meant to curb corruption on the part of federal officials.
The most recently uncovered outbreak showed how more than one hundred and thirty federal judges have broken stock trading laws by presiding over cases in which they had (often significant) financial interests, according to the Wall Street Journal.
This judiciary scandal comes on the heels of a controversy in the executive branch, which saw after it was revealed they had made questionable stock trades.
The Fed revelations caught the attention of Senators Elizabeth Warren and Sherrod Brown, who separately called for a ban on Fed officials from owning individual stocks. Brown’s call came with the promise of new legislation which, while not yet published, will presumably focus on the Fed, a quasi-private institution in the federal government that governs US monetary policy, including setting interest rates and managing the money supply.
Senator Warren insisted the Fed take direct action to bar its senior officials from making those kinds of trades. But history suggests she has much more ambitious reforms in mind. In the wake of allegations of potential COVID-19 related insider trading by several Senators from both parties, including Richard Burr from North Carolina and Diane Feinstein from California, Warren reintroduced a bill, the Anti-Corruption and Public Integrity Act, to capitalize on the political fallout.
Senator Warren’s Anti-Corruption Act functions as an omnibus bill on ethics and corruption, covering much more than stock trades, prohibits members of Congress from owning individual stocks, and establishes a host of new judicial ethics regulations—but it stops short of extending the congressional stock ban to federal judges. While the legislation would establish new layers of cumbersome bureaucracy, many of these proposals that are not just good, but necessary.
Warren’s efforts conjure memories of the STOCK Act, passed in 2012, in the aftermath of Peter Schweizer’s bombshell book Throw Them All Out, which was quietly gutted a year later. The law originally forbade lawmakers from using information acquired in congressional settings to buy or sell stocks. It also required thousands of federal officials, elected or not, to disclose their finances in an open, searchable, and online setting. These searchable, online disclosure provisions were subsequently nixed by unanimous consent, and without debate.
This is where Warren’s Anti-Corruption Act falls short. It does not restore the provisions removed from the STOCK Act. Banning stock trades without online, searchable disclosures will hamper the ability for citizens and journalists to hold lawmakers accountable.
It is worth noting that the official reason Congress removed the more rigorous disclosure provisions from the STOCK Act was drawn from a report by the National Academy of Public Administration. The report cited concerns about the safety of officials should their financial information be made available online. If made into law, Congress members would not be subject to the same level of disclosures that court officials are, despite both groups of officials being major vectors for this federal epidemic.
It has been eight years since the STOCK Act was gutted and , despite a long list of members being caught violating the remaining disclosure requirements. They are always granted time to file amendments to prior disclosures, sometimes months after the fact, as was the case with Arizona Senator Mark Kelly earlier this year. Or take Kansas Senator Roger Marshall, who waited more than a year to disclose some stock trades made by one of his children.
The legislation proposed by Senator Warren provides a welcome roadmap to combating the corruption epidemic raging inside the federal government. But unless the STOCK Act is restored to full strength in tandem with these new efforts, one can’t help but wonder if the outbreak will ever be contained by lawmakers.