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Killing the STOCK Act in 24 Seconds and How to Resurrect It


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The US federal government is, in many ways, like all institutions. It is resistant to change and oversight, especially when pushed from the outside, and yet it can quickly spur to action when core interests are threatened.

A clear case in point is the STOCK Act, a 2012 bill prohibited members of Congress from personally benefiting from information gained on the job. The bill was signed into law by President Barack Obama on April 4, 2012 with near unanimous support in Congress following an appearance on the 60 Minutes program by investigative journalist Peter Schweizer, who explained the prevalence of insider trading by elected officials. The political response was swift, and bipartisan.

Such unity is fleetingly rare, and was especially so during the Obama Administration as Republicans refused to play ball and the President eventually took to playing ball by himself. In that environment, the STOCK Act was seized upon by both parties as a common-sense effort to bring much-needed accountability to a federal government increasingly distrusted by the public.

Barely a year later, in a blanket of near-secrecy, Congress and the President would gut the bill with a sweeping amendment in a matter of seconds.

So what was the STOCK Act all about?

In essence, the Act established a range of rules and requirements governing financial investments of elected federal officers and tens of thousands of appointed and hired officials, in an effort to curtail insider trading by public officials. One of the key provisions called for officials to release their financial disclosures in searchable formats. Another required federally elected officials and competing candidates, Cabinet members, high ranking appointees, and Congressional staff to electronically file for public access online.

These two key elements formed the backbone of the Act. Which is probably why Congress later chose to remove these two provisions via statutory amendment, doing so with zero debate and zero publicity, in a brisk twenty-four-second span across both chambers. This amendment passed by unanimous consent. Not a single Member of either chamber voiced formal dissent over the proposal. The President signed the amendment into law with little fanfare.

Why would Congress and the President make such an about-face on such a widely praised and popular law? The official narrative is that a report by the National Academy of Public Administration revealed how criminals and even foreign governments could access this financial data and abuse it for their own interests., Perhaps, but did Congress explore any other remedies to this perceived threat before settling on simple reversal? Surely the vast security apparatus of the federal government could ease these concerns without compromising ease of public access.

And, why was the amendment handled in near-total secrecy? Breaking a vow is never well-received, but an open dialogue goes a long way to making it sting less badly.

Finally, wouldn’t searchable formats and wide public access serve to make public officials safer from bad actors? It is extremely difficult to leverage publicly shared information over someone if they made the information public themselves The point of the STOCK Act was to change the behavior of federal officials by allowing anyone, journalist or regular citizen, to look for troubling transactions.

It’s been nearly a decade since the STOCK Act was effectively gutted, and it’s unclear whether the offending behavior that inspired the legislation has changed much at all. Several Senators (including Senator Richard Burr who was one of the three no votes on the STOCK Act when it passed the Senate) had no qualms making questionable stock trades during a global pandemic that shattered millions of livelihoods. No disciplinary action was taken—although Senator Burr subsequently announced his retirement from the Senate. What is clear is that a framework for financial oversight needs to be built, with emphasis on a few key elements.

Restoring the gutted provisions from the original STOCK Act is an obvious first step. Limit behavior that invites conflicts of interest such as prohibiting any public official from accepting an Initial Public Offering, with complete transparency when such limits are not possible. Making this distinction can help create rules that are both simpler and easier to enforce.

Make it easier for public officials to live comfortably with their given salary and benefits, reducing incentive to engage in ethically risky financial behavior. This is, admittedly, a tricky needle to thread, it also isn’t as simple as paying public officials higher salaries. The range of net worth and financial interests of public officials complicates things immensely. But one consideration would be to focus on positive regulation, that is, to build a rigorous framework around financial behavior considered acceptable rather than focusing simply on behavior we want to curtail.

It is entirely up to Congress and the President to make such changes, and their track record is not encouraging but in this post-COVID world we are entering into, the winds of change are picking up.

Congress and President Biden should take stock of that.