New York Times Editorial: Make Laws, Not Money

New York Times Editorial: Make Laws, Not Money

Members of Congress should not be allowed to buy and sell stocks, or to serve on corporate boards.


By:  The Editorial Board

The case of Chris Collins, the New York Republican who resigned from Congress and pleaded guilty to insider trading earlier this fall, was a rare victory in the long-running battle to ensure that members of Congress do not take improper advantage of their privileged positions.

It also underscored the need for stronger rules.

Mr. Collins is going to jail because he called his son seven times from the White House lawn to share the private news that a small drug company’s flagship product had failed a key clinical trial. Those phone calls prompted the son to dump his shares.

But in the years before that flagrant act of insider trading, Mr. Collins already was deeply involved in the affairs of the company, Innate Immunotherapeutics, even as he served on various congressional committees that played a role in directing federal health care policy.

Mr. Collins was the company’s largest shareholder. He served on the company’s board. He solicited investments in the company, including from other members of Congress. (Tom Price, who served as a Republican representative from Georgia and then as secretary of health and human services in the Trump administration, was among the buyers.)

Mr. Collins wrote legislative language to expedite drug trials, potentially benefiting Innate, and he pressed a staff member at the National Institutes of Health to meet with the company about its clinical trial.

He also invested in other health care firms, some of which held federal contracts.

None of this was clearly illegal. But it should have been.

Members of Congress serve in positions of privilege and power. They have the opportunity to shape public policy for their own benefit, and to profit from information not available to the general public — and it is clearly too much to expect that all of them will resist temptation.

Congress took an important step in 2012, passing a law that bars members and their aides from trading on the basis of confidential information that they receive as lawmakers. The law also strengthened disclosure requirements. It has made a difference. The volume of stock trading by members of Congress declined by 65 percent in the three years after it took effect, compared with the three years before its passage, according to a 2017 study by Public Citizen.

But the 2012 law is insufficient.

When the Securities and Exchange Commission began its first investigation under the new law, in 2013, Congress went to court to prevent the S.E.C. from obtaining documents. The two sides eventually reached a deal, but the case showed that Congress remained unwilling to play by the same rules as everyone else.

Congress also passed a bill in 2013 reversing some of the disclosure requirements that it had established and celebrated just one year before. The original bill, for example, mandated the creation of a searchable online database of trades by members and aides. The 2013 law made it harder to identify wrongdoing, allowing members of Congress to submit disclosures in a form that is not easily searchable.

And the narrow ban on insider trading does not go far enough. Members still may be tempted to cast votes that are personally profitable but not in the public interest. And because insider trading is a very difficult crime to prove, it is likely that they still have ample opportunity to profit from their privileged positions.

As if to underscore these problems, members continue to buy and sell shares in companies that have business before Congress.

Senator James Inhofe, the Oklahoma Republican who chairs the Armed Services Committee, bought stock in the defense contractor Raytheon last year while pushing for an increase in federal spending on defense. The senator said the decision was made by a financial adviser, and after its public disclosure, he said he would make no further investments in the industry.

Inhofe’s declaration of abstinence amounts to a tacit acknowledgment of the need for stronger rules that apply to all members of Congress. Public Citizen and other groups have argued for a narrow rule barring members from trading in the shares of companies that have business before their committees. Such a rule, however, would not go far enough. The work of Congress encompasses the entirety of the economy.

The most comprehensive solution would be to require people who are elected to Congress to divest holdings in public companies within a reasonable period following their election. But such a requirement could impose significant costs on people entering public service. It would be nearly as effective, and less burdensome, to bar members from buying or selling shares.

A bill that would impose such a ban was introduced earlier this year by Senator Jeff Merkley, Democrat of Oregon, and Senator Sherrod Brown, Democrat of Ohio. It would require members to put holdings in blind trusts, or else to refrain from any trading until they leave Congress. The bill also would bar members of Congress from serving on corporate boards.

These are necessary reforms, and they are long overdue.