Divided House committee advances bill to restrict congressional stock trading

Accusations of “misdirection” and “disingenuous” pursuit of perfection underscored how a once-bipartisan effort to ban members of Congress from trading stocks has devolved.

The partisan finger-pointing was on full display as the House Administration Committee on Wednesday approved a Republican-led bill to prohibit members of Congress, their spouses and dependent children from purchasing publicly traded stocks.

The 7-4 vote fell along party lines, after Republicans rejected Democrats’ multiple attempts to amend the bill.

New York Rep. Joe Morelle, the panel’s top Democrat, called the measure a “misdirection play.”

“I believe this bill is simply Speaker [Mike] Johnson’s attempt to blunt momentum toward a full congressional stock trading ban,” he said.

House Administration Chairman Bryan Steil, Wisconsin Republican, said that a complete ban is not the goal of the legislation.

“The focus of the bill is not to make elected officials poor,” he said. “The focus is to prevent them from benefiting off their insider information.”

The GOP bill does not prohibit lawmakers from selling their stocks, but it requires them to provide public notice 7 to 14 days before doing so.

If lawmakers violate the disclosure requirement, they would have to pay a $2,000 fee, or 10% of the investment’s value, whichever is greater, as well as any net gains from the sale.

Mr. Morelle and other Democrats on the committee offered several amendments, all of which Republicans rejected on the grounds that they could derail the underlying legislation when it goes to the floor.

The Democrats’ amendments included attempts to force members of Congress to sell any publicly traded stocks they own, extend the stock trading restrictions to senior congressional staff and executive and judicial branch officials, and eliminate perceived loopholes they argued would still allow for insider trading.

“Under this bill, the wealthiest members of Congress can keep every single share of stock they currently own and use their dividends to buy even more stock,” Mr. Morelle said. “Under this bill, members can liquidate their holdings at any time while in office, profiting off years of ballooning investment portfolios.”

Mr. Steil expressed a willingness to work on tweaks to the language before the bill gets a floor vote, but broadly applied what he called the “Goldilocks argument” to suggest Democrats were making perfection the enemy of the good.

He went beyond the metaphor of a fairy tale character who dismissed her porridge as too hot or too cold and compared Democrats to a “second grader” who, when offered an ice cream cone, “says no, because he wants a banana split.”

Rep. Julie Johnson, Texas Democrat, pushed back on the Goldilocks narrative.

“There’s no porridge in the bowl based on this bill, because it doesn’t do anything. It doesn’t have any real teeth,” she said. “There’s not a meal to be had here to pick about.”

Ms. Johnson offered an amendment to force lawmakers to divest their current stock holdings, which she and many members of both parties have done voluntarily to avoid any appearance of impropriety.

“When you choose to serve the public, you must ensure your personal financial holdings never conflict with the public good,” she said. “That is how trust is built. That is how confidence is restored.”

Mr. Steil said he, too, has sold stocks that could conflict with the committees he serves on, but he warned that divestment can have “a very significant financial impact” because it triggers capital gains taxes.

“I think there may be a real concern that some individuals would choose not to come to Congress,” he said. “And not because they did anything wrong, [but] because they had a successful private sector career.”

Mr. Steil said some lawmakers invested in corporate stocks as a retirement planning measure, while others have holdings in local businesses that are not for profit but about supporting their communities.

Another amendment Republicans shot down would have made the president and vice president subject to the trading restrictions in the bill.

“The president has an unprecedented ability to influence the United States economy and the world economy, which we have witnessed as President Trump’s tariff war has tanked financial markets,” said Rep. Terri A. Sewell, Alabama Democrat who offered the amendment.

She also cited reports of Mr. Trump purchasing corporate bonds to influence market decisions, like $1 million in Warner Bros. bonds, which is seeking government approval to merge with another media company.

Republicans did not directly address Democrats’ arguments about Mr. Trump’s investments other than to note the president is bound by the STOCK Act and other federal laws that attempt to restrict insider trading.

They rejected the amendment, as well as others that would have extended the restrictions more broadly to executive and judicial branch officials and senior congressional staff, as attempts to derail the bill.

“I do think it’s a worthy conversation,” Mr. Steil said. He suggested there would be future opportunities to “think more broadly” about applying restrictions across the three branches of government that would prevent abuses of power while maintaining “avenues for people from an array of backgrounds to be able to come and serve this country.”

Democrats also targeted aspects of the bill they said would still allow insider trading.

Rep. Norma Torres, California Democrat, sought to eliminate a loophole that would allow lawmakers to reinvest dividends, profits that companies can opt to pay shareholders to incentivize them to retain their stock holdings.

“We have seen proof that members who sit on the committee responsible for overseeing Big Pharma and who hold large amounts of Big Pharma stock vote differently than everyone else — unacceptable,” she said. “And this bill allows those same members to keep all of their Big Pharma stocks and reinvest their dividends to buy more. Oftentimes that amount is in the millions.”

Mr. Steil said the reinvestment of dividends “doesn’t carry the risk of insider trading.”

“Those dividends are structured by the company with advanced notice outside of the control of any given member,” he said.

Mr. Morelle also offered an amendment to close what he called the “grandma loophole.”

“A member’s spouse could buy and sell stocks on behalf of a member’s parent or grandparent, who are not, under this bill, covered individuals,” he said. “They could all do this while the member stands to inherit a grandparent’s or parent’s estate.”

The issue arose from language in a section of the bill meant to provide an exception for lawmakers’ spouses and dependent children to make trades on behalf of others if done so as part of their occupation.

Mr. Steil said that he is willing to “finesse” the language before the bill gets a floor vote because the situation Mr. Morelle described is not intended.

“We don’t want a loophole where somebody’s, you know, ’wink, wink, nod, nod,’ trying to make a trade around the intent of the bill,” he said.