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An ethics debate in Congress

December 20, 2021

Though unlikely to gain traction soon and not much covered or noticed, there has been a serious ethics debate in Congress about the behavior of our elected officials. Alexandria Ocasio-Cortez and Elizabeth Warren again have pointed to Congressmen trading individual stocks as a kind of corruption. The former explains the issue:

It is absolutely ludicrous that members of Congress can hold and trade individual stock while in office. The access and influence we have should be exercised for the public interest, not our profit. It shouldn’t be legal for us to trade individual stock with the info we have.

Nancy Pelosi, who is well-known for having made some successful stock investments, snapped back:

We are a free market economy. They should be able to participate in that.

Former director of the Office of Government Ethics (OGE) Walter Shaub responded sharply:

This is the opposite of government ethics. Nobody kidnapped these members of Congress when they were private citizens, dragged them to Washington and forced them to be in Congress. The American people are sick of members of Congress buying and selling stock and creating the appearance of trading on insider information.

My view is that the corruption runs deeper than insider information. Holding individual stocks, something I have done for decades, influences one’s attention. An investor naturally reads on the industries and companies in which they are invested. That creates a kind of insider attitude even when all the information gleaned is public. Legislators, judges, and other civil servants constantly make decisions that intersect business interests. Even if they consciously try to do so in a way that does not favor their own interests, they cannot be objective, because their attention has been focused partly by that investment.

Cortez and Warren have focused on the behavior of members of Congress. That seems where to start first. Unless Congress can regulate itself in this regard, it cannot regulate the rest of government. Eventually I would like to see broader law: no employee of the federal government, from the president down to the postman delivering mail, should be invested in an individual business.

Importantly, the laws Cortez and Warren propose allow investment in index funds. It would be considerable financial imposition on civil servants to prohibit entirely their ability to benefit from equities. In rebuttal to Pelosi, the modern financial world provides tools to invest in American enterprise generally, without being biased by attachment to specific enterprise. Shaub has it right that when one goes to serve the public, that should exclude interest in particular business.

All of those named above support capitalism. They recognize publicly owned corporations and equity markets as a key part of that. None of them are Marxists or other kind of radical trying to tear that down. The argument is not about whether people should own stock. It is a narrow argument about public service and conflict of interest. All that should go without saying. Alas, it doesn’t, because of the amount of nonsense now popular. Which also is the reason that this important issue likely is irrelevant for the time being.

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