Final Podcast v2

Congressional insider trading is a problem that allows members of Congress to profit from their positions. Insider trading is illegal because it harms investors. However, Congress members have a different set of rules with minimal punishments for violations. Many Congress members have been found guilty of insider trading, but face only a small fine. This unfair practice raises concerns about conflicts of interest and the use of insider information. Congress members can make trades before the public is informed, giving them an unfair advantage. Some notable examples include Nancy Pelosi's husband trading millions of dollars in stocks and Dianne Feinstein making profitable trades before the COVID outbreak. Congress members have an average rate of return of over 30%, much higher than the average investor. Legislation has been introduced to ban trading individual stocks and increase disclosure requirements, but the severity of punishments is unknown. It is important to question the fairnes Have you ever wanted to become a millionaire, or maybe be worth 20 times your salary? Well, you should just become a congress member. This is one of my favorite ways to become a millionaire, and all it takes is for you to vote for certain policies that would help the companies you're invested in perform better. I'm Ryan Lane, and today I'm going to be explaining to you the problem of Congressional Insider Trading. Now before we start, it's important to know what insider trading is, and why it's such an important issue. Insider trading is defined as the illegal practice of trading on the stock exchange to one's own advantage through having access to confidential information. Now why is this such a big deal, you might ask? Well, it's made to protect investors from being harmed. Let's say a company is going to half their sales from the previous quarter. The market is not going to like that, and this would lead to a steep decrease in the share price. Insiders of the company see this poor performance, and before the sales numbers are announced to the public, they sell their positions to minimize the loss, and this leads for other investors to be harmed further. To combat this, there are hefty punishments for anyone caught insider trading. You would be looking at up to 20 years in prison, up to $5 million in fines, and would be banned from financial services for life. Now why is congressional insider trading so bad, you might think? Because the members of Congress have a different rulebook, one that was made back in 2012, called the Federal Stock Act, and it was created to prevent public officials from insider trading. The Stock Act was passed in April of 2012 with strong bipartisan support, with only three people in the Senate and two people in the House voting against it. It significantly expanded the disclosure requirements for securities transactions by members of Congress, requiring monthly reports. But what is so different from regular insider trading? Well, I would have hoped they would be the same, but I can only imagine since they make their own rules, it's probably next to nothing. Well, the punishment, instead of years in jail and millions in fines, there is a standard $200 fine which can be waived by the Board of Ethics. In 2021, news organizations found that 55 members of Congress had violated the law and that there was no report of the initial $200 fine being paid. Many of them reported that they had been carried out independently by a spouse or a broker with no input from them. Some even just said it was an accidental trade. This is from Fernando from Investopedia. That's ridiculous. That just doesn't seem very fair. I think they should be removed from office if they've been convicted, not just a fine. It feels like it's different rules for different people. The trading patterns underscore longstanding concerns about the potential for conflicts of interest or use of insider information by members of Congress. So since they have their own act in place, you think they'd follow it, right? No, a grand total of 78 Congress members have committed 83 different violations of the Federal Stock Act in the first six months of 2023, according to Leventhal with Business Insiders. To me and many others, this is just outrageous. They're in office not to become wealthy, they're in office because we elected them to create the country that we want. Instead, we see that dozens of Congress members made thousands of financial transactions prior to the COVID outbreak. Over 12,700 individual trades making well above average gains, while Wall Street had one of the worst years since 2008. Congress members create laws and before laws are made, Congress discusses them in full detail. This means they can make trades before the public is informed of anything. Want to trade pharmaceutical and biotech companies right before COVID in January 2020? Go for it. And maybe you can sell all of your stocks that are in the travel business, similar to Dianne Feinstein, a California Democrat, after making around $6 million worth of trades in January and February of 2020. Or maybe you would be interested in buying IBM and selling AccuCenture, both major department homeland security contractors, while you sat on the Homeland Security Committee. Michael McCaul, a Texas Republican, did. However, there is one story that personally bugs me the most. Nancy Pelosi, the Speaker of the House, has accumulated a great amount of wealth while in her position, being worth well over $100 million. Her husband, who apparently has no connection to what she does at work, has traded around $81 million in stocks, bonds, and other financial assets from 2019 and 2021. The reason this bothers me? Because she has immense power over which legislation makes it to the House floor, including various proposals being considered to regulate stock trading by members of Congress and their immediate families. After initially opposing stricter measures, Ms. Pelosi said in February that she would support them if federal judges were held to them also. A bill passed by Congress this past spring evened out disclosure requirements between the two branches of government. I think it's also important to note the average rate of return is over 30% for those in Congress, while the S&P 500, which is a benchmark, has an average return rate of 7.5%, which means that Congress members are averaging four times more profitability than the average investor. How does that make you feel? The new ethics ending trading and holding in congressional stocks was introduced in April of 2023. Oregon Senator Jeff Merkley and Ohio Senator Sherrod Brown led the charge with 21 other senators by introducing the bill. The bill would ban public servants from trading individual stocks and would require elected officials to disclose when they receive a benefit from the government and also penalize those who do not comply. There weren't any details on the severity of the punishment, however. The purpose is to ensure that the members of Congress are fighting for the interests of their constituents, not to advance their financial position. This is from a press release of Jeff Merkley. Now, if you were a Congress member, what would you do? Would you stand up and fight against this? Or would you take advantage of the system and create your own personal wealth? I would like to say no, but put in that position, I really don't know. I probably would. Absolutely not. I wouldn't change it and I would not want to be held accountable differently. I would think that, you know, you're here to represent the people of America and it's not a money-making scheme. It's just to represent these people and take care of the people of the United States. That's your job. For me personally, I don't really know what I would do. On one hand, you know, money is money. Having the wealth is pretty great. But at the same time, ethically, it just doesn't seem very fair. There are people who work countless hours every week doing their blue-collar jobs and I have an advantage over them. To me, that doesn't really seem fair. So it depends. It's obviously easy for me to say right now that I wouldn't do it, but in the position, I also think it might be kind of hard to not shy away from that opportunity. However, I do like that they are taking action and that there are senators who do care about trying to create equality throughout the market. Now I want you to think about it. Do you think that congressional insider trading is fair? Do you think it's ethical? Should there be stricter punishments for Congress members who get caught insider trading? I want you to think about it and I want you to formulate your own opinions and decide whether you believe that it is right or wrong.