Stop Trading on Congressional Knowledge Act of 2012

Floor Speech

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Mr. MERKLEY. Mr. President, I am delighted to rise today in support of the STOCK Act and in support of amendment No. 1481 that my colleague from Ohio has put forward to address the fundamental issues of conflict of interest that reside here in our body.

Let me start with the defining principle; that is, there should not be one set of rules for Members of Congress and a different set of rules for ordinary Americans. I think the citizens of the United States of America in every State understand that principle. Everyone else in the country has to abide by rules that say they cannot profit in the stock market from privileged information. There is no reason those rules should not apply to Members of Congress.

Indeed, Members of Congress at any given time can hold access to immense amounts of information from previews of economic forecasts, from advanced knowledge of events affecting major employers in their State, to classified defense information that might have implications for, for example, the oil market.

Under the right circumstances, all of this information can provide insider knowledge of which ways the markets are likely to move. So I am delighted that this body has voted overwhelmingly to move forward with the STOCK Act. It would make clear that trading on congressional knowledge is no more acceptable than any other form of insider trading, and it would also make financial disclosures for Members of the Senate searchable online, and that is also very important in the principle of transparency.

These are important steps, but they do not go far enough. Let's remember that insider trading is extraordinarily difficult to define and extraordinarily difficult to prosecute. Where did you get that information and what truly motivated you to make a particular trade in a stock? And because of that, when the conflict of interest exists, we have stepped forward to say that this must be addressed. We ask members of the executive branch to put aside their individual stocks in situations where the conflict arises. We ask our staff members to set aside and divest themselves of their stock when a conflict of interest arises. We applaud the fact that partners in law firms dealing with cases set aside and divest themselves of stock when the conflict of interest arises. But somehow we have not seen fit to have the debate about our own activities.

My colleague put it very well when he said: Why should we allow Members of Congress to hold oil stocks and then vote on issues affecting oil companies? Why should folks be able to invest in renewable energy companies and then fight for tax credits that benefit renewable energy companies? Why should we allow Members to hold stock in pharmaceutical companies and then be deciding on issues such as whether we should have competition in the pricing of pharmaceuticals for Medicare? It is a direct conflict of interest.

Any Member of this body who says, I never even gave a passing thought to the impact on my several-hundred-thousand-dollar investment in X, Y, and Z, I must say, well, I honor their thought, but it doesn't address the issue about us as an institution because no one else outside these walls will believe you didn't think a little bit about the impact on your personal financial portfolio when you voted for that tax credit or you voted for that policy that made your investment worth a lot more than it would have been otherwise.

The people in America are far ahead of us. During January, I had seven townhall meetings in which the STOCK Act came up several times, and I asked for feedback. I said: How many folks here believe Congress should live by the same rules of insider trading that everyone else in America lives by? And there was not a person who raised their hand in support of having a separate set of rules for Congress. Then I asked the question: Do you think we should go further? Should Members not be allowed to hold individual stocks given that they are making decisions that affect the values of the stock? Again universal support that Congress should address this conflict of interest in the same way we have addressed it for the executive branch or for our staff members. So the citizens of this country understand this.

The amendment that Senator Brown is championing and that I am partnering to support has three advantages: It directly prevents conflict of interest, and that is a good thing. Second, it eliminates the appearance of impropriety. It gives Americans confidence that we are addressing issues not with a thought to our personal financial status, and that is a good thing. Third, it is very straightforward to enforce. It is not like insider trading, which is difficult to define and difficult to prosecute. It is very clear-cut. You get rid of your individual stocks and you hold broad mutual funds, you hold your investments in a blind trust. These are reasonable options. So for these three reasons, the Members of this body should debate this.

I know many do not agree. A number have come up to me and said they are almost offended by the notion that we would address conflict of interest in this body. I would invite them to come to the floor and converse on this. Yes, it is a longstanding Senate tradition, but there have been a lot of longstanding Senate traditions that didn't work well for the Senate and our place in helping to shape the laws of this Nation. We have changed many of them, and we should change this.

I encourage my colleagues to support the amendment Senator Brown has put forward, and I applaud him for doing so.

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