When there is a Congressional act named “Honest Act,” it must be disingenuous. It was formerly called the “PELOSI Act” after the person who was largely responsible for not advancing Congressional restrictions on making investments while in office. Despite her lies, she (and her husband) profited immensely from financial abuse of her position. The “Honest Act” sets out to cure that but fails.
I have been all over this issue for a long time as members of Congress have appeared to abuse their positions, thus enriching themselves. Of course, when questioned, each stated they did not use their power or special knowledge gleaned from their positions to be enriched. On my very first day working for a mega-international CPA firm 49 years ago, I was taught an essential concept. That concept is that the appearance of a conflict of interest is the same as a conflict of interest. Many of our elected representatives in Washington clearly do not understand that concept.
I previously proposed a simple solution. That is to have managed investment accounts. The Beautiful Wife and I have had one for 25 years. Despite spending immense time educating myself daily on what is going on with investment markets, my holdings have been managed by a professional with whom we review the status of those holdings quarterly.
The actual investments in the accounts are not of interest to me. What is of interest is the overall composition of the holdings, whether they are age-appropriate for us (i.e., too much risk for people in their 70’s) and how they are performing compared to the overall market. If I own Apple stock is not something known to me nor do I care. That is for the professional to decide.
This is an easy concept for a member of Congress to exercise. Instead, some are regularly doing individual stock trades. How they have the knowledge or time to do that is a mystery. The job of a member of the House or Senate is 24-7 and does not provide much free time to analyze the markets. Whether accurate or not, three years ago the NYT found almost 20% of lawmakers bought stocks related to their committee assignments. Exactly 0% should be doing that.
For people who have a variety of investments like real estate or alternative investments like crypto or gold, a blind trust is a simple solution. Former U.S. Senator Harry Reid managed to make some pretty astute investments in land in the Las Vegas area while being majority/minority leader of the Senate. He was supposedly worth $9.3 million in 2014 after a career in public office, not including the value of his generous government-funded pension. A blind trust would have solved that. An independent professional oversees investments, and no conflict of interest thus exists.
Formally known as “Halting Owners and Non-Ethical Stock Transactions Act,” (Honest) does nothing like that. The act would require members and their families not to invest directly in securities, commodities, futures, options, and trusts. Supposedly that covers everything, but it does not.
Banning stock trades and encouraging mutual funds and exchange-traded funds does not completely do the job. Other investments like derivatives are still not banned. Insider information could influence their investment in these funds.
More interestingly it requires members of Congress, the President, and Vice-President to divest from covered assets at the beginning of the next term. How stupid can a law be? If someone is required to divest there will be huge transaction costs from that and potentially significant losses because of being forced to sell assets at inopportune times. The bigger issue is putting a tremendous barrier in front of any financially successful person from potentially running for office. Why would they want to take on this position when required to divest instead of establishing a blind trust? This is an immensely ignorant and offensive proposal in the Act. We would have only Leftists and career politicians willing to run for these positions. We certainly don’t want that.
Senator Ron Johnson (R-WI) is a perfect example. Prior to running for office, he was financially successful with holdings in real estate and other investments. Divestment would put a hard stop on someone like this from running. It is un-American and possibly unconstitutional. On the other hand, Johnson stated, “There is already enough disclosure, trust me,” does not ring true.
Think of it this way. There are medical professionals in Congress. They add a lot to the mix there. They aren’t still running their medical practices. Why should someone be running other investments like real estate or stocks and bonds? A blind trust or professional managers who oversee these matters will solve the problem, protect the integrity of our elected officials, and prevent the blatant conflict of interest.
Supposedly, Rob Bresnahan (R-PA) has made over 500 trades this year. He states he relies on a financial adviser for these trades, but what does that mean? Does it mean the adviser is making the decision or following his directions? Mr. Bresnahan has stated he has tried to establish a blind trust, but House ethics rules have stopped him. How inept can our elected officials be if that is so?
Members of Congress should be focused on one thing – running our country. Making stock trades or buying land on tips from influential people should be off the table. Divestment is ridiculous. Blind trusts and independent investment managers cure the problem.
