The text of a bill that would ban members of Congress, senior congressional staff, Supreme Court justices, and members of the executive branch from owning or trading individual stocks has been released.
Lawmakers in the House of Representatives now hope to vote on the legislation before the week's end, when Congress adjourns until after the November elections, but their are now doubts as to whether that will happen.
The "Combatting Financial Conflicts of Interest in Government Act" has a flaw when it comes to blind trusts according to ethics experts.
The Project on Government Oversight zeroed in on a provision within the text that allows for the creation of blind trusts that do not comply with existing regulations.
According to Walter Shaub, a senior ethics fellow at the Project on Government Oversight and the one-time director of the Office of Government Ethics, the bill would allow the creation of "fake" blind trusts.
—Walter Shaub (@waltshaub) September 28, 2022
A blind trust is a financial arrangement whereby people turn over their assets to be managed by an independent entity. Lawmakers can place their stock into a blind trust instead of selling off their stock holdings if the stock trading ban is passed.
The House leadership bill, backed by House Speaker Nancy Pelosi and released by the Committee on House Administration, allows the ethics committees in the House and Senate to approve blind trusts.
Dylan Hedtler-Gaudette, government affairs manager at the Project on Government Oversight, said that the bill doesn't have any rules or requirements around it. Even though there wouldn't be any way to prove that a blind trust is a blind trust, you would be able to create any kind of trust you wanted.
—Walter Shaub (@waltshaub) September 28, 2022
The lack of a definition for what exactly constitutes a "diversified" fund is one of the things Hedtler-Gaudette criticized.
He referred to the practice of members of the House and Senate armed services committees trading the stocks of weapons and defense system manufacturers. It's not just one company, so it's diverse.
Conflicts of interest related to lawmakers holding stock in defense contractors have been identified.
Insider and other media organizations have identified 72 members of Congress who have violated the disclosure provisions of the Stop Trading on Congressional Knowledge Act, an existing law passed by Congress in 2012 to curb insider trading, defend against conflicts of interest, and enhance public transparency.
Citizens for Responsibility and Ethics in Washington (CREW), another watchdog group, took a slightly more measured approach to the House leadership bill, praising the overall strength of the legislation while urging a fix to the loophole issue and a narrowing of the legislation to include just Congress.
The group called for the removal of text that they said would create a loophole that would weaken the blind trust rules that they worked so hard to get included in the legislation.
According to Kedric Payne, the vice president, general counsel, and senior ethics director at the Campaign Legal Center, the Pelosi-backed legislation is a good bill that addresses many of the concerns they had.
Payne said that the focus should be on Congress. It's similar to using an axe for scalpels. It gets the job done, but it is going to cause a lot of problems.
Payne said that the blind trust loophole was a small risk and that the language allowed it to grow for future circumstances.
The worst case scenario is that someone could take out all of the current features of a blind trust in order to avoid conflicts of interest.
The "Combatting Financial Conflicts of Interest in Government Act" was drafted by the Committee on House Administration Chair, a California Democrat who is close to House Speaker Nancy Pelosi.
A committee spokesman told Insider that it was intended to provide rulemaking flexibility to supervise ethics offices to contemplate new and improved forms of qualified blind trusts.
The committee will evaluate further refinements as a regular part of the legislative process.
Good-government groups and members of Congress who have written their own stock bans are upset because they weren't involved in the bill-writing process.
"We're going to have to solve the problems because they're going to do something that's riddled with problems, and then we're going to have to do something about it," she said. It's my guess.
Pelosi and Lofgren were excoriated by Roy for their "cram-down from the top" approach to legislating.
Roy said he would oppose the bill for a number of reasons.
The two Democrats who pushed their own stock-ban bills told Insider that they hadn't yet looked at the text.
Lawmakers trading stocks have been called for aggressive measures by other liberals.
Hedtler-Gaudette said that the drafting process led to this point.
He said they haven't consulted with experts.
This was not a good faith effort to put something out there that could move.
The executive director of the Supreme Court watchdog group Fix the Court issued a statement against including the judiciary in the bill.
The Courthouse ethics and transparency act brought federal judges and the Supreme Court into compliance with the STOCK act, just like members of congress. The bill is going to take effect later this year.
The bill isn't criticized by all ethics experts.
The legislation was praised by the senior director of legislative affairs for Common Cause.
It would go a long way to give more than just a slap on the wrist to people who don't comply with the STOCK Act.
He said he's glad the bill strengthens rules for all branches of the government, not just Congress, and that he's not concerned that it includes Supreme Court justices.
He said that the House should not project what will happen in the Senate.
The stock-ban legislation will not be taken up by the Senate until after the election.
Dave made a contribution to this report.
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