Four U.S. Senators have been accused of trading stocks based upon non-public information about the coronavirus outbreak. The most disturbing cases appear to be Republican Senators Richard Burr and Kelly Loeffler. Senator Burr, who as Chair of the Senate Intelligence Committee attended a daily confidential briefing on the pandemic, divested between $628,033 and $1.72 million from industries hardest hit by coronavirus restrictions, including two major hotel chains. Senator Loeffler, who attended a confidential meeting about the coronavirus on January 24th, divested $1.275 million to $3.1 million from industries most hit, while also purchasing stock in teleconferencing companies. (Two other Senators, Democrat Dianne Feinstein and Republican Jim Inhofe, both also made significant stock sales during this time, but Senator Feinstein’s funds are in a blind trust, and Senator Inhofe has said his financial decisions are made by his financial advisors without consulting him.)
This is not the first time that concerns have been raised about Members of Congress corruptly taking advantage of their privileged access to inside information to enrich themselves, though the fact that Senator Burr engaged in these transactions shortly after having co-authored a piece claiming that “the United States today is better prepared than ever before to face emerging public health threats, like the coronavirus” makes his case particularly egregious. In 2004, a quantitative study found that the investment portfolios of U.S. Senators consistently outperformed the market, a result that at least suggests that Senators were using non-public information to inform their investment decisions. In response to this concern, in 2012 Congress enacted a bipartisan bill called the Stop Trading on Congressional Knowledge (STOCK) Act. (Senator Burr, it should be noted, was one of only three Senators to vote against it.) The main purpose of the STOCK Act was to expressly affirm that Members of Congress and their staffers were covered by the general prohibition on insider trading. The Act also increased transparency by requiring that Members of Congress and senior staff release financial disclosures within 45 days of major trades.
The STOCK Act was a step in the right direction, but it does not do nearly enough to prevent federal legislators from using their privileged positions to enhance their own wealth. To eliminate this form of corruption, the law should impose much more aggressive, prophylactic restrictions.