Congress & Insider Trading
The conversation around congress and the stock market is not a new concern. The Stock Act of 2012 was designed to prevent insider trading, but vague language and weak enforcement has demonstrated to us that this is an issue that must continue to be dealt with. This report by Insider helped to highlight some of these concerns. It showed that dozens of lawmakers failed to abide by disclosure rules, and that congress was doing a poor job of upholding accountability and transparency measures. The main debate is centered around not whether reinforcements are needed, but how those reinforcements will look. The issue with insider trading is that it can be difficult to prove whether or not a crime has been committed. It is not as simple as simply limiting trades for members of congress, or any other branch of government for that matter. In trying to ensure that these individuals are not benefiting from their insider knowledge, you also have to look at their spouses and dependents, which is a difficult thing to police. Not only that, but in order for any regulation to be effective it must extend past simply the members of congress and those related to them. We have seen members of the judiciary also abusing their knowledge in their rulings related to cases in which they or their families had shares in the companies. The issue is finding a balance of a regaultion that is encompassing enough to be effective but also realistic enough to be enacted, as the sentiment of the necessity for regulation has only just recently begun to garner support in congress.
We already know that this issue is on the minds of some Americans. This poll commissioned by the conservative advocacy group Convention of States action found that a startling 76% of voters agree with the sentiment that lawmakers and their spouses have an unfair advantage in the stock market. In order for the American people to have faith and trust in their government, they need to be able to know that their elected officials are doing the jobs they are expected to do, and a concept like insider trading ruins that. If government officials are using their positions to get an advantage in the free market that regular citizens do not have, it not only destabilizes the trust citizens will have in their officials, but also calls into question how to genuinely do the job they have been requested to do without harmful overreach.
In looking at some of the effects that can lead to the destabilization of democracies, it is important to focus on the role of elected officials, and those who hold other democratically earned positions of power. Although they are coming to these positions through democratic means, when congresspeople and members of the judiciary are able to use those positions for unintended purposes, it is eroding the purpose and integrity of those positions that were once created through democratic means. In order for Americans to be able to have faith in the government and its ability to do the job it is designed to do, they need a better sense of security that government officials will be held to the standards they are designed to be.
I think you did a great job of highlighting the problem with government officials’ insider trading: it interferes with the purpose of their positions, and can hinder the ability of citizens to trust their representatives. Of course, having corrupt officials financially benefiting from their positions is problematic, but I’d wonder how this issue fits into definitions of democracy that we’ve discussed in class. For instance, Dahl describes democracy as a system in which citizens can formulate preferences, signify their preferences, and have these preferences weighed equally. Although insider trading arguably interferes with weighing citizens’ preferences equally, I’d question whether we know for sure what exactly motivates each member of Congress, and how biased each individual person could be. I think the question that then remains is whether insider trading represents democratic erosion in itself, or if it creates instability that can one day lead to democratic erosion. Either way, I think this is a really complex topic and I found your post really fascinating!