ANNA PAULINA LUNA FILES PETITION TO FORCE A VOTE ON CONGRESSIONAL STOCK TRADE BAN

The authors of the study, Shang-Jin Wei of Columbia University and NBER, and Yifan Zhou of Xi’an Jiaotong-Liverpool University, surmise that congressional leaders are able to garner outsize returns through their sway in Congress and their connections to businesses, which they term, respectively, the political influence channel and the corporate access channel.

“The political influence channel is reflected in higher returns when their party controls the chamber, sales of stocks preceding regulatory actions, and purchase of stocks whose firms receiving more government contracts and favorable party support on bills,” the study reads.

Meanwhile, the researchers found that the corporate access channel is reflected in trades that “predict subsequent corporate news and greater returns on donor-owned or home-state firms.”

Wei pointed out during an interview with the Washington Examiner that another key aspect of the research is that it controls for peer comparisons. Essentially, the research indicates that those making big gains in leadership were basically getting the same returns as their peers before entering into leadership.

Wei noted that it is important because the argument could be made that those members in leadership who make outsize returns on trades tend to be smarter or savvier, which could also be why they ended up in leadership to begin with.

“So the same people, before they became leaders, they didn’t do very well. They did essentially the same as other members of Congress,” Wei said.

He said that assuming leadership led to a “tremendous improvement in the trading gains.”

One hypothesized reason for ithe mprovement of trading returns for leadership falls into the political information and influence channel, according to the paper. Basically, trading on advanced knowledge of regulatory actions or the legislative agenda.

The researchers point out that, for instance, the House speaker and Senate majority leader can choose whether to put bills on the floor for votes, which would affect the stock prices of companies that are influenced by the legislation.

The other channel the authors hypothesize could influence the outsized stock gains is through corporate access. Essentially, leadership might gain better access to non-public corporate information, such as potential lawsuits or R&D breakthroughs, that run-of-the-mill members might not be privy to.

“While corporations might wish to ingratiate all politicians, there is a cost in sharing non-public information about corporate fundamentals, including the possibility of legal liabilities,” the study reads. “If firms have to decide which subset of politicians to share the information based on some notion of a cost-benefit ratio, they may prioritize congressional leaders ahead of ‘regular’ members of Congress.”

The new research poses important questions about congressional stock trading, particularly as some lawmakers look to reform the process.

On Tuesday, Rep. Anna Paulina Luna (R-FL) filed a discharge petition that would force a vote on banning congressional stock trading. Members of both parties have sought to ban or limit stock trading in Congress in recent years.

“Across the country, from every political background, the American people agree on one thing: Members of Congress should not be enriching themselves with insider trading,” Luna wrote on X. “This is one of the most popular, most supported bipartisan issues in the entire country. Americans deserve a Congress that works for them, not for special interests or personal portfolios.”

Also this week, a group of dozens of former Republican and Democratic lawmakers urged House Speaker Mike Johnson and Minority Leader Hakeem Jeffries to bring the bipartisan Restore Trust in Congress Act, which would ban congressional stock trading, to a floor vote.

“Public trust in the federal government is at historic lows,” the letter reads. “Enacting this critical reform would be a powerful step toward rebuilding that trust, addressing real and perceived conflicts of interest, and demonstrating that members of Congress prioritize the institution’s integrity and their commitment to their constituents above personal gain.”

PELOSI’S RETIREMENT OFFERS 278 MILLION REASONS TO BAN STOCK TRADING

Some lawmakers in leadership have received significant scrutiny for their stock trading while in Congress.

For instance, former House Speaker Nancy Pelosi attracted considerable attention for trades made by her husband, which have netted the family millions of dollars. In the past three years, the volume of her disclosed trades was about $59 million.