Tangle - We're back: Congress and stocks.

Episode Date: January 3, 2022

You can read today's podcast here. You can take the poll about Tangle we mentioned in today's podcast here.Shortly before Christmas break, Business Insider published a series that found 52 members of ...Congress and 182 senior-level staffers had violated the STOCK Act, which requires members and their familiey members to publicly disclose sales or purchases of individual stocks, bonds and commodity futures within 45 days of their actions.Democratic House Speaker Nancy Pelosi (D-CA), whose husband has a reputation for being a prolific stock trader, responded to a question about whether Congress should ban members and their families from trading stocks by saying "no... we're a free market economy. They should be able to participate in that."You can subscribe to Tangle by clicking here or drop something in our tip jar by clicking here.Our newsletter is written by Isaac Saul, edited by Bailey Saul, Sean Brady, Ari Weitzman, and produced in conjunction with Tangle’s social media manager Magdalena Bokowa, who also created our logo.The podcast is edited by Trevor Eichhorn, and music for the podcast was produced by Diet 75.--- Send in a voice message: https://podcasters.spotify.com/pod/show/tanglenews/message Hosted on Acast. See acast.com/privacy for more information.

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Starting point is 00:00:00 The flu remains a serious disease. Last season, over 102,000 influenza cases have been reported across Canada, which is nearly double the historic average of 52,000 cases. What can you do this flu season? Talk to your pharmacist or doctor about getting a flu shot. Consider FluCellVax Quad and help protect yourself from the flu. It's the first cell-based flu vaccine authorized in Canada for ages 6 months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection is not guaranteed. Learn more at flucellvax.ca. From executive producer Isaac Saul, this is Tangle.
Starting point is 00:01:00 Good morning, good afternoon, and good evening, and welcome back to the Tangle Podcast, a place where you get views from across the political spectrum, some independent thinking without all that hysterical nonsense you find everywhere else. I am your host, Isaac Saul. And if I sound a little different today, it's because, well, A, I'm officially over COVID and B, I am in a new closet right now. I'm on the road. Tangles hitting the road this month. I'm not going to tell you where I am because it's kind of fun to be running around, but I'm in the country in New York and I am going to be headed west, southwest to be exact later this week. So, you know, depending on where I am in the setting, the podcast may sound a little different here and there just because it's hard to build a studio out of blankets and pillows and things like that, but we do it every
Starting point is 00:01:46 week. So we're going to keep figuring it out. All right, listen, before we jump in, there is a lot of stuff that happened in the last week or 10 days since you heard from us. So we're going to start with some quick hits from the break and then some quick hits for today. First up, former U.S. Senate Majority Leader Harry Reid, the Democrat from Nevada who helped pass the Affordable Care Act, died at the age of 82. The CDC cut its quarantine period for asymptomatic people infected with COVID-19 from 10 days to 5 days. Holiday sales rose at the fastest pace in 17 years with clothing and jewelry as top drivers. The James Webb Telescope, which will peer back at the origins of the universe, was launched by NASA. Kim Potter, this suburban Minnesota police officer who said she confused her firearm for her taser when she shot and killed Daunte Wright, was found guilty of manslaughter.
Starting point is 00:02:51 In another high-profile case, Delaine Maxwell, the confidant of Jeffrey Epstein, was found guilty of several sex trafficking-related charges and faces up to 40 years in prison. TikTok surpassed Google as the most visited website in the world. President Joe Biden signed a bill banning imports of products made in the Xinjiang region of China, where ethnic minorities are being sent to labor camps. He also signed the National Defense Authorization Act, a national defense bill that authorizes $770 billion in spending next year. For what it's worth, we are very interested in how you felt about Tangle in 2021. And so in today's newsletter and in the description of this episode, there is a brief poll you can take if you want to
Starting point is 00:03:37 give us some feedback and help drive some of our coverage for the upcoming year. some of our coverage for the upcoming year. All right, so those are the quick hits from the break, and these are today's quick hits. First, 705 people have now been arrested in connection with the January 6th riots. Second, two people are missing and tens of thousands have evacuated, and more than 500 homes have been destroyed in Colorado's wildfires. Number three, Twitter permanently suspended the personal account of Representative Marjorie Taylor Greene, the Republican from Georgia, citing its COVID-19 misinformation policy. Four, Eric Adams, the former police officer, was sworn in as New York City's mayor, replacing Bill de Blasio. He'll become the city's second black
Starting point is 00:04:25 mayor ever. Five, based on data from abroad, the surge of the Omicron cases in the U.S. could peak by mid-January, according to some experts. All right, so that is it for the news you missed and the quick hits for today, which brings us to our main story. This one is on Congress and stocks. Business Insider completed a five-month investigation into every member of Congress on their financial conflicts and transparency and found dozens of lawmakers in violation of the Stock Act. And it's not just lawmakers. Insider found that at least 182 high-level staffers on Capitol Hill have missed deadlines to disclose their personal stock trades.
Starting point is 00:05:13 The violations are bipartisan, though, with late reporting split down the middle between Democrats and Republicans. I want to turn now to a story that probably hasn't gotten the attention it deserves until now. On Wednesday, House Speaker Nancy Pelosi shot down the idea that lawmakers should be banned or limited from trading individual stocks. Shortly before Christmas break, Business Insider published a series that found 52 members of Congress and 182 senior level staffers had violated the Stock Act, which requires members and their families
Starting point is 00:05:46 to publicly disclose sales or purchases of individual stocks, bonds, and commodity futures within 45 days of their actions. Democratic House Speaker Nancy Pelosi, whose husband has a reputation for being a prolific stock trader, responded to a question about whether Congress should ban members and their families from trading stocks by saying, no, we're a free market economy. They should be able to participate in that. Her comments reignited a debate that has existed for years on Capitol Hill. Other members of Pelosi's own party, like Representative Alexandria Ocasio-Cortez, have said it's absolutely wild members can sell stock and that creates incentives for unethical behavior. In March of 2021, a bipartisan bill was introduced in Congress to ban certain stock trading among
Starting point is 00:06:31 members of Congress and their families, but it got little traction. A quick reminder, in 2012, then-President Barack Obama passed the Stock Trading on Congressional Knowledge, or STOCK Act, which prohibited members from trading stocks based on non-public information. It passed by a 96-3 vote. First-time fines for violations are set at just $200, and in 2020 that bill became front and center after Senators Richard Burr, Kelly Loeffler, Dianne Feinstein, and James Inhofe were accused of dumping millions of dollars of stocks
Starting point is 00:07:04 after receiving non-public briefings on the threat of COVID-19. Investigations into all four members were eventually dropped. Since 2012, only one member of Congress, Representative Chris Collins, a Republican from New York, has been convicted of insider trading. After a pharmaceutical executive told Collins during a White House picnic that a drug had failed clinical trials, Collins called his son and told him to dump the stock. He pled guilty and resigned from Congress shortly after. In August, I wrote a Friday edition about why I believe that members should not be allowed to trade stocks,
Starting point is 00:07:38 but now that that debate has once again broken into the public lexicon, I think we should give it another look. Below, we'll take a look at some arguments from the left and the right, and then I'll revisit my own take. First up, we'll start with what the left is saying. Many on the left side with Ocasio-Cortez over Pelosi, saying that Congress shouldn't sell stock. They argue that even if it's all above board, the appearance of corruption damages trust in the public. The Stock Act, passed in 2012, has not worked, they also say. In the New Republic, Matt Ford said lawmakers have one
Starting point is 00:08:21 big advantage over the rest of us. They are privy to all sorts of material non-public information by virtue of Congress's legislative and oversight powers. And since their access to that information isn't always readily apparent to the outsiders, it's also a lot harder to prosecute them for insider trading violations. Banning lawmakers, their top staffers, and their spouses from buying and selling individual stocks should be as non-controversial as crop rotation or pulling to the side of the street when an ambulance goes by. But no matter how often a lawmaker's investments make the news, or how much controversy these revelations subsequently court,
Starting point is 00:08:57 the status quo remains intact, and excuses that sound very similar to Pelosi's recent remark sound a shrugging refrain. Following the Trump era, when government corruption and the ethics of the president and his inner circle often took center stage, you would think lawmakers would be more cognizant of the ways that even an appearance of self-dealing or conflicts of interest can breed cynicism in the electorate. And, in an era when the very bedrock of our democracy is under attack, And, in an era when the very bedrock of our democracy is under attack, that cynicism can be doubly damaging, Ford said. In June, the Bloomberg editorial board said the Stock Act was meant to stop financial impropriety, but it, quote, hasn't worked. With trust in government at a low ebb, nothing is more important than to hold the country's politicians to the highest standards of financial propriety.
Starting point is 00:09:45 Up to now, the efforts of Congress to police itself to the necessary standard have failed, the board said. In May, Representative Tom Malenkowski admitted that he had failed to disclose up to $1 million worth of trades in the stocks of medical and tech companies involved in the pandemic response. Even that sizable admission was minimizing things. His total undisclosed trades were valued closer to $3.2 million. Not a single lawmaker has been prosecuted under the Stock Act, the board added. It's reasonable to ask whether it was toothless by design. For one thing, it still allows legislators to trade stocks in industries they oversee. Numerous senators responsible for supervising defense spending own stock in defense contractors, for instance.
Starting point is 00:10:27 And its standard for wrongdoing using non-public information for private profit is nearly impossible to enforce. In December, the Washington Post editorial board said Pelosi is wrong. She should have advocated for tighter scrutiny on congressional trading. Even better would have been a full ban on individual stock trades for members of Congress, the board wrote. When members of the general public trade on non-public information, they go to jail for it. It's theoretically possible to go after members of Congress for trading on insider information as well, but that has proved extremely difficult. A bipartisan group of lawmakers has introduced the Ban Conflicted Trading Act, which would prohibit buying or selling individual stocks and serving on corporate boards while in office.
Starting point is 00:11:07 This is a common sense reform that would go a long way toward restoring trust in Congress. All right, that's it for what the left is saying, which brings us to what the right is saying. So the right is a little bit more split on this issue, with some advocating for a ban and others saying congressional stocks don't actually perform all that well. Some on the right have pointed to recent studies looking at whether members of Congress outperform the general public in trading, which they generally do not. Others agree with the left that the Stock Act has failed and new reforms are necessary. In the American Spectator, Addison J. Hosner said Pelosi has given the public one more reason to doubt the integrity and honesty of our politicians.
Starting point is 00:12:00 This isn't a Republican or Democrat issue. It's an issue of ethics and right from wrong. Members of Congress, particularly the most wealthy, have made fortunes selling out the American people right under their noses in a time of global uncertainty, Hosner wrote. No matter your political affiliation, this behavior from your elected officials should signal outrage and a demand for accountability. What is essentially occurring with congressional members is insider trading, a specific form of securities trading that is outlawed and governed by the SEC, Hosner added. Don't let Pelosi or other congressional members pull the wool over your eyes. Make no mistake,
Starting point is 00:12:36 the information and reports that Congress receives is de facto material insider information and should preclude them from making trades to their own personal benefit. By definition, material insider information is information that, if known, could reasonably be expected to affect the value of a company's stock or which would affect the investment judgment of a person deciding to buy or sell the stock. a serious disease. Last season, over 102,000 influenza cases have been reported across Canada, which is nearly double the historic average of 52,000 cases. What can you do this flu season? Talk to your pharmacist or doctor about getting a flu shot. Consider FluCellVax Quad and help protect yourself from the flu. It's the first cell-based flu vaccine authorized in Canada for ages six months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection is not guaranteed.
Starting point is 00:13:28 Learn more at flucellvax.ca. In May of 2020, the Wall Street Journal editorial board said trying to treat senators like insiders raises a few difficulties. Senator Richard Burr sold Wyndham hotels. Does anybody think he had secret information about Wyndham's business, the board asked. If Congress's virus briefings merely reinforce public speculation about a generalized threat, can it be proved that Mr. Burr relied on non-public information? Several other politicians are also under attack for their trading, but the public should put down its pitchforks. For one thing, Congress isn't very good at investing, the board added. Senators are as feckless as the rest of us at stock picking, according to a study last month from the National Bureau of Economic Research.
Starting point is 00:14:13 Dartmouth economics professor Bruce Sackerdote and three students examined trading by U.S. senators back to 2012. On average, stocks purchased by senators underperformed for their industry and size. At six months out, the gap was 0.17%. Stocks that senators sold went on to underperform the benchmark slightly over three months, but they overperformed slightly at a year out. In the National Review, Caroline Downey noted that members of the squad were choosing to stay silent on Pelosi's comments despite opposition to her position. The offices of Representatives Alexandria Ocasio-Cortez, Rashida Tlaib, Ilhan Omar, Ayanna Pressley, and Cori Bush did not respond to a request for comment on what
Starting point is 00:14:55 appears to be a substantial difference of opinion between the Progressive Caucus and leadership. While Pelosi herself has only reported her home in Napa, California, and a small checking account as assets, her husband's investment portfolio has included companies like Slack, Tesla, Disney, Visa, Salesforce, PayPal, Alphabet, Facebook, and Netflix, all of which spend tens of millions of dollars lobbying the federal government each year. While the 2012 Stock Act tightened insider transaction regulations for politicians, members of Congress have historically profited handsomely from equity training, Downey added. A 2019 analysis of 61,998 stock trades from 2004 to 2010, conducted by finance professor Sirkin Karadas, found that public officials' portfolios outperformed the market by 20%. All right, so that is it for the left's take and
Starting point is 00:15:57 the right's take, which brings us to my take. So as I've said, I've already kind of shown my cards on this issue, but I'll just say another six months of debate and opinion making really hasn't moved my position that much. Whether members of Congress outperform the general public or not is really irrelevant to me. The larger issue is the influence trading has on legislating and the inability for us to track whether insider trading is actually taking place. Even the politicians who sing the right tune are apparently worthy of some scorn. New Jersey Democrat Tom Malinowski is a great example. This is not the time for anybody to be profiting off of selling ventilators, vaccines, drugs, treatments, PPE, anywhere in the world, Malinowski said as the COVID-19 pandemic
Starting point is 00:16:42 wreaked havoc on the economy. But a few months later, he admitted that he failed to disclose $1 million worth of stock trades in medical and tech companies that were responding directly to COVID-19. The real value of the trades was actually $3.2 million, about three times what Malinowski said. It must have just slipped his mind, I guess. Pelosi's position is equally eyebrow-raising. She and her husband, Paul, own over $46 million in assets. Paul recently made a $6 million bet on Apple, Amazon, and Google's parent company, Alphabet, with short-term, high-risk call options.
Starting point is 00:17:18 He bought them in May of 2021, and they expire this June, meaning Pelosi's husband is making a huge bet that those companies will surge in value at a time when Pelosi is overseeing a congressional majority that is trying to rein in and regulate big tech. In what world is this not an issue? And how does our knowing about it make it any better? Pelosi's office naturally repeats the same defense until their teeth fall out. The Speaker has no involvement or prior knowledge of these transactions. The Speaker does not own any stock. I suppose the evidentiary support for this claim is that Pelosi has not emailed her husband from a government computer on all caps lock, insisting he bet their livelihoods on certain tech stocks. But the idea that Pelosi and her husband don't
Starting point is 00:17:58 talk about his portfolio is just as absurd as the idea that former President Trump wasn't trying to profit off his position as president, or that current President Joe Biden never discussed his business dealings with his son Hunter. The difference here is we can actually do something about Congress. The vast majority of Americans say they support this idea. The bipartisan bill in Congress would allow members to invest in mutual funds, which would be an improvement on what we have now, even if I think they could go further. Pelosi's defense that we live in a free market economy might be the best talking point she and other members of Congress have. They have the right to make wealth, sure, but everyone gives up certain rights based on the work they do. The kinds of ethical issues I run
Starting point is 00:18:39 into as a reporter are numerous, and members not being able to trade stocks while they draft laws that regulate corporations and the market itself seems like an all-time slam dunk of a no-brainer. I just don't understand why this isn't law. So yes, I still think we should ban it and I still think we need a law to regulate it. Quick reminder, if you have thoughts about my take, you can always reply to the newsletter and write in or go to our website and leave a comment if you're a subscriber. All right, so that brings us to our reader question for the day. This one comes from Jacob in Indianapolis, Indiana. Jacob asks, a common refrain I see on the left is that Biden can cancel all student loans by executive order. However, I have yet to find anything on the matter from a source I can trust not to be biased. Is this true? And if so, what political legal consequences do you think are keeping that out of his platform? Okay, Jacob, great question. You're right. I
Starting point is 00:19:34 also see a lot of people talking about this. Biden could absolutely take action on student loans, but the idea that he can utilitly forgive them is a pretty hotly contested legal issue. So stating that he could as a fact is a bit silly. There are several ways Biden could go about forgiving student loans. He could cancel debt up to a certain amount. He could cancel debt that hasn't yet been paid off after 10 years. He could lower the percentage students have to pay each month. He could make loan cancellation automatic for certain populations like students with disabilities, or he could set up an income-driven system to apply for student loan forgiveness so people who have not made a
Starting point is 00:20:15 lot of money after they've gotten out of college could apply to be forgiven for the loans. There's a Forbes article I linked to it in the newsletter today. It has a great breakdown of the paths available to him. Anecdotally, student debt forgiveness is one of the most asked about topics I get entangled, and I suspect that addressing the student loan crisis is a huge issue for the base of the Democratic Party. It was, after all, a major platform nearly all Democrats ran on. Polling consistently shows that more than 60% of Americans support some kind of student loan forgiveness, polling consistently shows that more than 60% of Americans support some kind of student loan forgiveness, which makes sense when you consider 43.2 million Americans are holding over $1.5 trillion of student debt at an average of about $39,000 a person. Ultimately, I think it's very
Starting point is 00:20:56 unlikely Biden makes a sweeping reform like student debt cancellation via executive order. First, because like I said, it'd be at a huge risk of being struck down by the courts. It probably wouldn't be upheld. And second, because there is enough bipartisan support for the initiative that Biden may be able to bring some Republicans along with him. Still, he just extended the pause on repayments until May 1st, and he has actually ordered the U.S. Department of Justice and the Education Department to review his legal authority to cancel student loan debt by executive action. So I'd keep an eye on this space going forward. We will too. Right now, I would say unlikely he just executive order cancels all student debt. I could see him
Starting point is 00:21:36 forgiving $10,000 of student debt for a certain percentage of borrowers or something like that. More likely, though, I think we're going to see him get some legislation passed that addresses the student loan debt crisis. All right, that brings us to our story that matters today. Yesterday, a new federal law snapped into action that will ban so-called surprise medical bills. The law prohibits excessive out-of-network medical bills and puts the onus on doctors and health insurance companies to figure out payment disputes rather than dumping the issue on unwitting customers.
Starting point is 00:22:14 Out-of-network bills are now prohibited for emergency care in a hospital room or emergency room, elective care at in-network hospitals where some doctors may be out-of-network, and for air ambulances. Importantly though, ground ambulances are not included in this new legislation, meaning taking an ambulance ride could still put you at risk of a hefty surprise bill. Axios' Bob Herman has a great breakdown of the rules in an article that's linked to in today's
Starting point is 00:22:40 newsletter. All right, that brings us to our numbers section. These numbers are all directly tied to today's story. 67% is the percentage of Americans who said they would support a bill banning members of Congress and senior staff from buying and selling individual stocks, according to Data for Progress. 220 is the number of representatives and senators who own individual stocks, according to Insider. That's a little more than 40% of Congress. 225 million is the estimated collective worth of their assets. 72 members hold Apple stock, 64 members hold Microsoft stock, 45 members hold Disney or Alphabet stock, and 44 members hold Amazon stock. $48 million is the amount of money those five companies spent in total lobbying Congress in 2020.
Starting point is 00:23:38 All right, that brings us to our have a nice day section. On December 9th, sixth grader Davon Johnson managed to save two lives in one day. First, Davon performed the Heimlich maneuver on a choking classmate while at school. Then, later that night, the 11-year-old helped a woman with a walker escape from her burning home in Muskogee County, Oklahoma. Johnson's heroics were recognized by the school board and the local police department, which awarded him a certificate to make him an honorary deputy for the Muskogee County Sheriff's Office. The New York Post has an awesome story about this today. It's linked to in our newsletter. All right, everybody, that is it for today's podcast. Quick reminder, if you want to give us some feedback about this
Starting point is 00:24:22 year in coverage and the podcast, you can take our poll. It's linked to in today's newsletter and in the episode description. Also, on Friday, I'm going to be releasing a subscribers-only newsletter about my coverage in 2021, what I got right, what I got wrong, sort of reflecting on some of my writing. If you want to receive that, you need to be a subscriber. So subscribe to Tangle. Read Tangle.com backslash membership. All right, everybody, that's it media manager, Magdalena Bokova, who also helped create our logo. The podcast is edited by Trevor Eichhorn, and music for the podcast was produced by Diet75. For more from Tangle, subscribe to our newsletter or check out our content archives at www.readtangle.com. The flu remains a serious disease. Last season, over 102,000 influenza cases have been reported across Canada,
Starting point is 00:25:51 which is nearly double the historic average of 52,000 cases. What can you do this flu season? Talk to your pharmacist or doctor about getting a flu shot. Consider FluCellVax Quad and help protect yourself from the flu. It's the first cell-based flu vaccine authorized in Canada for ages 6 months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection is not guaranteed. Learn more at flucellvax.ca.

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