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At least eight members of Congress or their close family members dumped or cashed in on bank shares in March as the industry’s crisis was unfolding, according to data compiled by data firm 2iQ’s “Capital Trades” watchdog project and reported by The New York Times.

For example, on 10 March, Rep. Jared Moskowitz (D-FL) sold Seacoasts Banking Corp. stocks worth between $65,000 and $150,000. 

Two days later, Signature Bank also failed.

On 13 March, Seacoast’s share price dove 20 percent.

A spokesperson for Moskowitz said he sold the shares after attending a bipartisan briefing on the looming crisis and that the sale was recommended by Moskowitz’s financial advisor. 

The stock was sold from holdings Moskowitz manages for his young children, the spokesperson added.

On 15 March, Rep. Dan Goldman (D-NY) sold shares of First Republic Bank as it teetered on the edge of insolvency. Rep Ro Khanna sold his First Republic stock the same day.

By then, stockholders were fleeing the bank and the shares had lost two-thirds of their value. However, the two representatives salvaged some of their money before the stock price hit bottom.

Goldman said his funds are managed by a third party that does not consult him about trades. He pledged to set up a blind trust to further distance himself from the possibility of any taint.

Khanna said in a statement that the First Republic sale was made by a trust that belongs to his wife and young children and that he is uninvolved with it.

On 17 March, Rep. Nicole Milliotakis (R-NY) bought stock in New York Community Bancorp (NYCB) after she had a private conversation with New York state bank regulators. Two days later, the company bought assets belonging to the failed Signature Bank.

Over the following five days, NYCB stock gained 50 percent in value.

Milliotakis’s spokesperson said the stock purchase had been recommended by her financial advisor and was less than $5,000.

The trades were not illegal.

However, it and others underscore the financial advantage that members of Congress have in gaining advance information about events that will move markets.

Early this year, lucrative stock trades made by Paul Pelosi, husband of former House speaker Nancy Pelosi, made headlines around allegations that he had traded on advance information.

Over a three-year period, almost 20 percent of Congress members or their close relatives bought or sold stock the price of which could easily have been moved by Congressional actions, a 2022 NYT investigation found.

Various attempts by Congress to prevent such trades have failed repeatedly.

Now another such effort is underway.

Senators Jeff Merkley (D-OR) and Sherrod Brown (D-OH) introduced a bill with 19 cosponsors to limit financial transactions by Senators and their family members.

A twin bill has been introduced in the House by Michael Cloud (R-TX) and Raja Krishnamoorthi (D-IL).

“As Silicon Valley Bank was closed, even during that period, there were reports that members of Congress were trading bank stocks,” Brown said to reporters in announcing his bill.

“Members of Congress…we have more inside information,” he added. “Members of Congress, because of our jobs, are able to know more about the economy.”

TREND FORECAST: These eyebrow-raising trades mirror the behavior of officials at the U.S. Federal Reserve who were actively trading stocks, bonds, and options while they also were setting interest rates, a scandal we reported in “Bankster Bandits Get Rich Playing the Inside Track” (14 Sep 2021) and “Another Fed Bankster Bandit Caught Violating Financial Disclosure Rules” (18 Oct 2022).

As comedian George Carlin used to say, “It’s one big club and you ain’t in it.”

No doubt some of these trades were made without the knowledge of, and not at the direction of, some members of Congress. Maybe some were.

The larger point is that these incidents leave a bad smell that attaches to the institution of Congress and sours public faith that elected officials are not there to cash in.

The solution is to ban stock and bond trading by senators, representatives, and their immediate family members. The definition of “public service” should be expanded to include this provision.

However, too many Congress members are too resistant to allow this to happen any time soon.

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