By: Abigail Tracy
4/2/2020
In the aftermath of the current pandemic, there are likely to be two central questions: Who knew what when? And what did they do about it? One who knew early was Senator Richard Burr of North Carolina. By early February, senators on the Senate Intelligence Committee, which Burr chairs, were receiving daily briefings about the threat posed by the novel coronavirus. On February 7, he coauthored an op-ed that emphasized America’s preparedness for the coming wave: “The United States today is better prepared than ever before to face emerging public health threats, like the coronavirus,” he wrote. At the time it was hardly an unusual opinion among public officials.
What was unusual was what was happening out of the public eye. He told a group of high-dollar donors on February 27 that the novel coronavirus was no ordinary ailment: “It is much more aggressive in its transmission than anything that we have seen in recent history,” he said, according to a recording of Burr’s talk that was obtained by NPR. “It is probably more akin to the 1918 pandemic.” And Burr, one of the less wealthy senators, unloaded between $628,000 and $1.72 million of his stock holdings in mid-February. First reported by ProPublica, Burr’s stock dump occurred well before the stock market plummeted.
The wide outrage in Congress over his actions hasn’t died down, and is liable to have consequences for both Senator Burr and how congresspeople can manage their financial assets while holding office, possibly leading to stricter rules. In Congress, after all, inside information is ubiquitous.
“There’s a temptation for anyone if you know that you’re holding on to an asset that is going to go down steeply in value and you have a chance to change that by selling it off, or if you get a piece of information that you know is going to be very valuable and could increase the value of an asset that you’re holding on to,” Texas congressman Joaquin Castro, who hasn’t owned stocks since he joined Congress, explained. “In the regular course of the job in Congress, you’re being tipped off all the time in your meetings, in your discussions, about things that are going to impact sectors and stocks.
“In the case of Senator Burr, what was especially alarming, is that he seemed to be projecting confidence about the economy and the outlook for dealing with the coronavirus and at the same time was taking actions that suggested the exact opposite, which was to dump stocks that were negatively impacted by what’s been going on,” Castro, who stressed the importance of the ethics investigation into Burr’s trades, told me. “That just reeks of complete self-interest.”
CNN reported earlier this week that the Justice Department had launched a review of lawmakers’ stock market transactions before the stock market downturn and had reached out to Senator Burr as part of the probe. Burr, for his part, has denied any wrongdoing and asserted that he was acting only upon public information. Alice Fisher, a lawyer for the North Carolina lawmaker, told the outlet that Burr “welcomes a thorough review of the facts in this matter, which will establish that his actions were appropriate,” and “immediately asked the Senate Ethics Committee to conduct a complete review, and he will cooperate with that review as well as any other appropriate inquiry.”
Burr is not alone in Congress in regard to coming under fire for playing the market before its free fall. Senators Kelly Loeffler of Georgia, Dianne Feinstein of California, and Jim Inhofe of Oklahoma engaged in a series of trades that—to varying degrees—have prompted public outcry. But Burr’s transactions have eclipsed those of his colleagues due to their magnitude, but also because of the gap between his public statements and private actions.
Republican congressman Matt Gaetz of Florida has emerged as Burr’s chief critic on Capitol Hill. “Burr has failed to give an adequate explanation for his conduct, and that’s because the explanation is obvious. He had information that informed on the future of markets before other people did, and he capitalized on that information for his benefit,” Gaetz told me animatedly. “His statement was very damning.… Other members have suggested that the trades were made without their knowledge, without their direction. I don’t know if those claims are true or false. They should be investigated. However, no such defense exists for Senator Burr because he admitted that he directed the trades.”
Gaetz has called for Senate Majority Leader Mitch McConnell to remove Burr as chairman of the Senate Intelligence Committee while the ethics investigation into the transactions is ongoing—a position Castro has also taken. “With the information available about an investigation into him, it raises the obvious question: How can someone be the intelligence committee chairman, with oversight over the FBI, when they are being investigated by the FBI?” Gaetz said of his thinking.
Some Gaetz detractors have suggested that the firebrand Florida lawmaker, a top Donald Trump ally, is targeting Burr because of his actions in the Russia investigation, where the senator became something of a hero to Democrats for being more evenhanded than some of his colleagues. Gaetz dismissed this premise. “I am critical of some of the decisions that Senator Burr made in the Russian investigation, but that is not the reason why he is drawing my ire on this matter,” he said. “The reason why I am so animated in my critique of Burr is that it really reinforces what people hate about Washington and Congress. People believe that too many folks in D.C. are just looking out for their own bottom line and their own self-interest. And so when we see instances arise that reinforce that view with the public, I think it’s important for us to clean our own house and to disclaim that conduct is not associated with the work that we do.”
Against this backdrop, the conversation around whether members of Congress should own or trade in individual stocks at all is suddenly a live topic. Over the past few weeks, a bill authored by Congresswoman Angie Craig— the Halt Unchecked Member Benefits With Lobbying Elimination, or HUMBLE, Act—that would bar members of Congress from owning individual stocks, along with other anti-corruption measures, has gained traction. Members Ro Khanna, Ilhan Omar, Katie Porter, and Alexandria Ocasio-Cortez are the lawmakers who have signed on as cosponsors of Craig’s bill in the last two weeks.
“No member of Congress should leverage their position to earn a profit. Recent reports of alleged Senate improprieties are deeply disturbing. For far too long, members of Congress have used their positions of power to gain privileges and unnecessary perks at the expense of the American people,” Omar said in a statement about the HUMBLE Act. “Our total focus should be on serving the public interest, not personal gain.” Khanna echoed the sentiment. “I’ll do everything in my power to clean up our democratic government and make it work for the people, not special interests,” the California progressive said.
As a veteran of corporate America and a freshman Democrat who flipped a Trump district in 2018, Craig is a somewhat unexpected proponent of banning members of Congress from owning individual stocks. But she said it was precisely her familiarity with corporate America that prompted her to introduce the bill. “I had enough understanding of how stocks work that I understood that there is absolutely no reason why members of Congress should own individual stocks. You know, mutual funds—fine. Those are a bunch of stocks,” she told me. “The truth is that if one of us does something that may be perfectly legal but smells unethical, it impacts public perception of all of us. And at the end of the day, if your personal stock and portfolio is more important to you than serving your constituents, then you probably shouldn’t be a member of Congress. So I don’t understand why my colleagues wouldn’t just want to remove that potential cloud over all of us.”
By way of example, Craig said, “I’m on the transportation and infrastructure committee now and I’m in a public hearing, so it’s public information and I’m sitting there and I hear a disconnect between, for example, when the FAA anticipates Boeing being able to get back to market with its 737 Max. And then I hear Boeing say on an investor conference call their expectation—and I immediately think, If I were an investor, I’d be shorting their stock right now.
“We have too much information, and at the end of the day, to me, even the sense of impropriety isn’t worth the trade-off of having these stocks,” she said emphatically.
Of course, passing a ban on members of Congress owning individual stocks is far from likely, at least at the moment. “Ideally, yes, you would be able to say, ‘Hey, if you’re a member of Congress, you can’t own any stocks.’ Right?” one lawmaker told me. “But I’m also cognizant of the fact that you don’t want to bake into the job so many things that would discourage somebody from deciding that they’re just never going to run for Congress.
“I think at a minimum, the way I would say [is] that you’d have to have it in a blind trust with a verifiable way of showing that you’re not communicating at all with the person or persons that are in charge of that trust,” this member added.
But in the meantime, the perception that anyone in Congress profited off the coronavirus crisis is a blow to the institution. “Congress has to be more scrupulous about the conduct of its members when it comes to buying and selling stock and other assets,” Castro said. “Hopefully this will start a new chapter in that effort.”