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22 June, 2024
 
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US Congress members sold bank shares amidst banking crisis fears

At least eight members of Congress or their relatives sold shares of bank stocks in March, while the government was trying to control the financial crisis caused by the pandemic.

Source: The New York Times

On March 10, as fears were swirling over the health of the nation’s banks, an investment account belonging to the children of Rep. Jared Moskowitz, D-Fla., sold shares of Seacoast Banking Corp. worth $65,000 to $150,000.

Two days later, with the government working to control the crisis, Moskowitz said in a television interview that he had attended a bipartisan congressional briefing on the tumult. And on March 13, as investors fretted over the failure of Silicon Valley Bank and two other, smaller banks, Seacoast Banking shares fell nearly 20%.

A spokesperson for Moskowitz said in an email that the Seacoast share sales had been suggested by the congressman’s financial adviser as a means to diversify his young children’s holdings. Moskowitz said the congressional briefing on the bank crisis had taken place just before the television interview and after the shares were sold.

But the transaction was just one example of how members of Congress continue to buy and sell stocks and other financial assets in industries that intersect with their official duties.

At least eight members of Congress or their close relatives sold shares of bank stocks in March, according to an analysis by Capitol Trades, a project of the data firm 2iQ — a number that could rise in the coming days, as lawmakers make additional disclosures of trades made last month.

Although broadly legal, stock trading by members of Congress has become a flashpoint because lawmakers are sometimes privy to closely held information about the companies and industries they oversee.

A New York Times investigation last year showed that during a three-year period, nearly one-fifth of federal lawmakers or their immediate family members had bought or sold stocks or other securities that could have been affected by their legislative work.

Efforts to pass legislation to place limits on trading by members of Congress or to ban it have stalled in recent years. On Capitol Hill on Tuesday, Sen. Jeff Merkley, D-Ore., and Sen. Sherrod Brown, D-Ohio, announced a new bill intended to eliminate the practice that has 19 co-sponsors in the Senate.

A House version of the bill is co-sponsored by Rep. Michael Cloud, R-Texas, and Rep. Raja Krishnamoorthi, D-Ill.

“As the Silicon Valley Bank was closed, even during that period, there were reports that members of Congress were trading bank stocks,” Brown said. “I mean, imagine that — that members of Congress, we have more inside information,” he said, adding, “members of Congress are able, because of our jobs, to know more about the economy.”

Rep. Dan Goldman, D-N.Y., sold shares of First Republic Bank, the large depositor that was rapidly losing both cash and clients, on March 15, the day before it received an industry bailout of $30 million.

The wife and children of Rep. Ro Khanna, D-Calif., sold First Republic shares that same day. Rep. John Curtis, R-Utah, sold shares in First Republic from a joint account with his spouse on March 16, the day the industry bailout occurred.

By that time, First Republic shares had already fallen nearly 80% from a February peak. The timing of the sales by those three lawmakers or their relatives meant that the sellers averted an additional price swoon that was still to come. First Republic stock is down nearly 90% since the beginning of this year.

A spokesperson for Goldman has said that his portfolio is managed by a third party without his knowledge and that he is setting up a blind trust to avoid any appearance of a conflict of interest. Khanna has said that his filings relate to trades made by a diversified trust belonging to his wife and young children and that he has no involvement in it. Spokespersons for Curtis did not respond to requests for comment.

Some members were also buying bank shares during the volatility. On March 17, Rep. Nicole Malliotakis, R-N.Y., bought shares of New York Community Bancorp after private discussions with New York state bank regulators. Her transaction was first reported by The Wall Street Journal.

Two days later, New York Community Bancorp bought assets belonging to the failed Signature Bank — a deal that prompted its biggest share rally ever. Around that same time, other lawmakers, including Sen. Gary Peters, D-Mich., and family members of Khanna, bought shares in larger U.S. banks, like Truist Financial. Goldman, among other transactions, made a series of purchases of shares in foreign banks, like Lloyds Banking Group and Mizuho Financial Group.

A spokesperson for Malliotakis said that her financial adviser had recommended the purchase and that it amounted to less than $5,000 in value. A spokesperson for Peters did not respond to questions about the transaction.

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