Why Democrats are gearing up to oppose a bill to curtail stock trading in Congress

• A GOP-backed bill to curtail stock trading by members of Congress is set to get a House vote soon.
• Democrats are expected to oppose the bill, saying it doesn't go far enough and has loopholes.
• AOC called the bill a "scam" that's "written precisely for the wealthiest members of Congress."

The House is set to vote on a bill to significantly curtail congressional stock trading in the coming weeks. Democrats say it's a scam.

"This bill is a scam. It is not a congressional stock trading ban," Democratic Rep. Alexandria Ocasio-Cortez of New York told Business Insider. "It is written precisely for the wealthiest members of Congress."

On Wednesday, the Committee on House Administration passed a bill called the "Stop Insider Trading Act." Backed by House GOP leadership, the bill would ban sitting members of Congress, their spouses, and their dependent children from buying new stocks in publicly traded companies.

It would be the most significant change to stock trading rules in over a decade. Yet the bill falls far short of other long-standing proposals on the issue.

Most significantly, it allows lawmakers to hold onto their existing stock holdings, a provision that Republicans have insisted on in the name of ensuring that financially successful people aren't deterred from serving.

"The focus of the bill is not to make elected officials poor," Republican Rep. Bryan Steil of Wisconsin, the chairman of the committee, said at the bill's markup on Wednesday. "The focus is to prevent them from benefiting off their insider information."

The bill also allows lawmakers to sell their existing stocks, as long as they disclose the sale at least seven days before.

Democrats have also taken issue with several other provisions in the bill, including one that allows lawmakers' family members to trade stocks on behalf of another person.

Steil said on Wednesday that the provision was intended to allow family members whose jobs involve stock trading to continue doing so.

But Democratic Rep. Joe Morelle of New York dubbed the provision the "grandma loophole," because family members can "freely trade stocks on behalf of their parents or grandparents with a member of Congress in line to inherit the estate."

"This is a loophole so big, you could fly a Qatari jet right through it," Morelle said.

'There's no porridge in the bowl'

At the Wednesday markup, Democrats offered a slew of amendments to fix what they saw as problems with the bill, including broadening the scope of who's prohibited from trading, adding a divestiture requirement, striking a provision that allows lawmakers to reinvest stock dividends, and even replacing the bill wholesale with a separate Democratic-backed stock trading ban.

All of them were voted down, and the bill ultimately cleared the committee without Democratic support.

Steil contended that Democrats were making a "Goldilocks argument" in their opposition to his bill, and that it represented the best chance at passing any new restrictions this Congress.

"The porridge is too hot, the porridge is too cold," Steil said. "They may try to allow perfection to be the enemy of the good."

Democrats countered that the bill simply does not meet the definition of a stock trading ban.

"There's no porridge in the bowl," said Rep. Julie Johnson, a Texas Democrat who's moved to divest from her own significant stock holdings since coming to Congress last year. "It doesn't have any real teeth. There's not a meal to be had here."

Despite the years-long efforts by a bipartisan coalition to bring a stock trading ban to the floor, the issue appears likely now to be fracturing along party lines.

Morelle told reporters that he plans to file a "discharge petition," a legislative maneuver to force a vote on a bill if it garners signatures from a majority of the chamber, for a separate bill that would include stronger stock trading restrictions and also apply those restrictions to the president and vice president.

Meanwhile, a separate bipartisan discharge petition on a bill that does not include the executive branch is languishing, with Democratic leadership opposing that effort.

Rep. Chip Roy of Texas, one of the Republicans who had been part of the bipartisan group, told Business Insider that he was satisfied with Steil's bill, even if it wasn't as strong as the bill he's long pushed for.

"It's a really good bill," Roy said. "If you'd asked me when I set out down this road five years ago that we'd get that? It's a good bill."

And at least one Democrat — Rep. Josh Riley of New York — said that he plans to support the GOP-backed proposal.

"I would love to see a bill that completely drains the swamp, and gets everybody to divest investments, and the whole thing," Riley told Business Insider. "I also came here to get stuff done, and this bill is something we can get done, and it's going to make really meaningful progress."