CAPITOL GAINS — In the Senate, Majority Leader Chuck Schumer said today that he supports it, while Minority Leader Mitch McConnell said he’s prepared to look at it. Speaker Nancy Pelosi has left the door open to backing it, and House Minority Leader Kevin McCarthy is said to be eyeing it. What is “it”? Across the aisle, momentum seems to be building for legislation that would restrict lawmakers’ stock trading. How Congress got here is easy to understand. After heightened scrutiny of trades by members of both parties, including reported Justice Department inquiries into four senators, it became impossible to ignore the potential for politically perilous — if not truly illegal — stock-market plays by lawmakers who are often privy to privileged information that the average investor never gets. How Congress can fix the problem is more complicated. About a decade ago, members passed a law that requires disclosures of their trades, but that didn’t stop several of them from landing in hot water thanks to spotty compliance. Now there’s a flurry of proposals out there to rein in lawmakers’ trades, so many that Schumer said today that he’s asked his Democrats to “try to come up with one bill.” The most frequently cited proposals would require members of Congress to choose mutual funds or other diversified investment options, while either divesting of individual stocks or moving them into “blind trusts.” Blind trusts are designed to turn over control of investments to third-party trustees, who manage the money out of members’ sight, and influence. But that hasn’t stopped several politicians from running into tough questions over the years about how truly blind their blind trusts are, including former Senate Majority Leader Bill Frist (R-Tenn.) and Sen. Joe Manchin (D-W.Va.). Manchin’s holdings in a coal brokerage steered by his son earned him $500,000 last year, according to financial disclosures. He has said he uses a blind trust for those holdings and adheres to Senate ethics guidelines. Yet the Washington Post has reported that the size of Manchin’s disclosed blind trust doesn’t seem to encompass the full scope of his reported earnings from the family business. Which gets us to the questions: Can Congress be trusted to set up its own blind trusts? And will the public be too, uh, blind to the contents of those trusts to tell what lawmakers are doing behind the scenes? Sen. Mitt Romney (R-Utah), who faced his own PR troubles over a blind trust during his 2012 presidential campaign, called the blind trust “an age-old ruse, if you will,” during his 1994 Senate run . “Which is to say,” he went on, “you can always tell the blind trust what it can and cannot do.” Now, that’s not a fair description of the current rules for blind trusts owned by federal lawmakers, which Romney wasn’t subject to in 1994 because he was but a Senate candidate at the time. An FAQ produced in 2015 by the Senate ethics committee, which approves blind trust arrangements for the chamber, states: “When interviewing a trustee, the grantor may communicate his or her overall investment objectives for the portfolio, but may not communicate specific directions about how to construct or manage the portfolio.” Even so, Frist ran into trouble in 2005 after reports emerged that he had delivered very specific instructions to his blind trust about selling stock in a family-founded hospital company, which would seem to fly in the face of that guidance. The Senate and House ethics committees may well have since tightened up their internal rules for approving blind trusts — but we haven’t exactly seen press releases trumpeting that. That’s because, though the House panel has made some strides since the establishment of the Office of Congressional Ethics, both chambers’ internal ethics are known more for their opacity than their transparency. Given that truism about the ethics committees, putting all lawmakers’ individual stock trades into the existing blind trust approval structure might shed less sunshine on lawmakers’ investments, rather than more. And perhaps it wouldn’t matter, if the majority of the members of Congress responded to a stock trading ban by simply selling their stocks or moving into mutual funds, as McConnell said he’s recommended to his Republicans. The truth is, we don’t know. But it’s time to start asking whether more blindness, as it were, would help eliminate congressional conflicts of interest, or just make us blinder to them. Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com. Or contact tonight’s author at eschor@politico.com, or on Twitter at @eschor.
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