Senator Elizabeth Warren on The Fight to Ban Stock Trading in Congress (Pt 1)

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I'm Nicole Lapin, the only financial expert you don't need a dictionary to understand.

It's time for some money rehab.

Today, we're going to get into a topic that I am so, so heated about: insider trading in Congress.

And to break it all down, I have a very special guest who has long advocated for congressional stock trading to be banned, Senator Elizabeth Warren.

You've seen Senator Warren in the headlines.

She's been the senator of Massachusetts since 2013.

And in 2020, she ran for the Democratic nomination for president, but withdrew.

And as we know, President Biden got the spot on that ticket.

But before she was in Congress, she was one of the fiercest watchdogs for consumers during the 2008 financial crisis.

In fact, she was the driving force behind the creation of the Consumer Financial Protection Bureau.

And whether you think Doge had a point in slimming the CFPB or not, it is true that the CFPB has helped return over $20 billion to Americans who were cheated over by big banks or shady lenders.

She's also a former Harvard law professor, and a little-known fact, even though she's a very vocal advocate for liberal issues, she was a registered Republican until the mid-90s.

Okay, let's address the elephant in the room here.

No pun intended.

I know that not all of you listening agree with Senator Warren politically, and that's okay.

But here's why I think you should stay with me for this episode anyway.

What we're talking about today is not red or blue.

It is green.

Because when members of Congress get to trade stocks on information the public does not have, that is not politics.

That's a rigged system and you deserve to know about it.

And tomorrow you'll hear the second part of our conversation where we dig into whether stock trading should come with a warning label.

So whether you lean right or left or somewhere in between, listen to this conversation with an open mind and let me know what you think.

You can always send feedback at hello at moneynewsnetwork.com.

I am always open to any and all conversations.

All right, let's get into it.

Senator Warren, welcome to Money Rehab.

Thank you.

I am delighted to be here with you.

So excited to have you.

I know we only have you for a short time.

So should we just get into it?

You bet.

I'm ready.

I would love to talk about something that is really boiling my blood these days, which is potential insider trading with Congress.

We just get right into it because we had Senator Dillebrand on the show.

And when she was here, she said one in three members of Congress trade stocks, but only one in seven disclose it.

And they beat the market 17%.

So I'm thinking either members of Congress are the greatest investors of our time or the system is rigged.

That's right.

I'm going to choose door two.

Me too.

Yeah.

And this is just outrageous, just totally outrageous that members of Congress, and I want to do this both ways.

They not only get inside information, we absolutely do.

We know what's going on.

I sit on the Senate Armed Services Committee, for example.

You want to trade in defense stocks?

You've got an idea of what's happening.

But it's not only the insider information, it's that you can actually affect outcomes.

So go invest in crypto and then help move the crypto bill forward.

So it's, they are in that sense,

potentially the inside traders extraordinaire,

absorbing information and actually changing the direction things go.

And here's the deal.

I have had legislation pending for years now, just to shut this down.

It's not even very fancy.

It just says, you're a member of Congress, no.

No buying, no selling, no trading on any individual stocks.

You want to be in the stock market?

Fine.

Just get indexed funds so it's moving like everyone and announce what they are.

Make it all public.

That you don't get,

you don't get this constant, well, here's a place I could help myself.

We just knock that out.

And then we get to stand in front of the American public.

and say

the one thing you can count on, we may get it right, we may get it wrong, but that nobody here is voting based on their financial interest.

And right now it's a slap on the wrist, right?

The violations of the stock act are only $200.

Well, remember, the stock act, all it does is say tell.

It doesn't stop it.

And then the violation, as you say, just total slap on the wrist.

That's insulting to American voters.

Agreed.

So what should it be?

Right now, the Restore Trust in Congress Act, this is bipartisan.

So it proposes a blind trust plus potential 10% penalty.

Is that what you think?

Yeah, I think it's the right direction.

But like I said, I want to start.

We'll hit, it's kind of like the 90-10 rule.

We'll hit 90% of the problems by just saying you cannot buy, sell, or trade individual stocks.

Full stop, period, we're done.

You'll have so many days after you're elected to divest and you're done.

And then if you've got, I know, and there's some of this, well, you have business interests and a blah, blah, blah.

Set up a true blind trust, not a pretend blind trust, where let's say you put the money in, but you can kind of peek over the edge and see what's going on.

You can set up a true blind trust.

And that's where you start working down through the smaller and smaller details.

You're part owner and a family business.

How do you deal with that?

And there are, there's some places at the margins you've got to work through it.

But let's just do the basics.

And if we still have a problem, we can always come back and tighten those up.

And the basics are get Congress, and I want to be clear for me, get Congress,

get every head of every agency, get everybody who is named to the President's cabinet or deputies, these people in policymaking decisions, and

drum roll, please, the president of the United States, all out of the business of trying to make money personally at the same time that they are serving in public office.

And it's a no-brainer.

Yep.

Should be.

You said that you invest in mutual funds.

I'm glad that you made the distinction of index funds because there's a lot of different kinds of mutual funds, of course.

So you could be on the Armed Services Committee, but you could have defense mutual funds or you could have sector-specific energy funds or agriculture funds.

And that seems like

a broadly held S ⁇ P 500.

That's right.

SP 500 approach.

We've seen this on both sides of the aisle, though.

It's been interesting in this.

There are people who want to see the law go in place on both sides, and there are people who are resistant.

And that's been a hard part about this.

And part of what's made it harder has been Donald Trump.

And whether you want to go into the politics or not, I'll just start with

the opportunities here for buying, selling, and trading, particularly in crypto, has given Donald Trump the position, in effect,

of being able to take what sure look like bribes out in public.

Someone just goes out and buys

$400 million worth of his crypto coin.

He knows that, boosts the price up, and then asks for a presidential pardon or asks for better treatment for your country on a tariff deal or asks for approval of a merger, all those things that

it becomes a way to influence the decisions

that the person in power who's supposed to be working on behalf of the American people, but to influence those decisions to help those who line the pockets of the public official.

And I just think that's wrong.

We got to put a stop to that.

Yeah.

And we've seen it with the president.

We've seen it with Marjorie Taylor Greene.

We've seen it also with Speaker Pelosi.

And so we've seen just stop it.

Yep.

This bipartisan approach to literally say restore trust in Congress.

This feels like if this doesn't pass,

then is Congress basically admitting its own corruption?

You know,

look.

I'm the one banging the drum over and over and over, pass this thing, pass this thing, pass this thing.

But I want to put it this way.

If it doesn't pass, it does not mean that people like me should just give up.

It means we got an election coming up in another 14 months.

Ask that question.

Have you supported the bill that would stop trading and insider trading among public officials?

I want to see us keep building the pressure, building the pressure, building the pressure.

I do what I can on the floor of the United States Senate.

But what I want to see is I want to see more people asking that question back home Because

it's only if we get the temperature high enough under this pot of water that we're actually going to get enough people to say, yep, time for some change.

Got to talk about the Fed.

Okay.

Haven't seen this much drama with the Fed in quite some time.

I think the Fed was going to turn into a major motion picture.

Right?

Wow.

It feels like a reality show.

The president has been leaning hard on Jay Powell to

put that diplomatically.

Come on, he has gone after the Fed

with just an all-out assault last February, March, threatened to fire him, said he had the power to said he was going to fire him.

And then, when the markets blew up, you kind of backed that one up.

Then went after him again over how much he was spending on repairs.

at the Federal Reserve's old building, and then trying to knock off Lisa Cook, one of the governors of the Fed, and not just tried to fire, he has fired her.

Now a court has said, no, you haven't.

And then they took it up on appeal and the second court said, no, you haven't.

And now he's taking it to the Supreme Court so he can try to get her pushed out of that job.

And there was an opening on the Fed.

Just to make this round it on out, he puts in a guy who is the head of the Council of Economic Advisors.

Okay, that means economic credentials, works literally in the White House.

And here comes the best part.

The guy is not giving up the option to return to the White House and continue working for Donald Trump.

So he's going over to the Fed to be, I'm going to put this one in quotes, independent.

And at the same time, he's holding on to, please, Donald Trump, let me continue to be the head of the Council of Economic.

There's nothing like it in history.

So I would say with four major assaults on the Fed, Donald Trump has made it clear he wants to own the central bank in this country.

Do you think that could happen?

Well, he's sure moving in that direction.

What worries me is what the consequences would be.

So Donald Trump's not the first person to figure out that if you could control the central bank, you could change your political fortunes.

In Turkey, when the strong-armed guy in charge grabs control of the central bank, inflation goes to 80%.

In Argentina, when the same thing happens, inflation goes to 200%.

And the reason for that, for everybody who's listening to this thinking, oh my gosh,

is that

we have Fed independence.

We built it into our system

because sometimes the Fed has to make really unpopular decisions.

Back in the 1980s, when inflation in this country went up to about 16%,

the Fed

actually

put the interest rate up at 14% as a way to signal to everybody in this country and everybody around the world, we will bring inflation down, which meant to people around the world, you can invest in the dollar.

It meant to Americans, okay,

I'm not going to see crazy price increases.

You know, that the price of eggs will go up by another dollar next week and the price of cars will go up by another $1,000 next week.

I can calm down on prices and start to budget.

And sure enough, it brought the economy under control.

But wow, talk about politically unpopular at the time.

If the president of the time could have fired the head of the Fed, he would have.

So, when Donald Trump says he's going to seize the Fed

and then use it to try to juice the economy, you know, push down interest rates, even if the numbers don't support it, what he's really

playing with here

is kind of medium term in the economy, what this is going to mean for prices for families, what this is going to mean for investment in jobs domestically, and what it's going to mean for the U.S.

currency as the reserve currency around the world and the leader around the world.

He's just burning.

all that down.

And

that means everybody in our country will pay a price if Donald Trump successfully seizes control over the Fed.

That doesn't mean that all elected officials shouldn't talk to the Fed.

You've written letters

before he was renewed, right, as Fed chair.

But there's a difference.

Or where is the line between oversight and interference?

That's a great question.

So let me start with the distinction here because I have.

I've gone after Jerome Powell.

I mean, I just want to make clear.

I'm out there defending the independence of the Fed.

When Donald Trump said he was going to fire Jerome Powell, I stood up and said, you cannot fire Jerome Powell.

Can we just make clear here?

I voted against him.

I spoke against him.

I can give you multiple reasons why I do not like him as the chairman of the Fed, but he retains his independence.

So here's the deal.

Independence.

Doesn't mean they just get to hoop off and do anything they want.

It means they are supposed to be focused on the economy and what the economic numbers tell them is best.

Dual mandate.

That's right.

Employment and inflation.

Employment and inflation.

You've got it 100% right.

In addition to that, they also do regulatory oversight of the giant banks.

So that is what he's supposed to do.

What my job is, I am now the ranking member on the Senate Banking Committee,

is to push him back on the numbers, to say to him, as I did two years ago, loudly hey the direction on inflation is down the arrows are clearly on the down slope lower those interest rates and yeah i've dogged him and dogged him about that now here's the interesting twist

he announced last month that

he and the fed would have lowered interest rates last february

but for the fact that Donald Trump's tariffs were just causing chaos in the economy and were likely to cause even more chaos, likely to make everything even worse.

So stop and let that soak into your brain for a minute.

For everybody who has a credit card balance and paid higher interest rates, for everybody who took out a car loan, for anybody who had a variable rate mortgage of any kind, anybody who borrowed money over the last seven months, let's just be clear.

you

paid more

because Donald Trump was creating so much economic noise, chaos,

and uncertainty, I like your word, uncertainty in the economy, that the Fed kept interest rates high.

Now, the Fed finally just lowered interest rates, as you know, just a couple of weeks ago.

Modestly, they're talking about maybe lowering them more

but now

it's not because the news looks good that is inflation is coming down and employment stays strong it's the other way around now inflation

not looking so great ticking slightly but historically you mentioned the 80s

we're in a good brain i know but the fed is always looking directions which way are the arrows pointing But the part that's worrisome is the job market is looking weaker.

So instead of a rate cut because the Fed says, woohoo, everything's going in the right direction, smooth sailing,

this is a rate cut that's more along the lines of

very worried about jobs.

So we're trying to loosen up and get more money into the economy in the hopes that more businesses will survive, expand, and hire more people.

Hold on to your wallets.

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And now for some more money rehab.

Where do you think unemployment should be?

We're hovering around 4%, which is pretty much the target historically.

I'm going to be really nerdy here and see

the place to be.

I know that we look just at the top-line number,

but it's important to pull the numbers apart.

Unemployment for African Americans has ticked way up, and that's always a canary in the coal mine.

Unemployment goes up first for black workers.

That's happened in America for a long time.

Second thing that's got me worried is young people coming out of college or other degree programs right now

are having a much harder time getting a foot in the door.

I don't know how much that connects with AI,

where the workers who are the newest and least experienced are the ones some people speculate the ones most likely you could replace with AI.

But the point is those are two groups.

that are now in a more vulnerable jobs position.

So look, I don't want anybody anybody to lose their job.

I don't feel better if someone else does.

But it makes me very uneasy, again, directionally on where we're going on jobs.

I think the Fed is right to be concerned and to be digging through those data as fast as they can.

So I think the headline number is what we've seen for inflation and jobs are right around

the ideal targets.

But you're saying double-click, look beneath the headline number, which is the more concerning

leading indicators potentially to economic turmoil versus a vibe.

I think people have a vibe session.

We're not seeing the recession in the numbers, but they're not feeling great about the economy.

Yeah, and remember, the Fed doesn't think we're at the right inflation number.

They think it needs to be markedly lower.

They want to see the full point lower than it is on inflation as well as wrong direction.

But you know, you go to a really interesting point here.

And that is

this question about averages versus quawing through the data.

On average, our incomes are going up every year.

Yeah, but understand

the billionaires are the ones who are looped into that average and that makes it look a lot better.

There was a time in America where the big gainers in incomes were the people who made the most modest incomes.

And proportionately, they were getting more and they were getting more out of GDP.

The worrisome parts now are to look at the debt levels that families are carrying.

Go back to your point that unemployment across the board is fairly low and inflation is not giant.

It's not like it was 40 years ago, which was just wild.

And yet,

Or even a couple of years ago.

Or even a couple of years ago.

Absolutely.

Absolutely.

And yet, Americans are carrying more and more household debt.

So between 2018

and 2024, we have seen just the total number of dollars of debt that the American public is carrying rise by $4 trillion.

And a big chunk of that is more people having to borrow to make it to the end of the month,

or people who already have some debt.

The debt is just ballooning on them.

They can't manage the interest payments, and the debt goes up and up.

Those are worrisome signs.

And for me,

the most worrisome signs are the survey data about how confident families are about the economy and that it's headed in the right direction.

And here,

families are giving lower reports on the economy than they have at any time since the survey researchers first started collecting this back 45, 50 years ago.

So where do you think interest rates should be?

I think interest rates should be somewhat lower than they are now if inflation stays low enough to justify that.

I want to see the interest rates come down, but it's got to come down in tandem with inflation.

We cannot say to America,

interest rates are going to be low.

You can go borrow that money and inflation is going to shoot through the roof.

That will turn millions of families upside down economically in this country.

I just worry it's such a slippery slope because we lived through 2008.

Why hear you?

And rock bottom interest rates were very addicting.

But we did that because we saw death in its eye.

We were close to financial Armageddon.

And so this idea that we keep trying to go back to rock bottom interest rates is dangerous.

I very much take your point on this.

I do not dismiss the point, but let me now do it the other way.

When we talk about the stress on American families, do you know one of the biggest expenses that's out there?

We don't count.

And that is how much you're spending on credit cards.

How much are you paying on debt on student loans?

How much are you paying all your debt?

It's actually left out of the calculation.

That's nuts.

And the difference between caring, as you know,

$5,000 of debt at

5% and $5,000 of debt at 36%

is the difference between whether you got a shot at paying it down and whether or not you're just overwhelmed and you're going to be in debt.

for as far into the future as you can see.

That's the first part of my conversation with Senator Elizabeth Warren.

Stay tuned to tomorrow's episode, where we talk about the line between democratizing investing and regulation when it comes to trading and whether Senator Warren will take another run at president.

So stay tuned for tomorrow's episode.

Money Rehab is a production of Money News Network.

I'm your host, Nicole Lappin.

Money Rehab's executive producer is Morgan Lavoie.

Our researcher is Emily Holmes.

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And let's be honest, we all do.

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And lastly, thank you.

No, seriously, thank you.

Thank you for listening and for investing in yourself, which is the most important investment you can make.