When we talk about the interplay of politics and finance, the recent activity of Rep. Kevin Hern (R-OK) provides a compelling narrative. Elected to the House in 2018, Hern, who has been an active stock trader with a prior career in business, recently sold shares of the mortgage company Freddie Mac (FMCC). The transaction, disclosed publicly, was worth between $100,000 to $250,000 and took place on November 6. The shares were reportedly sold at a price range between 64 cents and 67 cents.
Interestingly, earlier in the same year, on January 30, Hern purchased an equivalent amount of Freddie Mac shares, which, according to disclosures, were bought at a significantly lower price range of 45 to 47 cents. Analysts calculate that the profit margin from this trade could range from 42.2% to 48.9%. This impressive gain may raise eyebrows given Hern’s political position and recent appointment to the House Committee on Ways and Means, which is instrumental in shaping tax legislation.
The legal backdrop for Hern’s transactions is the STOCK Act, which mandates prompt disclosure of stock trades by members of Congress. Though Hern has complied with the act by disclosing his trades, he previously faced criticism for failing to report certain transactions made in 2021 within the required timeframe. This has sparked a broader discussion about the ethics of elected officials actively trading stocks, especially those like Freddie Mac that are known entities but trade off of major exchanges for less than $1.
Freddie Mac, along with Fannie Mae, entered conservatorship under the Federal Housing Finance Agency during the 2008 financial crisis as part of a federal rescue plan. The company’s shares are not traded on the major stock exchanges, and thus they are considered over-the-counter (OTC) penny stocks. While not illegal, the trading of such stocks by a member of Congress can be controversial, as these actions can be seen as leveraging a position of influence for personal gain.
Public responses to Hern’s trading activities have been varied. Some constituents argue that Hern’s financial acumen benefits his role in Congress. Others, however, feel that there is a conflict of interest, given the potential for insider knowledge or influence over legislation that could affect the markets.
Given the ongoing debates about the propriety of legislators trading stocks—debates that have only intensified in light of Hern’s transactions—there is a growing call for clearer regulations or perhaps an outright ban on the practice. The intent is to restore public trust by ensuring that those who craft the nation’s laws do not use their insider status for personal enrichment.
What can we take away from this episode? It highlights the fine line that exists between the financial dealings of public officials and their legislative duties. It’s a topic that calls for transparency, ethical conduct, and perhaps a reevaluation of the rules governing the financial activities of elected officials.
I urge you, the reader, to consider the complexities of this issue. How should we balance a free market with the need for ethical oversight in our elected officials’ financial dealings? Moreover, regardless of legality, what should be the standard for the appearance of propriety in public service?
This conversation is ongoing and undoubtedly complex, but it is crucial for the health of our democracy. Let’s keep it going in the comments below or on social platforms where this dialogue can expand. And remember, staying informed is the first step towards ensuring accountability and integrity in our political systems.
Let’s know about your thoughts in the comments below!
