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US Senator Sold First Republic Stock and Quickly Bought JP Morgan鈥檚 Before Collapse

As per reports, Lois Frankel, a Democrat representative, recently sold her share of the First Republic Bank before it was seized and sold. Frankel then went on to purchase JP Morgan stock which on Monday, 2nd May, purchased the First Republic Bank from regulators.

 Just last week, end of April, shares of the First Republic Bank fell by over 75%. This drop in share value came after the bank announced that its depositors had withdrawn about $102 billion in March.

After scrambling in vain to save the bank, it was seized by regulators and sold to JPMorgan Chase who as indicated will now assume responsibility for the bank鈥檚 assets as well as debts.

The collapse of the First Republic comes in a period when the American banking industry is in turmoil. In March, two banks, the Silicon Valley Bank (SVB) and Signature Bank both failed, setting off concerns about potential looming widespread financial troubles.

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Amid the collapse of SVB, the stock of the First Republic Bank began to drop. It was in this period that said depositors began withdrawing their money from the bank.

Newsweek reports that according to a financial disclosure report published on April 28th, 2023, Frankel first sold shares of the bank on March 16th. That is about a week after the collapse of the Silicon Valley Bank (SVB).

Days later, on March 22nd, Frankel went on to purchase shares in JP Morgan Chase as the report also discloses. There is no substantial information on how much exactly the stocks were worth. However, as per the fillings, each trade, the sale from First Republic, and the buy from JP Morgan were worth between $1,001 and $15,000.

In a response to an inquiry by CNN on the matter, Frankel said that her 鈥渁ccount is managed independently by a money manager who buys and sells stocks at his discretion.鈥� According to CNN, the congresswoman is not facing any investigations whatsoever.

While Frankel鈥檚 case has been publicized the most, she is not the only one who has benefited from the situation. At least nine (9) members of US Congress sold First Republic stock before the bank collapsed. The list includes Representatives Josh Gottheimer (New Jersey), Daniel Goldman (New York), Jared Moskowitz (Florida), John Curtis (Utah), and Earl Blumenauer.

The news of the trades has brought outrage with calls mounting for congress members to be banned from trading in stocks. Newsweek claims that allowing members of Congress to trade in stocks opens up the possibility of politicians profiting from the industries they are supposed to regulate.

What Laws Are There On Congress Members Trading In Stocks?

The 2012 STOCK Act made it illegal for congress members to knowingly use information gained in their official capacity to trade stocks. As per the law based on the act, congress members are expected to file timely financial reports disclosing their trades.

Compliance with the law has been sporadic and loose, to say the least. This s mostly due to the lack of strict enforcement mechanisms. In a bd to strengthen the law there have been several failed attempts with the most recent one coming in January 2023.

This was when Chip Roy of Texas reintroduced the bipartisan Transparent Representation Upholding Service and Trust (TRUST) in Congress Act. The law which was supposed to ban members of Congress and their families from trading individual stocks failed to receive sufficient support to get a floor vote.

As a result of recent developments, several members of Congress have introduced bills that are aimed to crack down on congress officials trading among their colleagues. One of them is Representative Abigail Spanberger, a Virginia Democrat.

She has introduced legislation that would require lawmakers and their families to place assets in a blind trust during their time in office.

It is possible that the congress members may have used information gained in their official capacity to opt out of First Republic stock. This should provide some ammunition for the legislation by Representative Abigail Spanberger.

However, Frankel purchased JP Morgan stock a month before the First Republic鈥檚 seizure and sale which can be categorized as 鈥済ood business鈥�.