Insider trading by members of Congress and senior officials of the executive branch demonstrate the sort of corruption that enrages voters. Co-host Eric Eggers starts the latest episode of the Drill Down off with a fitting observation:
“Behind every powerful and successful woman… is a husband with incredibly well-timed stock trades.”
Wait a minute. Didn’t we fix this problem back in 2012 when the STOCK Act (“Stop Trading on Congressional Knowledge) was passed? It was our own Peter Schweizer who blew the whistle on several congressmen who bought and sold stocks using privileged information they learned during hearings about certain companies and industries. At least one congressman was voted out of office over the practice, and members today must disclose it when they buy and sell stocks.
Apparently not. As Peter says on the show, the law was blunted about a year later, by an unrecorded late-night “voice vote.” The situation is as bad as it was before, Peter believes, citing a recent Wall Street Journal report that tracked the same kind of activity happening in the highest levels of executive branch bureaucracy.
“We cannot count on these people to police themselves,” Peter says.
The Wall Street Journal investigation this month found that “over 2,600 federal officials owned stocks in companies lobbying their federal agency, more than one in five senior federal employees across the 50 agencies” the WSJ studied. The Environmental Protection Agency, Department of Defense, Federal Reserve, and other agencies’ officials and their families owned thousands of dollars in stocks, individually. Officials in the office of the secretary of Defense collectively owned between $1.2 to $3.4 million of stock in aerospace and defense companies during each year examined by the Journal. Some of these holdings even included Chinese companies that the U.S. government was considering blacklisting because of their national security implications.
- An Environmental Protection Agency “top official” bought gas and oil stocks.
- The Food and Drug Administration allowed “an official to own dozens of food and drug stocks on its no-buy list.”
- “A Defense Department official bought stock in a defense company five times before it got new business from the Pentagon.”
The analysis reviewed “more than 31,000 financial disclosure forms for about 12,000 senior career employees, political staff and presidential employees, covering the years 2016 through 2021.”
Some more examples from the Journal’s great reporting:
- While the government was scrutinizing Big Tech, “more than 1,800 federal officials” owned or traded stocks in at least one of these four companies: “Meta Platforms Inc.’s Facebook, Alphabet Inc.’s Google, Apple, Inc. and Amazon.com, Inc.”
- Over sixty “officials at five agencies,” such as the Federal Trade Commission and the Justice Department, traded stock in companies right “before their departments announced enforcement actions…against those companies.”
- The Defense Department, office of the secretary officials “collectively owned between $1.2 to $3.4 million of stock in aerospace and defense companies on average each year examined by the Journal.” Some even “held stock in Chinese companies while the U.S. was considering blacklisting” them.
- “About seventy federal officials” utilized hazardous techniques like “short selling and options trading, with some individual trades” worth between $5 – $25 million. “[M]ore than 90,000” stock trades occurred in “the six-year period.”
- “When financial holdings caused a conflict, the agencies sometimes…waived the rules. In most instances identified by the Journal, ethics officials certified that the employees had complied with the rules, which have several exemptions that allow officials to hold” conflicting stocks.
It is important to note that when people in the private sector get caught doing this, they can go to jail. That happened to home-making maven Martha Stewart several years ago after she received a tip from a friend about a medical stock that was about to tank because it was about to be denied FDA approval for a new drug.
“Here you have people in very sensitive, important positions that are doing massive amounts of trades,” Peter says.
In his 2012 book Throw Them All Out, Peter documented insider trading by members of Congress. His revelations were picked up by CBS’s show 60 Minutes which did a full segment that embarrassed congressional leadership into passing the STOCK Act. But, as noted earlier, the law was de-fanged about a year later and it is still difficult to search the disclosure forms members must submit. Almost as if they wanted it to be difficult.