Over 2,600 officials at federal agencies invested in stocks of companies at the same time the firms were lobbying their departments for favorable policies, uncovered an investigation by the Wall Street Journal (WSJ).
WSJ looked at over 31,000 financial disclosure forms of over 12,000 political staff members, presidential appointees, and career employees—analyzing data of more than 315,000 trades in stocks, funds, and bonds made by the officials, their spouses, or their children between 2016 and 2021. Close to 40 percent of officials in the Treasury department had invested in stocks of firms that lobbied the agency.
Among the EPA, IRS, SEC, Fed, and Defense departments, more than 25 percent of the officials were found to have made investments under similar circumstances, the WSJ analysis shows.
Over 1,800 federal officials owned or traded in big tech firms like Meta, Apple, Amazon, and Alphabet at a time when the government was intensifying its scrutiny of such companies. Around 70 federal officials used risky trade techniques like options and short selling, with some individual trades going up to $25 million in value.
At the EPA, over 200 senior officials invested in firms lobbying their agency. On average, employees from the department as well as their family members owned between $400,000 and $1 million worth of shares in oil and gas firms collectively every year during the investigation period.
Officials from the Defense Department’s office of the secretary collectively owned between $1.2 million and $3.4 million on average in stock investments in defense and aerospace companies every year. Some of the investments were in Chinese firms at a time when Washington was considering blacklisting these firms.
More than 60 officials from five agencies took stock positions in companies just before their departments announced enforcement actions against these companies.
Speaking to WSJ, Don Fox, an ethics lawyer and former general counsel at the U.S. agency that oversees conflict-of-interest rules, pointed out that several of the trades made by officials cited in the report “clearly violate the spirit behind the law, which is to maintain the public’s confidence in the integrity of the government.”
Stock trading among federal officials and legislators has been a hot topic due to the wide scope of abuse. Last year, an investigation by Business Insider revealed that 49 members of Congress traded in stocks in a manner that violated laws against insider trading.
Speaker of the House Nancy Pelosi (D-Calif.) defended such trading by insisting that America is a “free market economy” and that members of Congress must be able to engage in such activities.
In July this year, Pelosi came under scrutiny after her husband bought semiconductor stocks just before Congress planned to vote on the industry.
In February, members of Congress introduced the Stop Trading on Congressional Knowledge (STOCK) Act 2.0 act which aims to ban elected officials from trading in individual stocks. It proposed a penalty of 10 percent of the investment value should a member violate the ban.
Last month, House Democrats proposed “Combating Financial Conflicts of Interest in Government Act” legislation which seeks to ban officials in Congress, the Supreme Court, the executive branch, and the Federal Reserve from owning or trading in instruments like stocks, futures, commodities, and cryptocurrencies.