Members of Congress shouldn’t be trading stocks. But that raises the question of whether non-elected officials should be trading stocks. The Wall Street Journal opened up that can of worms and they don’t call it the swamp for nothing. Or as the EPA would say, protected wetlands.
More than 2,600 officials at agencies from the Commerce Department to the Treasury Department, during both Republican and Democratic administrations, disclosed stock investments in companies while those same companies were lobbying their agencies for favorable policies. That amounts to more than one in five senior federal employees across 50 federal agencies reviewed by the Journal.
A top official at the Environmental Protection Agency reported purchases of oil and gas stocks. The Food and Drug Administration improperly let an official 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 won new business from the Pentagon.
That is really something. And entirely unsurprising.
You can try (and mostly fail) to regulate the ethics of elected officials, but unelected officials in D.C. have long since run riot and are a power unto themselves.
What the WSJ found is probably only the tip of a very slimy iceberg. But it’s still stunning.
More than five dozen officials at five agencies, including the Federal Trade Commission and the Justice Department, reported trading stock in companies shortly before their departments announced enforcement actions, such as charges and settlements, against those companies.
More than 200 senior EPA officials, nearly one in three, reported investments in companies that were lobbying the agency. EPA employees and their family members collectively owned between $400,000 and nearly $2 million in shares of oil and gas companies on average each year between 2016 and 2021.
And look at the size of some of those trades by government officials.
“About 70 federal officials reported using riskier financial techniques such as short selling and options trading, with some individual trades valued at between $5 million and $25 million. In all, the forms revealed more than 90,000 trades of stocks during the six-year period reviewed.”
Members of Congress do have access to all sorts of privileged information and influence over industries, but top senior agency officials often have far more direct access and power.
And far less oversight.
Under federal regulations, investments of $15,000 or less in individual stocks aren’t considered potential conflicts, nor are holdings of $50,000 or less in mutual funds that focus on a specific industry.
Good to know.
An FDA official named Malcolm Bertoni disclosed that he and his wife owned stock in about 70 pharmaceutical, diagnostics, medical device and food companies regulated by the agency in 2018 and 2019, including drug giants Pfizer Inc. and Takeda Pharmaceutical Company Ltd. All were on the prohibited list.
Mr. Bertoni, a career executive, ran the FDA’s planning office from 2008 to 2019, researching and analyzing agency programs. Most of the investments he reported were in the range of $1,001 to $15,000, but his 2019 disclosure showed he and his wife owned between $15,001 and $50,000 in each of Allergan PLC, Sanofi SA, Takeda and Zoetis Inc.
Mr. Bertoni’s lawyer, Charles Borden, said Mr. Bertoni and his wife held these stocks despite the bans because they got bad advice from the FDA ethics office.
An FDA official needed ethics advice on whether it was okay to own Pfizer stocks?
“Was that wrong? Should I have not done that? I tell you I gotta plead ignorance on this thing because if anyone had said anything to me at all when I first started here that that sort of thing was frowned upon, you know, cause I’ve worked in a lot of offices and I tell you people do that all the time.”
At the Federal Reserve, an economist named Min Wei reported trades in stock of a marijuana company after the Fed sought clarity about whether banks could serve cannabis businesses. A Fed spokeswoman said the trades were made by Ms. Wei’s husband.
In June 2018, Fed Chairman Jerome Powell said publicly that the issue put the central bank “in a very, very difficult position.” Even though its mandate has nothing to do with marijuana, Mr. Powell said, he “just would love to see” a clear policy on the matter.
Because Mr. Powell didn’t dismiss the idea, investors saw the comment as bullish for cannabis companies such as Tilray Brands Inc., a leading producer. Tilray went public the following month, and its stock skyrocketed.
In early September 2018, Ms. Wei’s husband bought between $480,005 and $1.1 million of Tilray shares, according to her disclosure form and the Fed. The stock continued to surge.
It then became clear that neither the Fed nor the Treasury would take action; it would be up to Congress, with no quick fix in sight. In October, shares of cannabis companies began to fall.
Ms. Wei’s husband sold his Tilray stake in five sales in early October. By then, the shares had nearly doubled, worth between $800,005 and $1.75 million, according to Ms. Wei’s disclosure.
At least someone’s making money while the Fed screws Americans.