Lewis Morris / October 17, 2022

Insider Trading for Bureaucrats

Americans pay too little attention to the goings-on within the federal bureaucracy, which allows self-enrichment schemes to flourish.

Graft and corruption aren’t just for elected officials anymore. One of the unintended consequences of the incessant growth of the federal bureaucracy is the spread of illegal activity. We’ve long known that the Swamp culture instills in federal employees a bulletproof sense of entitlement, especially among the political class, but a recent investigation across 50 federal agencies makes this even more apparent.

That investigation, conducted by The Wall Street Journal, revealed that federal officials in the executive branch have improperly profited from their jobs. Frankly, we’re as shocked — shocked — as Captain Renault to learn that employees of cabinet-level agencies have reported both owning and trading stocks that were directly affected by the actions of their agencies.

This, though, is not a tale of a few crooked bureaucrats. The Journal’s investigation found more than 2,600 federal officials in a host of agencies in both Republican and Democrat administrations who disclosed stock investments in companies that were lobbying their agencies or were subject to their agencies’ regulation. This accounts for approximately one in five senior officials in the 50 federal agencies the Journal investigated.

The activities were not isolated. During the push for tougher regulation on Big Tech, more than 1,800 federal officials reported owning or trading stocks in Meta (Facebook’s parent), Alphabet (Google’s parent), Apple, and Amazon. More than 60 officials at the FTC, Justice Department, and elsewhere reported trading stocks in companies shortly before enforcement actions were announced against them. A senior EPA adviser reported owning oil and gas stocks while former President Donald Trump was working to shift the country toward energy independence. A Defense Department official purchased Lockheed Martin stock before the government’s F-35 Lightning II Joint Strike Fighter deal was announced.

It goes on and on.

There are several factors that have allowed this behavior to flourish. Rarely have we ever taken much notice of the bureaucracy and the civil-servant corps. Whether it be facts or stereotypes, we tend to pay more attention to Congress and the presidency when it comes to corruption.

Rules, or lack of them, also make it difficult to track what goes on in the bureaucracy. Most officials’ disclosures are only available upon request, and some agencies either stonewall such requests or ignore them outright. Dollar amounts that trigger disclosure are also woefully out of step with the laws. Federal regulations, for example, don’t consider individual stock investments of less than $15,000 or mutual fund holdings in a specific industry of less than $50,000 to be of any concern. These thresholds can be easily met by merely diversifying portfolios, which is a golden rule of investing in any event.

In some instances, agencies don’t even have rules governing their employees’ investments, and those who do break rules often receive light punishment if any at all. And while the Journal took pains to point out that both Democrats and Republicans are at fault, it is reasonable to assume that Democrats are disproportionately involved in graft since they make up the vast majority of the federal workforce. Like-minded agency regulators are by nature unlikely to prosecute their own.

Then there’s the general sense of entitlement that pervades the federal bureaucracy. The more isolated these Swamp minions become from the rest of us, the more they believe in the virtue of public service and the more they believe they deserve an extra slice of the pie as compensation for all they do supposedly on behalf of the country.

Clearly, these folks need to be brought out into the light.

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