"Federal
officials working on the government response to Covid-19 made well-timed
financial trades when the pandemic began—both as the markets plunged
and as they rallied—a Wall Street Journal investigation found.
In
January 2020, the U.S. public was largely unaware of the threat posed
by the virus spreading in China, but health officials were on high alert
and girding for a crisis.
A deputy to top health official Anthony Fauci
reported 10 sales of mutual funds and stocks totaling between $157,000
and $480,000 that month. Collectively, officials at another health
agency, Health and Human Services, reported 60% more sales of stocks and
funds in January than the average over the previous 12 months, driven
by a handful of particularly active traders.
By March,
agencies across the government were working on wide-reaching measures
to prop the economy and markets. Then-Transportation Secretary Elaine Chao
purchased more than $600,000 in two stock funds while her agency was
involved in the pandemic response and her husband, Republican Sen. Mitch McConnell, was leading negotiations over a giant, market-boosting stimulus bill.
And as the government was devising a loan package aimed specifically at helping companies including Boeing Co. and General Electric Co., a Treasury Department official involved in administering the aid acquired shares of both companies.
Federal
officials owned millions of dollars of stock in industries most
affected by the pandemic and the government’s response. About 240
officials at health agencies and at the Pentagon, a key player in the
vaccine rollout, reported owning a total of between $9 million and $28
million in stocks of drug, manufacturing and biotechnology companies
that won federal contracts related to Covid-19 in 2020 and 2021, the
Journal’s analysis found.
Nearly
400 officials across 50 agencies reported owning stocks in airline,
resort, hotel, restaurant and cruise companies in early 2020, the review
found.
By
March, every major agency was drawn into the pandemic response. That
month was the most active for trading by officials across the federal
government, including at HHS, in the Journal’s analysis of financial disclosure forms for about 12,000 officials spanning 2016 to 2021. Federal officials reported more than 11,600 trades that month, 44% more than in any other month in the analysis."
"Agency
ethics officials rarely have a complete picture of what employees are
working on or privy to, especially during a fast-moving, governmentwide
mobilization in response to a national emergency.
Most
agencies’ ethics rules focus on what kinds of stocks officials can
trade, not when they can trade. And there are no restrictions on federal
officials’ investing in diversified mutual funds, which were more
volatile than usual early in the pandemic. Ethics officials certified
that the employees identified by the Journal were in compliance with
these rules."
"On Jan. 24, four days after the CDC publicly reported the first confirmed U.S. Covid-19 infection, Hugh Auchincloss,
principal deputy director at the NIH’s National Institute of Allergy
and Infectious Diseases, summed up the state of his agency in an email:
“New coronavirus all the time.”
That
same day, while the stock market remained lofty, Dr. Auchincloss
reported selling $15,001 to $50,000 of a stock mutual fund. Days later
he sold two more mutual funds and a stock, Chevron Corp., according to his financial disclosures, which give wide dollar ranges. That was just the beginning."
"Among officials involved in the CDC’s early pandemic response was Stephen Redd,
a veteran epidemiologist serving as deputy director for Public Health
Service and Implementation Science at the agency. His role involved
collecting information about the state of the virus and the federal
response in order to brief lawmakers.
The
CDC had a clear view of the virus’s threat by the end of January, Dr.
Redd later told a student interviewer in Atlanta. “It was easy to see it
was going to be a really big problem,” he said.
Dr.
Redd disclosed sales of between $95,004 and $250,000 in stocks and
bonds in January. He reported the sale in February of $100,001 to
$250,000 of bonds, along with purchases of between $2,002 and $30,000 of
short-term bond funds, a low-risk investment."
"On Feb. 28, Fed Chairman Jerome Powell signaled in a written statement
that the central bank was prepared to cut interest rates, a stimulatory
move aimed at quelling the economic disruption.
In the seven days preceding that statement, officials at the Treasury
and Fed reported more than twice as many trades as they made during the
same seven days of 2019."
"Two Fed bank presidents resigned last year after they disclosed a series
of investments during Fed market interventions in response to Covid-19.
The central bank in February 2022 prohibited its top officials from
buying individual stocks and sector funds and barred trading during
periods of “heightened financial market stress.”"
"That same day [March 16], Ms. Chao, the transportation secretary, made three
purchases in stock funds that track the S&P 500 and the U.S. stock
market broadly, totaling between $600,003 and $1.2 million, according to
her financial disclosures."
"By the end of the month, her investment in the S&P fund had gained
8%. By the end of the year, it was up 57%, according to its net asset
value."
"At around
the same time, a Treasury official later involved in administering the
stimulus package made a series of well-timed trades.
Early
on, the Trump administration made it clear it wouldn’t leave Boeing or
the rest of the aviation and airline sector hanging, as the travel
industry was thrown into turmoil. “We have to protect Boeing,” Mr. Trump
said March 17. “We’ll be helping Boeing.”
The
Treasury Department publicly detailed what it wanted to see in the
stimulus legislation on March 18, including $50 billion in loans for
airlines and $450 billion for “severely distressed sectors” and small
businesses.
Two days later, Treasury domestic finance counselor Jeff Goettman
reported purchases of 15 stocks, including Boeing and General Electric,
totaling between $29,015 and $260,000, according to his financial
disclosure.
Boeing was in close contact with Treasury officials as it lobbied the administration and Congress for federal aid.
Days
after Mr. Goettman’s stock purchases, lawmakers inserted a $17 billion
provision for companies deemed essential to national security, which
congressional officials said at the time was partly designed to help Boeing."
"Mr. Goettman convened the group that administered the legislation’s $80 billion for airlines"
"A week after Mr. Goettman’s March 20 stock purchases, Boeing’s shares were up 70%, and GE’s were up 17%."
"The U.S. has a law aimed at preventing the nation’s thousands of obscure
but powerful federal officials from using their influence on
regulations, policies and investigations to benefit themselves.
With penalties up to $50,000 and five years in prison, the law is
supposed to ensure that officials in the executive branch don’t work on
any matter that could affect their personal finances."
"It
doesn’t. It has exceptions. Violations often go unpunished. When a
problematic holding is identified, if the official resists selling it,
the rules often are waived. The result is a system that largely relies
on government employees to police their own stock investing.
A Wall Street Journal investigation
revealed how more than 2,600 federal officials invested in companies
that stood to benefit from their agencies’ work from 2016 through 2021.
The Journal reviewed annual financial disclosure reports filed for those
years by about 12,000 senior executive-branch officials at 50 federal
agencies, from career employees to political staff to presidential
appointees.
The
investigation found that some federal officials received waivers from
conflict-of-interest rules because they were considered too important in
a particular job. In other cases, officials were permitted to keep
holdings because they weren’t large enough to be a problem under the
law. Owning $15,000 or less in a stock isn’t considered a conflict.
The Federal Energy Regulatory Commission allowed an official who
reported a financial interest of between $50,001 and $100,000 in a
hydroelectric company to work as director of the agency’s hydropower
administration and compliance division."
"Under federal law, agencies can grant waivers from the
conflict-of-interest rules if an ethics official determines that an
investment is “too remote or too inconsequential to affect the integrity
of the services of the Government officers or employees.”"
