Senators sold millions of stocks before coronavirus threat crashed market
Four senators - Sens. Kelly Loeffler (R-Ga.), James Inhofe (R-Okla.), Dianne Feinstein (D-Calif.) and Richard Burr (R-N.C.) – sold hundreds of thousands of dollars of stock just days after a classified briefing on Jan. 24.
The briefing was with Trump administration officials over the threat of the coronavirus outbreak. About a month after the briefing, the stock market collapsed.
Now questions are being raised if the sale of shares by these senators violates the STOCK Act, which bans the members of the congress from trading stock based on the information not available publicly.
During the 2008 financial crisis, politicians of both parties were found to have sold shares following internal briefings. However, at the time, the insider trading rule did not apply to the lawmakers. But, in 2012, the STOCK Act (Stop Trading on Congressional Knowledge) was passed making it illegal for the lawmakers to trade stocks based on the non-public information. Burr, at the time, opposed the act, calling it “ludicrous.”
On Feb 13, Burr sold $628,000 and $1.72 million in stock, his biggest publicly disclosed sale in the past 14 months, according to ProPublica . On Friday, Burr has asked the Senate Ethics Committee to investigate his transactions.
Loeffler and her husband, who is also the chairman of the New York Stock Exchange, offloaded at least $355,000 shares between Jan. 24-31, according to Senate records. Then between Feb. 5-14, the two sold $890,000 in stocks. In a on Friday, Loeffler defended the sales, saying she has no control on their financial assets.
Inhofe, who sold over $20000 worth of shares, also said that he has no involvement in the investment decisions and that he didn’t attend the Senate coronavirus briefing on Jan. 24.
Feinstein, who sold shares of Allogene Therapeutics, a California biotechnology company, said he has nothing to do with the decisions to sell the stocks.
Shameful Insider Trading
According to reports, several United States Senators dumped their stocks following a confidential briefing in the Senate regarding the COVID-19 epidemic. If true, these senators would have violated the STOCK Act, signed by Barack Obama in 2012. STOCK stands for “Stop Trading on Congressional Knowledge” and was a bipartisan bill that met almost unanimous approval in both the Senate and the House.
One of the Senators who voted against the Act in 2012 was implicated in the latest scheme, Republican Richard Burr, as well as two other of his Republican colleagues. Democrat Senator Dianne Feinstein was also revealed in disclosure forms as one of the four Senators that engaged in the post-briefing trading. As expected, all declared innocence, by placing the blame on third parties they placed in charge of their portfolios, or in the case of Burr, that he traded not on the basis of the confidential briefing, but on public media reports on the spread of the virus in mid-February.
This is doubtful, as President Trump and his allies have been insisting even as late as February 24 that “the Coronavirus is very much under control in the USA”. Trump further tweeted, “Stock Market starting to look very good to me!” Burr has some extra explaining to do, and even Carlson Tucker took him to task for this by pointing out that Burr essentially conducted a cash-out and did no buying at that time.
As it stands, with the evidence made public, it looks like a case of shameful insider trading. Many free market advocates argue that insider trading should be made legal. But this creates crony capitalism, especially when politicians are engaging in it. Markets need to have regulations to keep the investment playing field fair, and to protect its integrity. Politicians that use their knowledge of national and international crises to profit on the market must be prosecuted to the fullest extent of the law.
While it can be debated whether or not insider trading should be illegal, the alleged actions of four United States Senators accused of dumping hundreds of thousands of dollars of stock right before the COVID-19 induced crash is a bad look for our politicians. This is a time when Americans want to look too D.C. and see leadership, not more corruption.
To set the record straight, the four Senators accused of violating the STOCK Act have all denied any wrongdoing. Unfortunately for them, however, the facts don’t look good.
And some look worse than others. Take Richard Burr’s case (R-NC) for example. He dumped between $628,000 and $1.7 million not long after a confidential February briefing on the Coronavirus threat. After the accusations of insider trading were brought to Burr’s attention he claimed that his sales were influenced by coverage of the Coronavirus crisis on CNBC. That could be true or it could be false.
Senator Diane Feinstein (D-CA) sold between $1.5 million and $6 million through January 31st and February 18th. She has claimed that her stocks are in a blind trust and she has no involvement in stock trading. Even if that’s true, is it possible she perhaps made a comment to her financial advisor along the lines of: “it’s about to get bad out there”?
What is true and what is false is muddled at the moment but it goes to show that we must have change when it comes to laws regarding insider trading. Either we need to abolish the STOCK Act, something many hard-line capitalists would be in favor of; or we need to make it law that Congresspeople cannot own stock unless they have it in a truly blind trust.
While the alleged corruption of these four US Senators is disgraceful, especially during this time of worldwide crisis, the whole situation shines light on another bad law. Again, the STOCK Act either needs to be amended to go all the way, or repealed.
A Stinging Betrayal of Trust
Party lines become meaningless when a politician betrays the trust of his or her constituents. Regardless of their status, reputation, or political allegiances, each of these individuals should be thoroughly investigated for violations of federal law. There is nothing more important to America right now than trust, especially between the government and the public. The country is grappling with an unprecedented challenge, our leaders are demanding an enormous sacrifice from citizens, and many are fearing for their lives and the lives of their loved ones. To make it through this crisis successfully, we need confident and competent leaders who can be trusted to make decisions in the best interest of the country. But when our leaders instead turn to violating insider-trading laws to cover their own interests, that trust is lost and we are left angry and divided.
I’m not saying that each of these four lawmakers are guilty, but it would be totally irresponsible for us not to investigate and hold them accountable. If any are found guilty, I sincerely hope justice is carried out and they are ousted from their offices. Americans deserve honest, efficient, and straightforward leadership. For me, this only strengthens my distaste for big government and bureaucracy.
I’ve always been bothered by the notion that certain people are made to be honest and effective leaders. It reeks too much of the “philosopher king” dreamed of by ancient greek scholars, a person knowledgeable, benevolent, and wise enough to lead the people in the right and never take for himself. In reality, such a person doesn’t exist. Everyone is flawed, everyone is selfish, and everyone can be corrupted by the power they hold. This is why I support establishing term limits for all government offices, and why I support limiting the power of the government as much as possible, both so when a politician fails the damage they do is minimal. It’s also why I support holding these men and women accountable to the extent of the law. America needs trust, and trust is only possible when the public can hold our leaders accountable for their actions.
This is indeed a betrayal of the people’s trust. Politicians have access to information the regular citizenship does not have, and to use that as a means to manipulate the market to their favor is shameful.
But although for some it causes distrust of big government, it actually highlights the need for fair and responsible regulations to keep would-be financial abusers honest. A big government is fine as long as it is accountable to the people, and regulations like the STOCK Act keep crony capitalism from growing out of control.
If found guilty, the implicated Senators must face the music, and face the consequences of their actions. So far, there has been no admission of guilt, only alibis that need to be tested in a court of law.
There is no true freedom without boundaries, and it is true within the market as it is in any relationship. Not even the staunchest Libertarian I know would believe anarchy is a proper solution; only be consistent and apply regulations for fair trading practices all around to keep situations like this from getting out of hand.
The right tends to be suspicious of power, the left suspicious of greed. So why not meet down the middle and keep regulations in place to keep in check the greed of the powerful. It will help ensure a fair and equitable marketplace and maintain true competition.