March 24, 2020
Amidst an economy-crashing pandemic, several Senators appear to be more concerned with their stock portfolios than with the well-being of their constituents or with their Senatorial responsibility to offer a solution. Sadly, this will almost certainly not be the only instance of crisis profiteering during the coronavirus outbreak.
In the coming weeks and months, government officials in the executive and legislative branches will have access to an unprecedented level of market-moving information. Given what we have learned from the Senate and the nature of Trump’s team, it feels inevitable that some will succumb to the desire to capitalize on their access for personal gain. In recognition of this near inevitability, it is essential that the Securities and Exchange Commission (SEC) intensify its efforts to monitor and police violations of securities law among federal decision-makers.
Senators Richard Burr (R-NC) and Kelly Loeffler (R-GA) are the first federal officials we know of to have allegedly used their privileged access for personal profit. Each sold off millions of dollars worth of stock in the last two months, conveniently avoiding the worst effects of a historic stock market decline.
While this could just be extraordinary luck, it seems highly unlikely. The scale of both Senators’ transactions stand out compared to other Senate colleagues in the same time period. It is also notable that Senator Loeffler had made no transactions in the weeks leading up to her first sale on January 24. These circumstances suggest that both lawmakers were acting off of non-public information, obtained through their duties as Senators, to protect their financial positions. If so, each violated the provisions of the STOCK Act of 2012 which “prohibit[s] Members of Congress and employees of Congress from using nonpublic information derived from their official positions for personal benefit.”
The appearance of impropriety will only serve to further undercut Americans’ damaged trust in their governing institutions. In recognition of that fact, the Demand Progress Education Fund and Revolving Door Project have filed complaints with the Securities and Exchange Commission (SEC) requesting that the agency investigate Burr and Loeffler’s transactions to independently establish the facts of each case. If each is found not to have erred, the public can feel more confident in their ability to govern in the public interest. If, in contrast, the SEC determines that either did violate the terms of the STOCK Act, then the public can take comfort in the fact that our regulatory institutions are acting as designed and policing bad behavior, even among the very powerful.
To build public trust in federal governance, however, the SEC will need to do more than respond to our pending complaint. The public, which has watched numerous executive branch officials openly using their positions for private gain over the past three years, knows that Senators Burr and Loeffler will not be the only federal officials who take advantage of this moment to pad their pockets. It is, therefore, imperative that the SEC actively and publicly monitor federal officials’ actions in the coming weeks and months to ensure that they are not using privileged access for personal gain.
This will not only build confidence in the federal government’s decision-making in this time of crisis, but help restore public trust in institutions like the SEC over the long-term by demonstrating that such agencies are ready and willing to take on even the most powerful wrongdoers. The SEC’s credibility has sustained severe damage in this regard, as the Revolving Door Project has highlighted time and again. Partisan attacks on agency leadership have undercut agency action, while the presence of legions of revolving door figures on both sides of cases before the SEC call into question the integrity of those actions.
Maintaining trust in governing institutions is always an essential component of effective governance. It is, however, especially important in times of crisis. Crisis profiteering, left unpoliced, will serve as a formidable obstacle to an effective federal response to the coronavirus outbreak. In contrast, active, principled governance from all corners of the federal bureaucracy will help rebuild public trust and leave us better prepared to weather what is to come.