[Salon] Unpacking a Wall Street Journal investigation into officials’ financial disclosures. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

N.B. The 'senior federal employees' mentioned here are almost all political appointees, not career public servants. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

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A guide to the day’s top news

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Your guide to the day’s news exclusively for Wall Street Journal members.

Good morning. In this special edition, we unpack The Wall Street Journal's investigation into federal officials’ financial disclosures. Among our findings:

More than 1,800 federal officials reported owning or trading major tech stocks as the U.S. ramped up scrutiny of large tech companies.
More than five dozen U.S. officials reported trading stock in companies shortly before their agencies announced actions against them.
When financial holdings caused a conflict, the agencies sometimes simply waived the rules.

>From Investigations Editor Michael Siconolfi:

After WSJ’s reporting last year on federal judges, which revealed that more than 130 jurists heard cases in which they had a financial interest, we asked a simple question: What about government officials? It was a gargantuan task: The federal government doesn't maintain a comprehensive public database of financial disclosures of senior executive-branch officials. So the Journal set out to build its own.

Our Investigative, Washington and Data teams spent 10 months digging into more than 31,000 financial-disclosure forms on about 850,000 financial assets and more than 315,000 trades for officials in 50 federal agencies. The findings were extraordinary: More than 2,600 federal officials reported owning or trading stocks in companies directly affected by their agencies. One-third of 90 senior FTC officials owned or traded stock in companies that were undergoing an FTC merger review or investigation. Dozens of federal officials reported frequent trades—in one case, 9,500 in a single year. Top U.S.officials working on the government’s Covid-19 response made well-timed trades when the pandemic began—both as the markets plunged and as they rallied.

The vast majority of the disclosure forms WSJ reviewed aren’t available online or readily accessible. The review amounts to the most comprehensive analysis of investments held by executive-branch officials, who have wide but largely unseen influence over public policy.

💬 Q&A: Members of WSJ’s investigative team discuss the findings from their probe. (Watch)
Six takeaways from the investigation (Read)
How WSJ analyzed 12,000 officials' financial disclosures (Read)

Thousands of federal officials held investments that stood to rise or fall with decisions their agencies made.

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.

When financial holdings caused a conflict, the agencies sometimes simply waived the rules. In most instances identified by the Journal, ethics officials certified that the employees had complied with the rules, which have several exemptions that allow officials to hold stock that conflicts with their agency’s work.

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The top watchdog of American business is also home to Washington’s most active Wall Street investors.

Senior officials at the FTC disclosed more trades of stocks, bonds and funds, on average, than officials at any other major agency in the Journal’s review. Many of the investments overlapped with the FTC’s work.

A third of its 90 senior officials owned or traded stock in companies that were undergoing an FTC merger review or investigation, based on actions the agency has made public. FTC officials owned stock in 22 of the roughly 60 large companies the FTC brought cases against in the period reviewed. The officials were most heavily invested in technology, an industry that has come under increasing scrutiny by the agency.

Seven dozen senior executive-branch employees disclosed a total of 80,000 trades in the past six years.

A subset of the disclosures reviewed by WSJ showed the kind of rapid-fire trading seen on Wall Street: hundreds of stock-market wagers, sometimes peppered with options and other aggressive trades. These officials accounted for roughly a quarter of all transactions while representing less than 1% of filers in the Journal’s review. One CFTC economist reported more than 9,500 trades in 2020 alone by her husband, also a federal employee—an average of 38 trades per trading day.

As Covid hit, some Washington officials were trading stocks with exquisite timing.

PHOTO: MARK LENNIHAN/ASSOCIATED PRESS

In January 2020—when the U.S. public was largely unaware of Covid’s threat 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. Collectively, officials at another health agency, the Department of Health and Human Services, reported 60% more sales of stocks and funds in January than the previous 12 months' average, driven by a handful of particularly active traders.

By March, every major agency was drawn into pandemic response. That month was the most active for trading by officials across the federal government, including at HHS, in the Journal’s analysis. Federal officials reported more than 11,600 trades that month, 44% more than in any other month in the analysis.

Ethics officials often lack the tools to investigate potential conflicts of interest.

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.

The 10-Point was the name given to the news column on the WSJ's front page.

Today’s newsletter was curated and edited by Sarah Chacko in North Carolina and Liz Webber in New York, in collaboration with Editor in Chief Matt Murray.

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