The drive to prevent insider trades by federal officials might be out of neutral. Agencies across the board are starting to better scrutinize — and who knows, maybe even punish! — fishy financial moves made by their employees.
All it took was a massive, shaming investigative effort by The Wall Street Journal, revealing that feds had direct financial interests in industries and sectors they were supposed to be regulating — everything from Microsoft to corn and soybean futures.
These actions, by the way, were pervasive: 2,600-plus federal officials invested in companies under the eyes of their agencies. Sixty-plus across five agencies reported trades in companies right before those agencies made enforcement moves against them.
That’s no coincidence. It’s the sign of a rotten institutional culture allowed to flourish through nod-and-winking at the law.
And that leaves out even more worrying moves like the nearly 3,000 (!!!) short sales made by a senior policy analyst at the Federal Deposit Insurance Corp. married to a Commodity Futures Trading Commission employee. And the (at least) seven-year gap in stock trade disclosures and clearance by an official of the Securities and Exchange Commission. And the move by a Commerce Department patent judge to hand a victory to Google while the company employed his wife.
Sure seems like a lot of “public servants” (i.e. unaccountable bureaucrats) are enriching themselves in ways that land average Joes in jail.
And that’s to say nothing of the much larger problem. Shady moves like this erode any possible trust in government. If massively powerful regulators are lining their pockets, why should anyone respect any law or rule at all?
Now, spurred on by actual journalism (as opposed to the tongue-bath regulatory enforcers usually get from major media), these agencies are trying to root out crooks from their own ranks. That’s good(ish) news, but it still leaves a major question unanswered.
Namely, who watches the watchers?
Theoretically, there are rules already in place throughout Alphabet City to stop this kind of malfeasance. But they are clearly too lax — as is enforcement.
The SEC trade-obfuscator, for example, got off with a seven-day suspension. And nothing happened to the CFTC short-selling husband, although such trades are explicitly forbidden to spouses by the agency’s own rules.
So the recent moves to observe and take action are a small step in the right direction. But if you dream of a world where the men and women making the rules you have to live by obey them themselves, don’t hold your breath. (And don’t get us started on Congress.)