The New York Times reported this week that 97 members of Congress “bought or sold stocks, bonds or other financial assets that overlapped with their Congressional work or reported similar transactions by their spouse or dependent child” between 2019 and 2021. After three years alone, the study uncovers potential conflicts of interest in almost every area of policy making.
Defense policy is no different. At least 25 members have sat on committees that shape national security policy while also trading financial investments in companies that might create competing interests with their work, such as defense stocks. With a near-even party split, Democrats and Republicans may have found a rare common ground.
The majority of these members sat on the House and Senate Armed Services Committees — the committees that oversee the military budget and oversight of the Ministry of Defence.
The list includes former Senate Armed Services Committee Chairman James Inhofe (R-Okla.), who bought and sold shares in tech companies as they battled for a 10 billion dollars Cloud computing contract with the Pentagon that eventually went to Microsoft. When the Pentagon later decided to cancel the contract, said Rep. Pat Fallon (R-Texas), a member of the House Armed Services Committee. sold Microsoft stock valued at up to $250,000 two weeks before public announcement. stand out served on the subcommittee that oversaw the deal, though a spokesman said at the time that he had “absolutely no prior knowledge that the Pentagon intended to terminate the contract.”
Also includes Rep. Ro Khanna (D-Calif.), who reported more trades than any other member of Congress. Although “made by trusts on behalf of his wife and young children,” these deals spanned all five of the top arms suppliers – Lockheed Martin, Raytheon, Boeing, General Dynamics, Northrop Grumman – consistent with his role as a member of the House Armed Services Committee. Khanna was a Opponent overspending for the Pentagon, an indication that there isn’t always a straight line between stock ownership and budget votes. But that’s definitely not the case with many other members who make money off defense stocks while wielding power in favor of larger defense spending.
Members of the foreign affairs, homeland security, intelligence, and resource allocation committees also reported trade transactions that might pose a conflict of interest.
John Rutherford (R-Fla.), for example, acted lockheed martin, Microsoft and BAE systems Stocks while he served on the budget appropriations subcommittee responsible for determining Department of Homeland Security funding. All three of these companies have obtained contracts with the Department of Homeland Security. Rutherford then Bought Raytheon stock on the day Russia invaded Ukraine, a company that also has been awarded Department of Homeland Security contracts.
The New York Times analysis defines a potential conflict of interest fairly narrowly, focusing only on stock transactions in companies relevant to committee duties. Given the daunting task of compiling such a comprehensive list, it is also limited to this three-year span. As a result, it doesn’t include instances like Earl Blumenauer (D-Ore.) cancel Raytheon stock on the day of Russian invasion of Ukraine or Marjorie Taylor Greene (R-Ga.) purchase Lockheed Martin shares the day before. In the Times’ own admission, “the analysis is certainly an undercount.”
Although all of these legislators deny any impropriety, the capacity for competing interests is clear; Congress continues to approve defense budgets Furthermore more than what even the Pentagon demands half of which goes to private contractors like Lockheed Martin and Raytheon, which in turn could benefit members of Congress invested in those stocks.
This could lead to a perverse incentive structure, given that defense stocks tend to lag as global tensions rise. War is often good for the bottom line of defense companies; Jon Schwartz written down in last year’s Intercept that “defense stocks outperformed the overall stock market by 58 percent during the Afghan war.” Some members of the defense industry even recognize this connection, as Raytheon CEO Greg Hayes did during a conference call earlier this year:
“We see, I would say, opportunities for international distribution. We only have to look at the last week where we have seen the drone attack in the UAE which has attacked some of their other facilities. And of course the tensions in Eastern Europe, the tensions in the South China Sea, all these things are putting some pressure on defense spending there. So I assume that we will benefit from that.”
Pressure is mounting for Congress to seriously consider self-regulating stock trading. Seventy percent of Americans support Lawmakers ban stock trading, including a majority of Democratic and Republican voters. At least until today six different bills were proposed to limit the ability of members of Congress to trade stocks.
Despite the popularity of these measures, self-regulation is always a major challenge. Sen. Tommy Tuberville (R-Ala.) took the record saying that it would be “ridiculous” to limit the legislature’s ability to trade stocks and that “it would really limit the number of people who want to come out here and minister.” Tuberville himself traded in stocks of major defense companies like Honeywell and General Dynamics while on the Senate Armed Services Committee.
Trust in Congress sits in the single-digit amount, since it was the turn of overinvestment in the Pentagon underinvestment in healthcare, in education and in tackling the climate crisis. Even if lawmakers routinely defend their craft, the goal should be to eliminate both the appearance and reality of conflict in setting national security priorities.
