The ongoing war between Russia and Ukraine is a tragedy that has killed thousands, displaced millions, and sent ripple effects through the global economy. For major American defense contractors, though, the situation may present new business opportunities. Particularly troubling is that some of these companies’ major stockholders are prominent members of the House of Representatives and the Senate. For members of Congress, who play a key role in determining how money is allocated in the annual federal budget, to have a vested financial interest in the corporations who receive defense contracts represents a clear conflict of interest. This conflict highlights the urgency of passing a law banning Congressional stock trading.
A number of members of Congress have actively traded defense stocks amidst the Russia-Ukraine war. One such offender is Representative John Rutherford (R-FL): According to Business Insider, Rutherford purchased thousands of dollars worth of Raytheon stock the day Russia invaded Ukraine. In a tweet that same day, Rutherford contended that the United States should “leave nothing off the table” in regard to Russia. Rutherford’s tweet indicates that he would support greater American involvement in Ukraine, including possible military intervention––something that the Biden administration has repeatedly and forcefully opposed. It is entirely possible that these views are incidental, but the idea that a lawmaker would purchase stocks in a company that would profit off of military intervention and then encourage that intervention is disquieting. Representative Marjorie Taylor Greene (R-GA), a popular source of political fodder for Democrats, drew criticism from figures like Ilhan Omar for her investments in the defense industry, especially in light of her previously tweeting that “war and rumors of war [are] incredibly profitable and convenient.” Greene bought stock in Lockheed Martin on February 22, roughly a day before the beginning of the invasion, according to congresstrading.com. She has since publicly proclaimed opposition to conflicts “that have spent trillions in endless foreign wars”— marking a concerning distinction between what she does privately and says publicly.
This phenomenon extends across the aisle; both Democrats and Republicans are responsible. According to congresstrading.com, Representative Kurt Schraeder (D-OR) purchased stock in General Dynamics on March 7, yet failed to disclose the trade until April 1. Schraeder, amidst an ongoing international conflict, actively tied his money to a major beneficiary of war, discussing the war publicly but keeping his stock purchases private. The only real consequence of Schraeder’s failure to immediately disclose his trade was some limited public scrutiny, a response that is unlikely to deter similar actions in the future. According to Business Insider, there is no public record to track fines and penalties for those who break congressional investment disclosure rules, demonstrating the weakness of the current system. With a legal requirement that stocks be placed in blind trusts, these incidents simply would not happen.
While the war has thrust defense industry ties amongst members of Congress into the spotlight, these ties are by no means a new phenomenon. According to Business Insider, at least 19 current members of Congress own stock in either Lockheed Martin or Raytheon. The list includes prominent Senate Democrats such as Sheldon Whitehouse (D-RI) and John Hickenlooper (D-CO), each of whom have at some point held over $100,000 of stock in the two companies. Several other prominent senators and representatives and their spouses also own defense stocks.
Between February 1 and April 10, Raytheon stock climbed by roughly 10 points, Northrop Grumman stock jumped by over 90 points, and Lockheed Martin stock increased by roughly 75 points. While the Russia-Ukraine war seems to have catalyzed the recent jump, defense stocks have been booming for more than two decades. According to an investigation from Sludge released in August 2021, the stocks of the top five defense contractors grew by an average of 900 percent since September 2001, and at least 47 members of Congress and their families own between $2 million and $7 million of stock in defense companies. War is incredibly profitable, with private defense contractors—and their shareholders—being perhaps the biggest beneficiaries of death and destruction worldwide. The fact that sitting members of Congress can both allocate funds towards and profit off of these companies raises massive questions about how policy decisions are made and just how involved private defense contractors are with American military spending and foreign policy.
Congressional trading is a broad issue, with defense contractors representing a particularly disquieting example. The fact that congresspeople can both shape the predominant public narrative and decide how money is allocated is problematic on its own, given that they have the capacity to impact the prices of stocks they themselves hold. An additional issue, and one particularly relevant to areas of national security, regards information. Members of Congress have access to private intelligence briefings, increasing the likelihood that they could use their privileged position to inform stock trades. A prominent and recent episode of this worrying trend involved former Senator David Perdue (R-GA), who is facing scrutiny for making a number of trades in early 2020 when, unbeknownst to many, Covid-19 was soon to completely upend normal life and dramatically impact the stock market. Concerns that Perdue’s potential knowledge of classified information may have informed his stock purchases logically extends to issues of national security. Though it would likely be too extreme to suggest that this is something akin to insider trading, it is reasonable to assume that members of Congress have more access to national security information than the average investor.The current system is demonstrably insufficient; The case of Schraeder illustrates that condemnation and monetary penalties do little to actually deter members of Congress. A more forceful solution would be to ban sitting members of Congress or their spouses from trading stocks entirely, with strict penalties for noncompliance, by forcing them to place stocks and other assets in blind trusts while they hold office. A bill to do just that was introduced in January by Senators Jon Ossoff (D-GA) and Mark Kelly (D-AZ). If that bill, the Ban Congressional Stock Trading Act, were to pass, concerns about conflicts of interest in defense and other industries would be greatly alleviated. The bill is likely to become law, given that more than 75 percent of Americans across the political spectrum support such a ban. Between the clear legislative solution to the issue and the collective will of the American people, a prohibition on congressional stock trading could, and more importantly should, be put in place.