Caroline Brehman/CQ Roll Call via AP Images
If Shalala sold stock in 2019, where are the legally required public disclosures?
First Response
Rep. Donna Shalala, newly appointed to the corporate bailout oversight panel, told the Miami Herald yesterday that she sold most of the individual stock holdings I highlighted in my report on Saturday. But the description of this divestment raises more questions than answers.
Shalala’s office says that she began to work with the House Ethics Committee to set up a blind trust after being sworn into Congress in January 2019. While that process is ongoing, Shalala “divested and sold almost all of her individual stock holdings,” says her chief of staff Jessica Killin. Those proceeds were transferred into mutual funds and exchange-traded funds. She even gives dates for these sales: shares in Boeing were sold March 2018 (before entering Congress), Alaska Airlines was sold March 2019, and Chevron, Conoco Phillips, AMC Networks, Moelis, and BlackRock iShares ETFs were sold “in 2019.”
If that’s the case, where are the STOCK Act disclosures? Under the 2012 law, members of Congress have 45 days to disclose stock transactions to the Clerk of the House, and those disclosures are publicly listed in a “periodic transaction report” (PTR). Shalala has not filed a PTR since entering Congress, and all of those 2019 trades would fall outside the 45-day window. We know about Richard Burr and Kelly Loeffler’s conveniently timed trading in February, after getting briefings about the coronavirus, because they had to disclose within 45 days.
I used Shalala’s 2019 financial disclosure form (which covers holdings through the end of 2018) because it’s the only one she’s filed; she got a 90-day extension to file a new disclosure in 2020, which is due in August. But the PTRs are supposed to be filed outside of the financial disclosure. At first glance, Shalala’s office either wrongly claimed that she made stock sales last year, or violated the STOCK Act by not disclosing them.
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Jen Ahearn, policy director for Citizens for Responsibility and Ethics in Washington, told me that there’s an exemption within the STOCK Act for transactions sold within a blind trust. However, Shalala’s office says that the blind trust is in the process of being set up, and therefore these trades were made outside of that.
Shalala spokesperson Carlos Condarco told me that “the Congresswoman has filed all the necessary disclosures required under the STOCK Act,” and that the House Ethics Committee could direct me to proof of the disclosures. But the Ethics Committee doesn’t handle STOCK Act disclosures and PTRs; that’s the domain of the House Clerk.
The Ethics Committee has not yet answered my queries. [UPDATE: the Ethics Committee gave a terse two-word response: “No comment.”] Ahearn suggested that the reference to the Ethics Committee could mean that she’s received a waiver for any penalty of not disclosing under the STOCK Act, though those are only supposed to be granted in “extraordinary circumstances.” However, Ahearn said, “maybe she and the Ethics Committee are working together to get rid of these things.”
It’s very strange. I really don’t think a member of Congress would lie about stock sales or the timing of stock sales, because the truth would eventually come out. So did her office just fail to file the transaction reports, violating the STOCK Act? And is it really that hard to set up a blind trust to transfer individual stock holdings? “The blind trust part of it I don’t totally understand,” Ahearn said.
Meanwhile, Shalala was only appointed to this commission four days ago. Why did she sell BlackRock exchange-traded funds, the type of funds she was putting stock proceeds into, in 2019, a year before she’d know that she’d be serving on a panel involving Federal Reserve programs that BlackRock is operating? At the same time, Shalala acknowledged that she continues to hold individual stock in UnitedHealth, an investment worth between $300,000 and $615,000 as of her 2019 disclosure. But she sits on the Education and Labor Committee, which has some jurisdiction over health care, and holding stock in a large health insurance company seems like the last thing you’d want to do if you wanted to avoid conflict of interest. Killin, Shalala’s chief of staff, did say the Congresswoman would be “happy to get rid of” the UnitedHealth stock.
I appreciate the transparency on divestment, I guess I just wish it was more transparent. The entire intention of the STOCK Act is to give the public full disclosure of these types of transactions, and not everything adds up here. There could be an innocent explanation for all of this. But if you have someone with so many financial entanglements that it takes 15 months and counting to segregate her assets, amid all these other questions, maybe she doesn’t have the independence necessary to question large corporate actors about bailouts.
To some critics, this invalidates Shalala’s appointment. “How is she going to perform oversight of banks if she thinks the straightforward instructions of the STOCK Act are too complicated?” asked Jeff Hauser of the Revolving Door Project. “And if she is dissembling to the Miami Herald, that should undermine confidence in her leadership as well. Good government people ought to be able to make Pelosi feel enough pressure that rethinking her choice of Shalala might become the easiest way out of this mess.”
Finally, in an example of worlds colliding: Shalala’s chief of staff, Jessica Killin? Before this job, she spent ten years as the top lobbyist for… USAA Bank, with whom I have a passing familiarity.
Odds and Sods
I was on The Real News discussing the “banks steal the checks” scandal. Watch that here.
I was also on Rising Up With Sonali discussing the COVID-19 crisis. Watch that here.
On a conference call yesterday, Alexandria Ocasio-Cortez said she would not vote for the emerging CARES Act 1.5 deal (which is still not finalized) because it lacks key priorities. That was in response to my question about it, and I wrote up the moment here.
The Washington Post reports that bank seizures of CARES Act payments are “under review” by the Treasury, which has known about this issue for nearly three weeks.
And I survived USA Today’s fact check on the “banks steal the checks” scandal, which was so rigid that they called two experts to check on whether the report was true, and both of those experts were quoted in my story.
What’s This Now?
You may have seen yesterday that oil was at one point -$40 a barrel. And yes, at that moment, if you wanted a barrel of oil and had someplace to put it, you would also be paid $40 for your trouble. The problem is there’s really nowhere to put it; the collapse in oil demand has been so sweeping that storage is a problem. This really caught up to everyone Monday because a certain futures contract required physical delivery that day, and this lack of storage meant that people would pay to get out of the contract.
It’s an extreme version of a long and complex concept known as contango, and here’s me writing about it seven years ago. The short takeaway is this: we just have too much oil, and that deal to cut production last week didn’t do the trick. Moreover, the futures market bears little resemblance to the real world, and speculation within those markets can cause massive distortions. We also see what “stranded assets” can look like: industry producers keep building oil infrastructure at a time when it should be wound down, or you might get stuck paying someone to take your oil.
Incidentally, Donna Shalala owns an exchange-traded fund composed of energy infrastructure assets. Who will likely be looking for a bailout. She apparently didn’t trade the ETFs, but I’d recommend unloading this one.
Today I Learned
- Matt Stoller is interesting on the small business program, particularly regarding how smaller banks were more successful at distributing it. Classic relationship lending: they were less skittish about the program because they knew their customers. (BIG newsletter)
- Meanwhile, JPMorgan and Bank of America have been sued by small businesses for favoring larger companies on PPP loans. (Seeking Alpha)
- At least eighty publicly traded companies received PPP loans. Time for the Ruth’s Chris rule! (Financial Times)
- That temporary immigration halt Trump announced via tweet is mostly for show. (Wall Street Journal)
- Private equity firms still buying millions of dollars in TV ads to keep surprise billing going, while cutting pay for ER doctors during a pandemic. (Pro Publica)
- The New York Times found 28,000 uncounted excess deaths suspected of being due to COVID-19 globally. That’s not even close to the total. (New York Times)
- Employers want legal immunity for COVID-19 cases after they reopen. (Reuters)
