Pete Hegseth’s Broker Tried to Buy Defense Stocks Weeks Before the Iran War Started

Corruption of Power GriftMatrix

The STOCK Act has been broken since it passed.

Pete Hegseth, the US Secretary of Defense, helped plan and advocate for a war against Iran. Well, according to the Financial Times, back in February, just weeks before the U.S. and Israel launched strikes on February 28th, his broker at Morgan Stanley called up BlackRock and asked about putting several million dollars into a defense industry ETF. A fund, specifically, that holds Lockheed Martin, Northrop Grumman, RTX, and Palantir. The companies that profit most directly from the U.S. going to war.

The investment didn’t go through. Not because anyone stopped it, but because the fund was so new that Morgan Stanley’s platform couldn’t even process the purchase yet.

The Pentagon called the Financial Times report “entirely false and fabricated” and demanded a retraction. The FT said they stand by their reporting. We’re now five weeks into the Iran war, that defense ETF has lost about 13% since the strikes began, so Hegseth wouldn’t have made money on this particular bet anyway. But that’s not really the point.

The point is that the person with the most classified, non-public knowledge about when and whether the United States was going to start bombing another country had a financial broker actively shopping for investments in the companies that build the bombs.

Whether Hegseth told his broker to do that, whether the broker acted on his own, whether this was a coincidence or something worse – we don’t know. The FT cited three sources. The Pentagon denied it. Who knows who to believe?

But the reason this story lands so easily, the reason it feels immediately plausible, is because we’ve designed a system where it could happen. We haven’t closed the door. We’ve left it propped open with a $200 fine and a 30-day disclosure window.

Congress passed the STOCK Act in 2012. It was technically progress. Before that, lawmakers weren’t even clearly covered by insider trading laws. The STOCK Act said, okay, yes, you can’t trade on non-public information you got from your job in government. And it added a disclosure requirement: report your trades within 45 days. The enforcement mechanism for missing that deadline is a $200 fine. Not $200,000. Two hundred dollars.

No member of Congress has ever been charged under the STOCK Act.

During the first weeks of COVID-19, when members were getting private briefings about how catastrophic it was going to be, several of them sold millions in stocks before the market collapsed. The DOJ investigated. Nobody got charged. The STOCK Act, it turns out, is good at generating public records and not much else.

There’s a bipartisan bill that keeps getting introduced and going nowhere called the ETHICS Act. It would ban members of Congress, their spouses, and their kids from trading individual stocks entirely. Polling consistently shows around 85% of Americans support something like this. Both parties’ voters want it. It has never passed.

Here’s what’s also true: funds that mirror congressional stock trades have beaten the market for years. That’s not a coincidence. That’s what privileged access to non-public information looks like when you dress it up in a brokerage account.

And it’s not just Congress. The executive branch runs the country’s foreign policy, monetary policy, and regulatory decisions. The people in those rooms know things that would move markets. Pete Hegseth knew more about the Iran war than anyone at a hedge fund could ever find out by reading the news. His broker knew he was a “high-profile potential client.” That’s the whole problem, distilled into one phone call to BlackRock.

We’ve had the conversation about fixing this for over a decade. The reforms keep dying in the same place they always die, which is the legislature that would have to give up trading its own stocks to pass them. Turns out asking people to vote against their own financial interests is a tough ask, no matter which party they’re in.

86% of Americans want a ban. Congress has a $200 fine and an honor system.

You do the math.

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