There are lots of different types of trusts out there. I wanted to spend a couple paragraphs this week discussing a specific type of trust that’s been in the news lately – Blind Trusts. Let’s start with a definition.
Blind Trust – a financial arrangement in which a person in public office gives the administration of private business interests to an independent trust in order to prevent conflict of interest. Under the trust, the owner does not know how the assets are managed.
The purpose of a blind trust is simply to “hide” the assets held by the trust from the owner so as to limit their ability to impact those assets. These mechanisms are used to separate the actions of influencers from personal benefit. EX. If I hold stock in XYZ Company and I give XYZ Company a government contract that I control, then I have directly impacted the value of my stock. If my assets are hidden from me then I don’t know how to benefit myself by my official actions – separation achieved.
The President of the U.S. has no obligation to put assets into a blind trust. Indeed, the President is not even subject to conflict of interest rules that apply to other government officials!
Directly quoting portions of a Congressional Research Service report on The Use of Blind Trusts by Federal Officials (emphasis mine):
Initially, it should be noted that there is no federal statute which expressly requires that particular federal officials place assets into a “blind trust” upon entering public service with the Federal Government. Rather, the use of a “blind trust” is one of several methods of conflict of interest avoidance under federal law and regulation. There are now uniform statutory requirements for the establishment and maintenance of blind trusts, and federal officials who are to use such devices, either voluntarily or as a remedial measure for identified conflicts of interest, must receive from their supervisory ethics office prior approval of the proposed trustee and the trust instrument to qualify the blind trust for ethics purposes.…
That is, federal officials in the executive branch of Government, other than the President or Vice President, must generally “recuse” or disqualify themselves from participating in any particular governmental matter in which they have a financial interest, or in which their spouse, dependent children, partner, or business with which they are associated, has a financial interest. Executive branch officials may also be required, under regulations promulgated by the Office of Government Ethics [OGE], to recuse themselves from certain governmental matters affecting an even broader category of persons or entities with whom they have a “covered relationship.”
The United States government, like all organizations that are full of living, breathing people, operates with several layers of “rules.” Some of these are laws, others are policies and procedures, and some of these are customs. You and I are most familiar with the customs – because they are the ones we see and hear about most frequently.
Presidents live in the White House. Not by law or policy, but by custom. The President pardons a turkey each Thanksgiving, not by law or policy, but by custom. Presidents release tax returns while running for office – and the list goes on. The office of the President wields tremendous power. Some of the customs we are familiar with have been adopted to voluntarily curb the potential for abuse of that power. We’ll see which of these customs are adopted by the President-elect, and which prove to be inconvenient.
Contact Chris Basom at firstname.lastname@example.org
Categories: Business & Finance