Misuses of power for private gain had been rampant in the Harding Administration. The extent of these infractions only became clear with the public disclosure of the "Teapot Dome Scandal." A naval oil reserve was leased to private individuals by the Secretary of the Interior. He was convicted and sentenced to a year in prison.

As the US Navy converted its ships from coal burning to oil burning it acquired a strategic reserve of oil in Wyoming and California. The Wyoming field was known as the Tea Pot Dome field. In 1921 President Harding issued an executive order transferring the control of the fields from the Navy to the Interior Department. In 1922 when the transfer was actually implemented Secretary of the Interior Albert Fall leased the fields without competitive bidding at a below market rate. Tea Pot Dome he leased to Harry F. Sinclair of Mammoth Oil, a subsidiary of Sinclair Oil Corporation and the California fields to Edward L. Doheny of Pan American Petroleum and Transport Company. Leasing the fields without bidding was legal, the problem was that Fall received bribes in return for what he did. Fall received a no interest loan of $100,000 and other gift valued at $400,000.

The scandal began to come to light when a competing firm wrote a letter to Senator John B Kendrick. Kendrick then introduced a resolution in the Senate to investigate the matter. The Senate Committee on Public Lands. By 1924 the basic outline of what had taken place had become clear. Fall was charged with accepting bribes and was eventually found guilty and served time in prison. Those doing the bribery were acquitted. In the meantime, the Supreme Court invalidated the lease and returned them to the Navy stating the Harding could not transfer the leases from the Navy.

The Teapot Dome Scandal was part of a larger pattern of misconduct that had taken place during the Harding Administration. In early 1923, Colonel Charles Forbes was found guilty of stealing from the government. It was estimated that he and his accomplices stole tens of millions of dollars in connection with the building of a Veteran's hospital.