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Should US Congressmen be able to make Financial Bets Against the US?

Posted: July 8, 2011 | Author: | Filed under: John Birch Society in Charge, Psychopaths in charge, The Media SUCKS, We are so F'd | Tags: , , , |34 Comments

Just about the time I think I’ve seen about the worst of the worst coming out of the US congress, another Congressman finds a new bottom.  The WSJ has reported that House Majority Whip Eric Cantor stands to gain financially from a U.S. default on the debt ceiling . (Basically, he’s shorted Treasuries). That’s something Cantor seems hellbent on happening. Congressman Cantor has made bets against US Treasury bonds that stand to pay if he can make it happen.  Unfugginbelievable!

Putting his money where his mouth is? Eric Cantor, the Republican Whip in the House of Representatives, bought up to $15,000 in shares of ProShares Trust Ultrashort 20+ Year Treasury ETF last December, according to his 2009 financial disclosure statement. The exchange-traded fund takes a short position in long-dated government bonds. In effect, it is a bet against U.S. government bonds—and perhaps on inflation in the future.

Salon‘s Jonathan Easley looked into the potential financial windfall for Cantor right after Cantor shut down talks with Biden and other Democrats on the budget and the debt ceiling.  Cantor is the House Majority Leader so he plays an important role in getting the majority to vote for any potential deal.  Even if a deal can be reached, Cantor could stall it and make money.

Unless an agreement can be reached, the U.S. could begin defaulting on its debt payments on Aug. 2. If that happens and Cantor is still invested in the fund, the value of his holdings would skyrocket.

“If the debt ceiling isn’t raised, investors would start fleeing U.S. Treasuries,” said Matt Koppenheffer, who writes for the investment website the Motley Fool. “Yields would rise, prices would fall, and the Proshares ETF should do very well. It would spike.”

The fund hasn’t significantly spiked yet because many investors believe Congress will eventually raise the debt ceiling. However, since Cantor abruptly called off debt ceiling negotiations last Thursday, the fund is up 3.3 percent. Even if an agreement is ultimately reached before Aug. 2, the fund could continue to benefit between now and then from the uncertainty. (One tactic some speculators are using is to “trade the debt ceiling debate” — that is, to place short-term bets on prices as they fluctuate with the news out of Washington.)

A Completely Unofficial Blog About Eric Cantor has more information on the disclosure statements filed by Cantor that indicates he has taken multiple positions against the U.S. Government.  Besides buying into a vanilla mutual fund, Cantor specifically went after investments that would pay if U.S. Government finances were troubled.

Picking individual financial products is more trouble than buying mutual funds. When Eric Cantor took the trouble to pick individual investments,  he chose the following:

$1-15,000     ProShares Trust Ultrashort 20+ Year Treasury ETF (TBT)
$1-15,000     iShares Barclays TIPS Bond Fund (TIPS)
$1-15,000     WisdomTree International Basic Materials (DBN)
$1-15,000     SPDR SP Metals Mining (XME)

So yeah, that acronym TIPS ring a bell? It should if you read Paul Krugman..
TIPS, as I read it is basically the interest difference between nominal U.S. Bonds and Treasury Inflation-Protected Securities.

Eric Cantor’s bet on the iShares Barclay’s TIPS Bond Fund is ANOTHER bet that U.S. Treasury Bonds will lose value (relative to inflation). That story from last year is actually twice as bad as it sounds.

There are huge implications here:

1. When Eric Cantor had a spare $2,000 to $30,000 laying around, he didn’t just go and buy some extra shares of Exxon or FOX stock or gold or whatever average wingnuts buy, he actively sought out a way to bet that U.S. Treasury Bonds would decline in value. He literally bet against America.

2. Eric Cantor is in the Republican leadership, and has been making open threats that he may push the United States toward defaulting on their bond obligations. If he does this, he has set himself up to profit from it. This is a really big conflict of interest.

You can learn more about how this deal works at Seeking Alpha.  Hedging and speculating with these kinds of funds is not exactly a beginning investor operation.

PoliticusUSA draws the logical conclusion.

Cantor has a history of betting against America. The difference is that in 2011, he now has the power make sure that his bets pay off.

Conflict of interest, abuse of power, it doesn’t matter what you call it. Eric Cantor’s desire to make a profit based on the pain and misery of very people that he has taken an oath to represent is just plain wrong.

Eric Cantor is the Republican House leader who can’t wait to see America fail.

In fact, he’s counting on it.

Your financial destruction will be Eric Cantor’s gain.

I guess this is what Republicans mean when they refer to one of their own as a “Real American.”

So, while the country was obsessed with sexted pictures of Anthony Wiener’s junk, Eric Cantor was putting the country in the position where could make money and the rest of us could suffer.  Who has the real ethics problem here?

Update:  From Amanda Terkel at HuffPo

House Democrats are circulating a resolution accusing House Majority Leader Eric Cantor (R-Va.) of having a conflict of interest in the debt ceiling debate, a move that could provide an awkward C-SPAN moment for one of the lead Republicans in the budget negotiations.

The resolution goes after Cantor’s investment in ProShares Trust Ultrashort 20+ Year Treasury ETF, a fund that “takes a short position in long-dated government bonds.”

The fund is essentially a bet against U.S. government bonds. If the debt ceiling is not raised and the United States defaults on its debts, the value of Cantor’s fund would likely increase.

The Democratic resolution, obtained by The Huffington Post from a Democratic source on the Hill, argues that Cantor “stands to profit from U.S. treasury default, which thereby raises the appearance of a conflict of interest,” and that he “may be sabotaging [debt ceiling] negotiations for his own personal gain.” It’s not clear how widely the measure was being circulated, with a House Democratic aide saying they hadn’t seen the resolution or heard it being discussed.

“Majority Leader Cantor has compromised the dignity and integrity of the Members of the House by raising the appearance of a conflict of interest in negotiations with the executive branch over raising the debt ceiling,” adds the measure.

 

34 Comments on “Should US Congressmen be able to make Financial Bets Against the US?”

  1. bostonboomer's avatar bostonboomer says:
    July 8, 2011 at 1:05 pm

    That is what I’d characterize as a conflict-of-interest on steroids. Thanks for post this, Dak. Why isn’t he being investigated? Are any other Congresspeople doing this, I wonder?

    • dakinikat's avatar dakinikat says:
      July 8, 2011 at 1:12 pm

      I was looking around to see if any other congress critters have done this and it appears that he’s the only one. I have no idea why congress isn’t looking into this. I’m assuming that they’ve been too obsessed with Weiner’s junk and the 4th of July weekend.

    • dakinikat's avatar dakinikat says:
      July 8, 2011 at 1:14 pm

      Treasuries went up today on the unemployment news so maybe he should pay more attention to the unemployment rate.

    • minkoffminx's avatar Minkoff Minx says:
      July 8, 2011 at 2:14 pm

      Yes Dak, thank you for bringing this to my attention. Damn these assholes….

  2. bostonboomer's avatar bostonboomer says:
    July 8, 2011 at 1:15 pm

    Interesting article about Nancy Pelosi at Swampland.

    Pelosi also has a more personal goal: She wants to be Speaker again. And she thinks that House Budget Chairman Paul Ryan’s unpopular plan to squeeze Medicare has provided the Democrats with a clear path back to the majority, a chance to run as the defenders of Medicare against the Republican marauders. So she really doesn’t want any bipartisan bargain, grand or otherwise, to include Medicare cuts that can inoculate Republicans from this line of attack next fall.

    There’s one other thing Pelosi wants. During last December’s lame-duck session, Vice President Biden forged a deal with McConnell to extend the Bush tax cuts, infuriating House Democrats who hadn’t even given up the majority yet. Then in April, Obama reached a deal with Boehner to trim spending, a deal that required House Democratic votes even though it lacked House Democratic input. And on Wednesday, the White House started leaking about a possible mega-deal that would include Medicare and Social Security, without giving Pelosi the courtesy of a heads-up.

    It would be interesting to know what Pelosi and House Minority Whip Steny Hoyer said to Obama when they marched over to the White House today, but it was probably some version of: Hey! Don’t forget about us! There was also a bit of: You can’t do this without us!

    One problem for Pelosi and the House Democrats is that it’s hard to picture them defying Obama, blocking a debt-ceiling deal and plunging the global economy into chaos. It’s quite easy to picture congressional Republicans doing that; at times they seem anxious to do that. That’s why Republicans have controlled these negotiations; they’re making credible threats. And that’s why Pelosi keeps getting rolled.

    It’s time for Nancy to draw a line in the sand. Republicans win because they won’t compromise. Democrats need to call their bluff.

    • dakinikat's avatar dakinikat says:
      July 8, 2011 at 1:28 pm

      nancy needs to drive by the white house and moon it

      • The Rock's avatar The Rock says:
        July 8, 2011 at 2:18 pm

        Imagine a family visiting the White House from a small town in the midwest seeing THAT. Comedy Central couldn’t write a better skit….

        Hillary 2012

      • bostonboomer's avatar bostonboomer says:
        July 8, 2011 at 3:15 pm

        ROFLOL! Steny Hoyer can drive the car while Nancy moons the WH. Great idea.

  3. madaha's avatar madaha says:
    July 8, 2011 at 1:18 pm

    as Charlie Brown would say: AAAAAAAAAaaargh!

  4. bostonboomer's avatar bostonboomer says:
    July 8, 2011 at 1:19 pm

    Why don’t these morons just call off the stupid wars?!

    As debt talks threaten Medicare and SS, study finds US spending $4 trilling on wars.

  5. bostonboomer's avatar bostonboomer says:
    July 8, 2011 at 1:21 pm

    Nancy Pelosi: “We are not Greece.”

    http://www.thestatecolumn.com/articles/rep-nancy-pelosi-we-are-not-greece-2/

    • paper doll's avatar paper doll says:
      July 8, 2011 at 2:58 pm

      Nancy Pelosi: “We are not Greece.”

      yet

      I welcome Nancy discovering she has a fighting bone in her body, but if the current speaker doesn’t need Dem votes to get stuff though,she can stamp her foot all she wants… it won’t change anything and that may be the point …this way she can say the Dem fought them!

      I HOPE she can ,and actually wants, to do something

      • dakinikat's avatar dakinikat says:
        July 8, 2011 at 3:03 pm

        We could never be Greece. We have taxable assets. Our housing stock alone is bigger than their country’s economy. That doesn’t even count the corporate assets and the number of tax payers. You can’t compare a country with a huge economy and assets to a small country that doesn’t have any assets or major corporations. It’s like saying New York City is just like a fishing village.

      • paper doll's avatar paper doll says:
        July 8, 2011 at 3:12 pm

        Thanks, you made me feel better !

      • WomanVoter's avatar WomanVoter says:
        July 8, 2011 at 4:12 pm

        Come on, she said ‘GOD’ sent him…then allowed Obama to block the Public Option, The Medicare Buy In, the signage of President Obama Stupak Executive Order (making women buy separate health insurance, because reproductive care is no longer covered in our regular plans) and NOW he is has put Social Security and Medicare on the CHOPPING BLOCK! If her past record of allowing him to step on women, the working people, I’d say Seniors should register to vote in droves…Obama is going to give the Republicans everything, EVERYTHING.

        Remember it was Nancy Pelosi that was trying to get Hillary to get out of the race, so we could have Obama…so maybe she knew all along…I would have to see something from her and thus far she has helped him do all of the above.

  6. dakinikat's avatar dakinikat says:
    July 8, 2011 at 1:36 pm

    Where Are the Jobs, Dammit!?

    The Labor Department’s June jobs report was a mess of bad news. The jobless rate increased to 9.2 percent, job growth was anemic (a measly 18,000 new jobs were created), hourly wages decreased, 272,000 workers left the labor force, and more.

    The report was cause for alarm—and within moments of its release partisans on all sides were yelling (via email press releases). The reaction boiled down to this: Republicans and conservatives are blaming Democrats for failing to slash the federal debt, lower taxes, and wipe out regulations, all of which, they claim, stifle job creation (even if taxes are at a historic low and President Obama and the Republicans negotiated a deal last December that extended the Bush tax cuts). Congressional Democrats are blaming GOP obstructionism. And progressives are excoriating the GOP’s obsession with deficit reduction and the Obama administration’s acceptance of this misplaced focus on the debt. In a statement, Obama acknoweldged that “the debate here in Washington has been dominated by issues of debt limit,” not jobs creation. But he did not assume any blame for that and called for continuing negotiations on debt reduction and for jobs-related programs, including an infrastructure initiative, patent reform, and trade deals.

    • Fannie's avatar Fannie says:
      July 8, 2011 at 2:14 pm

      Just a little over a year ago, Nancy said 4 million jobs would be created immediately with the health care bill………………immediately means the year 2014, and beyond.

  7. bostonboomer's avatar bostonboomer says:
    July 8, 2011 at 1:41 pm

    Great piece by Ari Berman

    “I earned capital in the campaign, political capital, and now I intend to spend it,” President Bush said after the 2004 election. He used that capital to push for the privatization of Social Security. By the time the fight was over, after both Democrats and Republicans rebelled against his radical scheme, Bush had almost no political capital left. What should have been the high point of the Bush Presidency instead signaled the beginning of the end.

    [….]

    Leaders of both parties have agreed that the debt ceiling must be raised to avoid a potential economic catastrophe. Yet the GOP has had the upper hand in this discussion from day one, insisting that any agreement—which everyone assumes is inevitable—includes massive spending cuts. Republicans know they made a huge mistake by voting for Paul Ryan’s radical budget plan, which led them to lose a special election in New York’s 26th Congressional district and could lead to many more GOP losses in November 2012. They’ve been begging the White House to give them a lifeline on Medicare. It seems they may get one and then some, with a Democratic president offering to cut two of the signature achievements of his party—not to mention two of the most popular government-run programs in the country—in the midst of a prolonged recession.

    • paper doll's avatar paper doll says:
      July 8, 2011 at 3:09 pm

      “I earned capital in the campaign, political capital, and now I intend to spend it,” President Bush said after the 2004 election. He used that capital to push for the privatization of Social Security. By the time the fight was over, after both Democrats and Republicans rebelled against his radical scheme, Bush had almost no political capital left. What should have been the high point of the Bush Presidency instead signaled the beginning of the end

      What’s missing here is that the American PEOPLE stopped Bush from doing this …I remember well the Dem cave dance , because if one recalls they never said no to Bush 2 …. They were not going to do so that time either It was the people who said no…and the Dems got back on board and pretend it was them leading all along …never

      So Bush’s SS smash and grab scheme went down in flames and the upper crust decided to get the money via Wall St meltdown

      Now we are back here…without the 2004 voodoo Wall St private accounts lies…….just straight up cut offs …they have learned and evolved like a virus

      • bostonboomer's avatar bostonboomer says:
        July 8, 2011 at 3:17 pm

        The American people are going to have to stop Obama too. Otherwise we’re doomed.

        • dakinikat's avatar dakinikat says:
          July 8, 2011 at 3:33 pm

          Jamie Leigh Jones’s jury has reached a verdict

          Jury finds that Jamie Leigh Jones was not raped.

          Guess digging up trash on the victim’s past still works… Sigh

      • paper doll's avatar paper doll says:
        July 8, 2011 at 3:39 pm

        BB, I couldn’t agree more…

  8. janicen's avatar janicen says:
    July 8, 2011 at 3:47 pm

    WTF?! I thought legislators who could benefit financially from legislation they propose/block had to put their money in a blind trust and have no knowledge about how it is invested. Is this not the case?

    • WomanVoter's avatar WomanVoter says:
      July 8, 2011 at 4:17 pm

      Nancy Pelosi wouldn’t investigate anything, and that is part of the reason this congressman is getting away with it. Remember Pelosi asked for an investigate Weiner! Yup, you get an immediate investigation for posing with ideas to screw people, if you plan on screwing ALL AMERICANS NO INVESTIGATION!

      Only Bernie Sanders is speaking up for the little people and he is an independent. Go figure!

  9. bostonboomer's avatar bostonboomer says:
    July 8, 2011 at 4:39 pm

    According to Brian Beutler, the Social Security stealth cut plan (changing the COLA formula) has “bipartisan support,” and it sonds like Nancy P. will cave on it.

  10. Woman Voter's avatar Woman Voter says:
    July 10, 2011 at 10:15 am

    BB,

    Look others are now taking a look at Cantor and betting against the US:

    @myvoternation myvoternation
    @WomanVote about eric cantor, jump into our debate
    http://tinyurl.com/4xx24sb

    Too bad the main press is still not looking into it. I guess they saw the RTs of this article, as I was hopping mad that Nancy isn’t asking for an investigation or at least bringing it up. Oh, Nancy, you sure disappoint… 😦

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