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Eric Cantor’s Glaring Conflict Of Interest

When Eric Cantor shut down debt ceiling negotiations last week, it did more than just rekindle fears that the U.S. government might soon default on its debt obligations — it also brought him closer to reaping a small financial windfall from his investment in a mutual fund whose performance is directly affected by debt ceiling brinkmanship.

Last year the Wall Street Journal reported that Cantor, the No. 2 Republican in the House, had between $1,000 and $15,000 invested in ProShares Trust Ultrashort 20+ Year Treasury EFT. The fund aggressively “shorts” long-term U.S. Treasury bonds, meaning that it performs well when U.S. debt is undesirable. (A short is when the trader hopes to profit from the decline in the value of an asset.)

According to his latest financial disclosure statement, which covers the year 2010 and has been publicly available since this spring, Cantor still has up to $15,000 in the same fund. Contacted by Salon this week, Cantor’s office gave no indication that the Virginia Republican, who has played a leading role in the debt ceiling negotiations, has divested himself of these holdings since his last filing. 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.)

Salon’s Andrew Leonard calls the debt ceiling negotiations “Washington’s titanic game of chicken,” and the longer the game goes on, the more skittish the bond markets will become.

“Cantor’s involvement in the fund and negotiations is not ideal,” Koppenheffer said. “I don’t think someone negotiating the debt ceiling should be invested in this kind of an ultra-short. We can only guess how much he understands what’s in his portfolio, but you’d think a politician would know better. It looks pretty bad.”

Cantor spokesman Brad Dayspring noted that U.S. Treasury bonds make up a large portion of the congressman’s pension, and said investment in ProShares ETF serves to balance that investment and to diversify his portfolio. Disclosure forms indicate that Cantor has considerable personal assets, including real estate in Virginia worth up to $1 million, and a number of six- and seven-figure loans to private entities and limited liability companies. So his investment in ProShares ETF represents only a small portion of his overall portfolio — but that share could grow a little larger just over a month from now.

 

By: Jonathan Easley, Editorial Fellow, Salo, June 27, 2011

June 28, 2011 Posted by | Budget, Congress, Conservatives, Debt Ceiling, Deficits, Economic Recovery, Economy, GOP, Government, Government Shut Down, Politics, Republicans, Right Wing | , , , , , , , , , , , | Leave a comment

Deficits Still Don’t Matter To Republicans

Think there will eventually be a bipartisan deal to increase the public debt limit after an extended period of Kabuki Theater posturing?  Maybe it’s time to think again.

Ezra Klein really hits the nail on the head in describing the “negotiations” as they stand today:

The negotiation that we’re having, in theory, is how to cut the deficit in order to give politicians in both parties space to increase the debt limit. But if you look closely at the positions, that’s not really the negotiation we’re having. Republicans are negotiating not over the deficit, but over tax rates and the size of government. That’s why they’ve ruled revenue “off the table” as a way to reduce the deficit, and why they are calling for laws and even constitutional amendments that cap federal spending rather than attack deficits. Democrats, meanwhile, lack a similarly clear posture: most of them are negotiating to raise the debt ceiling, but a few are trying to survive in 2012, and a few more are actually trying to reduce the deficit, and meanwhile, the Obama administration just met with the Senate Democrats to ask them to please, please, stop laying down new negotiating markers every day.If we were really just negotiating over the deficit, this would be easy. The White House, the House Republicans, the House Progressives, the House Democrats and the Senate Republicans have all released deficit-reduction plans. There’s not only apparent unanimity on the goal, but a broad menu of approaches. We’d just take elements from each and call it a day. But if the Republicans are negotiating over their antipathy to taxes and their belief that government should be much smaller, that’s a much more ideological, and much tougher to resolve, dispute. The two parties don’t agree on that goal. And if the Democrats haven’t quite decided what their negotiating position is, save to survive this fight both economically and politically, that’s not necessarily going to make things easier, either. Negotiations are hard enough when both sides agree about the basic issue under contention. They’re almost impossible when they don’t.

It’s worth underlining that “deficits” and “debt” don’t in themselves mean any more to conservatives than they did when then-Vice President Dick Cheney said “deficits don’t matter” in 2002.  Every Republican “deficit reduction” proposal is keyed to specific spending cuts–without new revenues–and increasingly, to an arbitrary limit on spending as a percentage of GDP.  Even the version of a constitutional balanced budget amendment that Sen. Jim DeMint is insisting on as part of any debt limit deal would have a spending-as-percentage-of-GDP “cap” (at 18%, as compared to about 24% currently) that would force huge spending reductions (you can guess from where since GOPers typically consider defense spending as off-limits as taxes).

Today’s Republicans are simply using deficits as an excuse to revoke as much of the New Deal/Great Society tepid-welfare-state system as they can get away with.  And it’s really just a latter stage of the old conservative Starve-the-Beast strategy for deliberately manufacturing deficits in order to cut spending.  Democrats should point this out constantly, and not let Republicans get away with claiming they are only worried about debt and fiscal responsibility.

By: Ed Kilgore, The Democratic Strategist, May 12, 2011

May 13, 2011 Posted by | Budget, Congress, Conservatives, Constitution, Debt Ceiling, Deficits, Democrats, Dick Cheney, Economy, GOP, Government, Government Shut Down, Ideology, Lawmakers, Politics, Republicans, Right Wing, Taxes | , , , , , , , , | Leave a comment

   

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