What would happen if Republicans positioned themselves to gain monetary rewards if the debt ceiling is not raised? Would there be repercussions for a House Majority Leader who stands to win financial gain for tanking our economy? Would you believe that this is not merely a hypothetical?
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 was up 3.3%.
Or in other words, the person who is playing hardball in bipartisan debt discussions stands to benefit substantially if negotiations collapse and the debt ceiling is not raised, causing the U.S. to default on their loans.
Our elected officials should be working towards stabilizing our economy, not betting against it.
-Eric Cantor’s Investment, Susan Davis, Wall Street Journal, 6/18/10
-Eric Cantor’s glaring conflict of interest, Salon.com, 6/27/10