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June 30, 2011 11:20 AM Cantor’s conflict of interest

By Steve Benen

Many of us got a good laugh at House Majority Leader Eric Cantor’s (R-Va.) expense a year ago, when we learned about his poor investment strategies. The oft-confused Republican invested $15,000 in a bet against U.S. government bonds, effectively expecting inflation to go up. That didn’t happen.

A year later, this is arguably even more interesting.

What do Bill Gross, Evan Newmark and Rep. Eric Cantor have in common? They’re all betting against Treasury debt!

But only one of these men has been involved in heated negotiations over the government’s debt ceiling, and that’s Eric Cantor, No. 2 Republican in the House.

Mr. Cantor, who walked out of debt discussions with Vice President Joe Biden last week, owns up to $15,000 in shares of the ProShares Trust Ultrashort 20+ Year Treasury ETF, Salon notes today, updating a Wall Street Journal report on this from last year.

Salon is raising a provocative point: Eric Cantor is helping drive debt-reduction talks. Indeed, as of last week, he was single-handedly derailing those talks. What went unreported at the time, though, is that Cantor personally stands to “reap a small financial windfall from his investment in a mutual fund whose performance is directly affected by debt ceiling brinkmanship.”

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.”

Cantor’s office claims the investment is simply part of a balanced portfolio. I have no evidence to the contrary. It’s hardly a stretch, though, to suggest prominent officials should avoid these kinds of conflicts of interest.

Steve Benen is a contributing writer to the Washington Monthly, joining the publication in August, 2008 as chief blogger for the Washington Monthly blog, Political Animal.

Comments

  • Eeyore on June 30, 2011 11:25 AM:

    Where is Darrell Issa's outrage? Why isn't he investigating this? Where are the calls for a Special Prosecutor? Where are the leering winks and nudges from Fox News?

    Oh, wait....

    IOKIYAR

  • Jim Pharo on June 30, 2011 11:32 AM:

    This is as good a moment as any to point out that the point of disclosure is not disclosure but rather the ability of people to use the data to make judgments about the discloser.

    Just sayin'...

  • c u n d gulag on June 30, 2011 11:35 AM:

    I'd have a lot more trust in the politicians in DC if they had their money in a blind trust until they decided to take their leap to LobbyLand, where $15,000 is that months tipping money.


    Can we put CAPTCHA in a blind trust?
    'Cause I'm sick of seeing it.

  • DAY on June 30, 2011 11:40 AM:

    One wonders what the R's would say, if Obama put some of his book royalties into, say Raytheon or Northrup Grumman, or Team SIX Commemorative night vision goggles. . .

  • Rochester on June 30, 2011 11:45 AM:

    Conservatives never experience this "conflict of interest" of which you speak. To do so would require a conscience, and a sense of decency... which are two things that conflict with their hypocritical world-view; (see "self-interest".)

  • Old Uncle Dave on June 30, 2011 11:46 AM:

    This is akin to a corporate executive shorting his own company's stock, then taking steps to insure lower revenues.

    Just when you think they can't get any lower, they do.

  • TR on June 30, 2011 12:04 PM:

    This needs to be hammered hard.

    The Democrats have rightfully been noting that key Republicans seem intent on sabotaging the economic recovery for their own gain.

    Previously, we just thought it was their political gain. But this shows it's for their economic gain too.

    Even the dimmest Beltway journalist should be able to get excited about this kind of scandal.

  • IOKIYAR! on June 30, 2011 12:28 PM:

    IOKIYAR!

  • Bob M on June 30, 2011 12:34 PM:

    I'm cool with it. Hedging is an appropriate strategy, though 15k would hardly be hedging. Politicians should have the same freedom as anyone else, but with transparency. But if the Dems can make political hay with it, hey, go for it!

  • m2 on June 30, 2011 12:45 PM:

    another opportunity to say that some of us don't put other peoples' money ahead of other peoples' lives.

  • flounder on June 30, 2011 1:45 PM:

    Steve,
    What Salon gets wrong is that Cantor's bet against America is even larger than $1-15,000. He is also invested in a Vanguard TIPS fund to the tune of $50-100,000. Since you are a reader of P. Krugman, you know that the TIPS spread is the difference between U.S. treasury bonds and interest protected bonds. He was invested in another one he bought in 2009, but according to his 2010 disclosure he sold it this year. Here's my story it.
    http://www.dailykos.com/story/2011/04/18/968197/-Eric-Cantor-is-betting-against-America-on-the-stockmarket?detail=hide&via=blog_553352

  • BetweenTheLines on June 30, 2011 2:01 PM:

    One wonder's if this day's Morning Joe/Halprin "dick" episode wasn't manufactured to take the media gas out of this potential bombshell.

  • max on June 30, 2011 4:17 PM:

    "Cantor�s office claims the investment is simply part of a balanced portfolio. I have no evidence to the contrary. It�s hardly a stretch, though, to suggest prominent officials should avoid these kinds of conflicts of interest."

    Have we transcended the politicans' faux blind trusts, e.g., former Republican Senate Majority Leader Bill Frist pretending he had not idea his considerable Colmbia/HCA stock holdinds were being traded for a profit because it was in a "blind trust?" If these guys were not wrecking the economy they would be funny and pathetic instead of just pathetic.

  • Both Sides on June 30, 2011 4:28 PM:

    It's also worth noting that President Obama has well over $1 million invested in Treasury debt, and he's been heavily pushing for raising the debt ceiling as quickly as possible. If the US defaults, he could stand to lose a lot of money. Clearly there are conflicts of interest on both sides.

  • Doug on June 30, 2011 8:53 PM:

    Both Sides, first off, you DO realize the abbreviation for your pseudonym is, appropriately enough, BS?
    Secondly, the question about raising the debt ceiling does NOT center on whether or not Treasury bonds will or will not be repaid. Regardless of whether or not the debt ceiling is raised, they will be repaid. No holder of ANY US Treasury bond, Mr. Obama included, will lose any money.
    Mr. Cantor, on the other hand, is invested in securities that INCREASE in value only if the US defaults, while at the same time he is, seemingly, not doing anything to PREVENT that default. Just like a boxer taking a dive, say. Or a baseball player betting against his own team, striking out on an easy pitch and losing the game. You know, conflict of interest?
    Reversing those two letters fits too...

  • Gefilte Bacon on June 30, 2011 10:48 PM:

    You mean that Eric Cantor didn't walk out of the budget talks solely out of solidarity to the opppressed hedge fund millionaires, rock stars, oil company CEOs and other wealthy folk who face a small tax increase?

    Maybe the rich need to rethink their support for him..http://gefiltebacon.blogspot.com/2011/06/open-letter-to-eric-cantor.html

  • Robert Waldmann on July 01, 2011 8:48 AM:

    You pulled a punch. Cantor's staff claims that a short position is part of a balanced portfolio. Given their boss, I'm not surprised that they are clueless, but a short position on an asset can't be part of a balanced portfolio. It could be a hedge on some other speculative position.

    the asset value is public. I think someone should calculate how much Cantor personally profited when he kicked over the negotiating table and keep up with his further profits as investors find out just how insane the Republicans are. If not me who. If not now, when.

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