How Cantor Feathered His Nest

As the debt negotiations grind on, most people should fear the effects of a default on the economy, and with it, our livelihood.  However, not all of us are in the same boat.  One person stands to make out like a robber baron, because a debt crisis will net him a fortune.  That person, Eric Cantor, has feathered his own nest to make America’s failure his windfall.  No wonder he tried to sabotage the negotiations.

When Republicans walked out of budget talks last week, short-circuiting efforts to ensure the federal government does not default on its loans, the Republicans’ chief budget negotiator, Eric Cantor, led the way. Now in a stunning revelation, Salon reports that Cantor may have a vested interest in making sure the government defaults on its loans–he stands to gain substantial sums of money if it does.

According to Salon, Cantor is invested in a mutual fund “whose performance is directly affected by debt ceiling brinkmanship.”

Last year the Wall Street Journal reported [Murdoch delinked] 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…

… [emphasis added]

Inserted from <AFL-CIO>

I checked the trust out, and here’s how ProShares describes Ultrashort 20+:

This ETF seeks a return of -200% of the return of an index (target) for a single day. Due to the compounding of daily returns, ProShares’ returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. Investors should monitor their ProShares holdings consistent with their strategies, as frequently as daily. For more on correlation, leverage and other risks, please read the prospectus.

Inserted from <ProShares>

In short, this is a highly leveraged “put” fund where a small investment controls a large volume of Treasury notes that pays off big in the event of a significant decrease in the notes’ value.

How is it that someone with such a conflict of interest was negotiating for the Republicans?  How many other Republicans have a similar vested personal interest in making America fail?