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EXCLUSIVE: GOP Senate Nominee Shorting U.S. Treasury Bonds, Would Profit From Government Default

By Scott Keyes  

"EXCLUSIVE: GOP Senate Nominee Shorting U.S. Treasury Bonds, Would Profit From Government Default"

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Ohio Senate nominee Josh Mandel (R)

The Republican nominee in Ohio’s Senate race stands to reap a significant financial windfall if the government defaults by not raising the debt ceiling, a move he opposed last year and has indicated he would vote against if elected to the Senate.

According to personal financial disclosure documents examined by ThinkProgress, Josh Mandel’s wife owns an undisclosed amount of ProShares UltraShort 20+ Year Treasury exchange-traded fund (ETF). This ETF aggressively “shorts” U.S. Treasury bills, meaning that it bets against U.S. debt and spikes when Treasury bill values drop. If a default were to occur, the desirability of Treasury bills would plummet and Mandel’s ETF would skyrocket in value.

That precise scenario could become more likely if Mandel wins his race against Sen. Sherrod Brown (D-OH). One of the top issues Mandel lists on his website is to “Stop increasing the debt ceiling.” Similarly, when Congress was embroiled in the debt ceiling fight last year, he stated that he “would have voted against the debt deal” that narrowly staved off a default.

Mandel and his wife’s personal financial disclosure form shows an investment of up to $1,001 in the Treasury-shorting ETF (highlighted in yellow):

In addition, it appears as though Mandel’s wife may own up to $15,000 in additional holdings that bet against U.S. Treasury bonds. As shown below, Mandel lists on page 18 ownership of up to $15,000 of “ProShares Trust Ultrashort (Bond).” Though this is not the name of a specific asset (and thus means the Ohio Republican did not file a complete form) ThinkProgress spoke with a representative from ProShares who noted that they only provide four “ultrashort” bond funds — 20+ year Treasury, 7-10 year Treasury, 3-7 year Treasury, and Treasury inflation protected securities — all of which short Treasury bills.

Though Mandel’s Treasury-shorting holdings may not be gigantic at the moment, their value would soar in the event of a debt default.

Controversy erupted last summer when it was revealed that House Majority Leader Eric Cantor was also betting against long-term U.S. Treasury bonds while opposing efforts to raise the debt ceiling. Mandel’s ProShares UltraShort 20+ Year Treasury stock is the same one that Cantor owned.

The very optics of a politician profiting off a default could present problems for Mandel as he tries to convince Ohio voters to send him to Washington next year so he can “stop increasing the debt ceiling.”

Multiple requests for comment have not been returned by Mandel’s campaign.

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