Speculating on Shutdown and Stock Short-Selling

Might patrons of well-placed members of Congress short-sell stocks and other financial instruments to profit from the approaching chaos of a government shutdown?

I probably should not speculate on something so unknowable at this point. John BoehnerAfter all, I've just spent four years researching my Presidential Puppetry book, and documenting it with some 1,100 endnotes.

Right now, neither I nor anyone else can get to the bottom soon of any financial shenanigans that might be occurring in the manufactured crisis of a shutdown. Probably no one could give a definitive answer even years from now.

Update: Government Shutdown: Congress Votes To End Funding.

Conventional wisdom is that House Speaker John Boehner (R-Ohio), left, is simply trying to appease the House's radical right GOP members.

So why broach the idea of a more complicated alternative? Punditry risks undermining research on other investigative and political topics where findings can be documented with the hindsight of history.

Trading PlacesWhen the stakes get this high for the public there's a place for speculation, especially from those who have researched related issues.
And if there's one thing my research has taught me, in general, it's this:
Many of those orchestrating public policy through their office-holding minions are more greedy, strategic, and dangerous than most regular citizens could possibly imagine.
I find it hard to believe that tea party conservatism alone is responsible for the huge monetary losses the country, corporations, and citizens are facing with the shutdown and a potential national default for failure to extend the debt-ceiling limit.
Tens of billions of dollars, if not vastly more, are likely to arise from extra interest costs if the federal government defaults. Ruination of the dollar's position as the main global currency would risk vastly more.
Few could be so fanatic as to take such risks simply to advance an ideology. Something else could be in play. As it happened, CBS News 60 Minutes documented something similar two years ago in, Congress trading stock on insider information.
Might it be members of Congress and their families dabbling in the market to take advantage of public panic? Recent scandals such as the CBS story and make repeat insider trading by members of Congress less likely.
Instead, any such misconduct is likely to come from insider actions by congressional patrons whose behavior is harder to track.
This scenario reminds me of the orange juice scheme in the 1983 film comedy Trading Places, starring Dan Ackroyd and Eddie Murphy.
Recall how they were matched up against two wealthy brothers at the Duke and Duke brokerage. The brothers were seeking to control the commodities market by advance knowledge of government action (in that case an official report affecting the price of orange juice futures).
In the current farce, the House Republicans added a late-night provision Sept. 28 allowing employers to ban contraception coverage from health care. This was yet another poison pill that ensured Senate rejection. Conventional wisdom is that the add-on was another example of zealotry.
But it reminded me also of the Mel Brooks comedy The Producers. The play and movies portrayed two producers who sought to fleece trusting investors out of their start-up funding by investing next to nothing in the play, and seeking to keep the investments by ensuring the play would flop. In one of many funny scenes, the producers approach theater critics in the crowded lobby after the first act and wave cash bribes under their noses to create bad publicity for the play.
Let's hope we're all laughing at the end of this one.
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What follows are major updates in the story following initial publication. Note especially, immediately below, how the Washington Post's ownership sought to use the controversy to achieve its longstanding goal of capping Social Security and Medicare payments, which it and other corporate leaders disparage as "entitlements."

Huffington Post, Government Shutdown: Congress Votes To End Funding, Debt Standoff, Michael McAuliff and Sabrina Siddiqui, Oct. 16, 2013. The government shutdown is dead. Obamacare is alive. The Senate voted 81 to 18 Wednesday night to reopen the federal government and raise the nation's borrowing limit, hours before the Treasury Department faced the possibility of being unable to pay all of America's bills for the first time in modern history. The House followed suit, voting 285-144, to end the latest damaging battle of divided government in a polarized Congress. President Barack Obama said he would reopen the government immediately to "lift this cloud of uncertainty and unease" that settled on the nation and start fixing the damage.

Washington Post, Paralyzed by principal, Editorial Board, Oct. 9, 2013. Paul Ryan hints at a way to end the political paralysis. Is there a way out of the political standoff that is paralyzing government and endangering the global economy? At the moment, it hardly seems so. But we see a glimmer of hope in suggestions from Rep. Paul Ryan (R-Wis.). In an op-ed in the Wall Street Journal on Wednesday, Mr. Ryan proposes negotiations not over Obamacare but about “common-sense reforms of the country’s entitlement programs and tax code.” This is what both sides should be talking about. Unreformed entitlement programs, including Social Security and Medicare, will drive the country deeper and deeper into debt, as a recent Congressional Budget Office analysis showed.

Barack Obama, Janet Yellin and Ben BernackeWashington Post, Halting the GOP’s doomsday strategy, David Ignatius, Oct. 9, 2013. A more modest Democratic strategy would be to allow the House Republicans to save face sufficiently to reach a compromise. Imagine a Versailles peace treaty in 1915 instead of 1919. Obama could offer confidence-building measures, such as pledging deficit-reduction measures, to persuade Boehner to stop his threats. Next could come a “grand bargain” reforming entitlement programs. Such a deal might actually leave the country better off.

At right, President Obama talks with Janet Yellen and Ben Bernanke in the Oval Office before he announced her as his nominee for Chairwoman of the Federal Reserve, to replace Bernanke, Oct. 9, 2013. (Official White House Photo by Pete Souza)

FireDogLake, Did Paul Ryan Win the 2012 Election? DSWright, Oct. 10, 2013. Something that seems to be missing from the government shutdown debate is that the “clean CR” President Obama and Congressional Democrats are demanding bears a striking resemblance to the Ryan Budget. So even if the Tea Party faction capitulates and passes the clean CR they have already won. The clean Continuing Resolution comes in at $986 billion. And what was the Ryan Budget? $967 billion. A mere $19 billion difference. But didn’t Mitt Romney and Paul Ryan lose the 2012 election? Wasn’t their agenda of sticking it to the so-called 47% thoroughly rejected? In fact, didn’t the Obama-Biden Team use the Ryan Budget as a punching bag during their campaign, so much so that Paul Ryan even distanceed himself from his own budget proposal. And now that properly vilified budget is essentially what the Democrats are demanding be passed while the House Republicans demand Obamacare be dismantled. Elections have consequences? Apparently not.

Paul Craig RobertsOpEd News, A Caesar In Our Future? Paul Craig Roberts, left, Oct. 9, 2013. What Happens If The Shutdown Causes The Treasury To Run Out Of Money? In a speech to the Commonwealth Club, San Francisco, November 23, 2010, Peter Dale Scott gave a history of the various directives concerned with government continuity during a state of emergency. He showed that these directives could be used to supersede the Constitution. The ease with which both the Bush and Obama regimes were able to set aside the due process protections of the Constitution that prohibit indefinite detention and execution without conviction in a trial indicate that Professor Scott's concern is justified that these directives could result in executive branch rule. The Federal Reserve also has the power to prevent a government shutdown. If banks are too big to fail, so is the federal government. If the Federal Reserve on its own authority can issue more than $16 trillion in loans to US and European banks in order to prevent their failure, the Federal Reserve can issue a loan to the US government. I don't expect either of these two possibilities to come into play. A shutdown and default of US debt obligations would terminate the US as a superpower and dethrone the dollar as world reserve currency. Neither Congress nor President Obama desire such an outcome.

New York Magazine, House Republicans’ Ransom Demands Falling, Jonathan Chait, Oct. 9, 2013.One way to understand the dysfunction within the Republican Party is to think of it as a hostage scheme that spun out of control. The subtext of op-eds today by Eric Cantor and Paul Ryan is a promise to ratchet down their ransom terms. Neither op-ed mentions any demands related to Obamacare. Ryan proposes to trade higher short-term discretionary government spending for permanent cuts to tax rates and retirement programs.The policy demands in Ryan’s op-ed are sufficiently vague that, if viewed as an opening bid, they would not completely preclude some kind of deal if he actually wants to bargain. The trouble is that Ryan’s entire history strongly suggests he does not want to deal.

AP via Huffington Post, Stocks Drop As Government Shutdown Nears, Ken Sweet, Oct. 8, 2013. Stocks sank Monday as Wall Street worried that a budget fight in Washington could lead to an event far worse for the economy – a failure to raise the nation's borrowing limit. Investors pulled back from stocks as a budget fight in Congress threatened to push the government into a partial shutdown for the first time in 17 years Lawmakers have until midnight Tuesday to reach a budget deal that would keep government in full operation. There is a simple reason why the budget battle – and, more importantly, an upcoming fight over the debt ceiling – are so crucial: the credit of the United States is the bedrock that nearly every other investment is built upon, largely due to the assumption that the nation will always pay its debts.

New York Times, A Federal Budget Crisis Months in the Planning, Sheryl Gay Stolberg, and Mike McIntire, Oct. 5, 2013. Last week the country witnessed the fallout from that strategy: a standoff that has shuttered much of the federal bureaucracy and unsettled the nation. To many Americans, the shutdown came out of nowhere. But interviews with a wide array of conservatives show that the confrontation that precipitated the crisis was the outgrowth of a long-running effort to undo the law, the Affordable Care Act, since its passage in 2010 — waged by a galaxy of conservative groups with more money, organized tactics and interconnections than is commonly known.


Related News Coverage

Marlin Stutzman

Atlantic, Here Is the Short GOP Quote That Perfectly Defines the Shutdown, Derek Thompson, Oct. 2, 2013. Forty-eight hours into the negotiations, one Republican stalwart's official position is that he has no idea what he's negotiating for. House Republicans are continuing to play hardball in negotiations over the spending bill that precipitated the government shutdown on Oct. 1, apparently out of fear that compromise would weaken their power. "We're not going to be disrespected," Rep. Marlin Stutzman (R-Indina), right,  told the Washington Examiner. "We have to get something out of this. And I don't know what that even is." On the one hand, you could say it's just a throwaway line. Representatives say empty, tired things every day. But quotes have a life of their own, and this one is already being hailed online as the perfect embodiment of the GOP's bargaining position: Equal parts resolution and deep confusion.

Paul RyanWashington Post, ‘We’ve already essentially adopted that Ryan budget,’ Dylan Matthews, Oct. 2, 2013. Michael Linden is managing director for tax policy at the Center for American Progress and one of the smartest left-of-center budget wonks around. We talked on the phone Tuesday afternoon about the policy substance behind the government shutdown. A lightly edited transcript follows. he continuing resolution (CR) that the Senate passed, the one that's ostensibly the Democratic position in this dispute now, spends $217 billion less on discretionary programs than Obama's budget would have. Break that number down for me. Where's it coming from? Surprisingly, while it's a little bit more of a cut for non-defense spending, it's not all non-defense. Some of the difference is defense as well. The Obama budget had $600 billion in it for non-defense discretionary spending, and the Senate CR says $467 billion. It's a $133 billion difference. But that leaves a big chunk in the defense as well. And it's mostly coming because of sequestration. Rep. Paul Ryan (R-Wisconsin), left, is chairman of the House Budget Committee.

CBS News 60 Minutes, Congress trading stock on insider information, Steve Kroft, Nov. 12, 2011. AlterNet, The Paul Ryan Insider Trading Story Won’t Die Because It’s Legitimate, Lynn Stuart Parramore, Aug. 17, 2012. Real News Network, Paul Ryan †Insider Trading and Attack on Medicare, Paul Jay, Aug. 17, 2012. Talking Points Memo, Paul Ryan Insider Trading Rumor Quickly Debunked,” Benjy Sarlin, Aug. 13, 2012.

OpEd News, Baffling Boehner: Who owns this guy? Michael Collins, Oct. 8, 2013. The Speaker of the United States House of Representatives has the power to end the government shutdown and avoid the U.S. entering into default on October 17. Take a look at the industry groups that chose John Boehner's 2012 campaign committee as their number one choice for contributions (see chart):  financial services and Wall Street.  e all know that campaign contributions are legalized bribery.  Politicians take money from big donors and do what they are told to do. Boehner is a minion of big finance and Wall Street.  At least, he should be.

Huffington Post, Government Shutdown: Senate Vote Leaves Congress At Square 1, Michael McAuliff and Sabrina Siddiqui, Sept. 30, 2013. The House and Senate played ping-pong with funding for the federal government Monday night, hours before cash for much of Uncle Sam's operations was due to run out. The GOP-led House passed its third measure that would keep government open after midnight, but only if Senate Democrats and the president agree to hamstring Obamacare. The Senate promptly took up the bill and voted to table it, 54 to 46. Update: NBC News, Senate nixes House-passed funding bill as clock ticks towards shutdown, Carrie Dann and Michael O'Brien, Sept. 30, 2013. The House measure -- which would fund the government through mid-December but also delay Obamacare’s individual mandate by one year -- passed 228-201, with 12 Republicans bucking their leaders to vote against the plan and nine Democrats voting for it. Editor's Note: The Justice Integrity Project was on Capital Hill Sept. 30 to assess developments at close-range.

New York Magazine, The House GOP’s Legislative Strike, Jonathan Chait, Sept. 30, 2013. If you want to grasp why Republicans are careening toward a potential federal government shutdown, and possibly toward provoking a sovereign debt crisis after that, you need to understand that this is the inevitable product of a conscious party strategy. Just as Republicans responded to their 2008 defeat by moving farther right, they responded to the 2012 defeat by moving right yet again. Since they had begun from a position of total opposition to the entire Obama agenda, the newer rightward lurch took the form of trying to wrest concessions from Obama by provoking a series of crises.

Huffington Post, Women Senators: GOP's Birth Control Amendment 'Defies Logic,' Laura Bassett, Sept. 30, 2013. Democratic female senators are stunned the government is on the verge of shutting down and Republicans are once again using the crisis to target birth control and preventative care for women, a group of them said on Monday. Sens. Barbara Boxer (D-Calif.), Debbie Stabenow (D-Mich.) and Mazie Hirono (D-Hawaii) told reporters that the Senate will unequivocally reject a provision sent to them by House Republicans this weekend that would allow employers to deny women birth control coverage for moral reasons.

Ted CruzOp Eds, The Radical Christian Right and the War on Government, Chris Hedges, Oct. 7, 2013. There is a desire felt by tens of millions of Americans, lumped into a diffuse and fractious movement known as the Christian right, to destroy the intellectual and scientific rigor of the Enlightenment, radically diminish the role of government to create a theocratic state based on "biblical law," and force a recalcitrant world to bend to the will of an imperial and "Christian" America. Its public face is on display in the House of Representatives. This ideology, which is the driving force behind the shutdown of the government, calls for the eradication of social "deviants," beginning with gay men and lesbians, whose sexual orientation, those in the movement say, is a curse and an illness, contaminating the American family and the country. U.S. Sen. Ted Cruz, right, -- whose father is Rafael Cruz, a rabid right-wing Christian preacher and the director of the Purifying Fire International ministry -- and legions of the senator's wealthy supporters, some of whom orchestrated the shutdown, are rooted in a radical Christian ideology known as Dominionism or Christian Reconstructionism. This ideology calls on anointed "Christian" leaders to take over the state and make the goals and laws of the nation "biblical." It seeks to reduce government to organizing little more than defense, internal security and the protection of property rights.

Huffington Post, Peter King: 25 Republicans May Vote Against Taking Up Spending Bill With Obamacare Provision, Jennifer Bendery, Sept. 30, 2013. Rep. Peter King (R-N.Y.), right, said Monday that he will buck his party leadership and vote against bringing up a government-funding bill that includes a one-year delay of Obamacare. And, he said, there may be as many as 25 other Republicans ready to Peter Kingdo the same. Nearly all Republican lawmakers flooding out of a closed-door meeting scoffed at the idea of passing a "clean" bill that simply funds the government ahead of Monday night's deadline.

Update: Huffington Post, Never Forget The Great Moderate Republican Revolt Of 2013! Jason Linkins, Oct. 1, 2013. There was a brief moment where everything threatened to actually get interesting. I speak, of course, of Rep. Peter King (R-N.Y.), who is what passes for a "moderate" House Republican in this day and age. King was primed to be one of those "mad as hell/not gonna take it anymore" types as Monday's deliberations began. As it turns out, King overestimated the number in his band of brothers by... you know, about 23 people: King and Pennsylvania representative Charlie Dent, two key moderates, voted no, while four hardline conservatives, including Representative Michele Bachmann of Minnesota, voted no because the bill didn’t draw a hard enough line against Obamacare. There aren't a lot of "moderate Republicans" in Congress. And those who exist are very timid and nearly useless when the chips are down.


Catching Our Attention on other Justice, Media & Integrity Issues

Washington Post, CIA ramping up covert training program for moderate Syrian rebels, Greg Miller, Oct. 2, 2013.  The CIA is expanding a clandestine effort to train opposition fighters in Syria amid concern that moderate, U.S.-backed militias are rapidly losing ground in the country’s civil war, U.S. officials said. But the CIA program is so minuscule that it is expected to produce only a few hundred trained fighters each month even after it is enlarged, a level that officials said will do little to bolster rebel forces that are being eclipsed by radical Islamists in the fight against the government of Syrian President Bashar al-Assad.

New York Times, Millions of Poor Are Left Uncovered by Health Law, Sabrina Tavernise and Robert Gebeloff, Oct. 2, 2013. A sweeping national effort to extend health coverage to millions of Americans will leave out two-thirds of the poor blacks and single mothers and more than half of the low-wage workers who do not have insurance, the very kinds of people that the program was intended to help, according to an analysis of census data by The New York Times. Because they live in states largely controlled by Republicans that have declined to participate in a vast expansion of Medicaid, the medical insurance program for the poor, they are among the eight million Americans who are impoverished, uninsured and ineligible for help. The federal government will pay for the expansion through 2016 and no less than 90 percent of costs in later years.

WMR, Special Report. Naval War College's involvement in personal cyber-attacks no mere aberration, Sept. 30, 2013 (Subscription required). The latest release of National Security Agency slides from whistleblower Edward Snowden reveals that the NSA is heavily involved in monitoring social media and the social networking activities of Americans.

Eric HolderHuffington Post, Eric Holder: DOJ Will Challenge Harsh Voter Law, Ryan J. Reilly and Saki Knafo, Sept. 30, 2013. North Carolina Republicans passed a restrictive voting law earlier this year "with the purpose of denying or abridging the right of African Americans to vote on account of their race or color," the Justice Department charged in a lawsuit filed Monday. The lawsuit was announced by Attorney General Eric Holder. left. Federal officials argued that, based on North Carolina's own data, four changes to the law -- eliminating several days of early voting, eliminating same-day voter registration, prohibiting the counting of certain provisional ballots and requiring specific forms of photo identification -- would have a discriminatory impact on minority voters.

Washingtons Blog, NSA Central to U.S. Assassination Program, George Washington, Sept. 29, 2013. We’ve previously documented that the NSA isn’t just passively spying like a giant peeping tom, but is actively using that information in mischievous ways … such as assassinations. A lot more information is about to come out on the topic.  JSOC, as well as the CIA, have been described as “the President’s private army“, which operate at the President’s beck-and-call with no real oversight. But a fourth agency is also centrally involved in both intelligence-gathering and assassinations:  the National Counterterrorism Center (NCTC).  NCTC is responsible for generating the “disposition matrix” of who to murder using drones or other means.

Harvey SilverglateForbes, The CUNY-Petraeus Imbroglio: Even Uncivilized Students Have Their Rights, Harvey Silverglate, left, Oct. 1, 2013. Retired general and former CIA Director David Petraeus recently began a stint as a visiting professor at the City University of New York, much to the chagrin of many students and even some faculty. Several students organized a protest against Petraeus, which involves their following him on his way to and from class chanting slogans. After a video of the first such protest went viral, the Executive Committee of the Faculty Senate issued a statement criticizing the students for “harassing” Petraeus and supposedly violating his academic freedom rights. My latest column, posted today on Forbes.com, tells the story of a similar case from my early days as a lawyer, and explains why the student protests criticized by the CUNY Executive Committee almost certainly qualify as protected speech under the First Amendment. (This is not to say, of course, that all subsequent protests have been or will be on the lawful side of the speech line.)

Aaron BarrWashington Lawyer, Internet Law Is Booming, Michael Hedges, October 2013.For attorneys specializing in Internet law, the saga of Washington, D.C.–based company HBGary Federal served as a cautionary tale of what can go wrong in the wilds of cyberspace. The technology security contractor, along with its sister firm HBGary, was making a name for itself as a place for the U.S. government to turn to when agencies needed help protecting data and repelling online intruders. The company offered, among other services, to identify and expose hackers, subjecting them to criminal and civil penalties. When the hacker group Anonymous was bedeviling some government agencies by infiltrating their Web sites, HBGary Federal Chief Executive Officer Aaron Barr announced he would use social media to identify members of the group. Barr, right, told a reporter from the Financial Times that he planned to reveal the names of leaders of the group. But over Super Bowl weekend in 2011, HBGary Federal suffered a catastrophic setback. Anonymous hacked the company’s Web site, copying tens of thousands of company e-mails—some of which included embarrassing and proprietary information— and posting them online. The group also took over Barr’s Twitter account.