In mid-April, Texas Senator Ted Cruz sold shares of Wall Street bank Goldman Sachs (NYSE: GS) when the stock was trading at $400 per share. The sale was not chump change and appears to have amounted to $375,000 but not more than $500,000, according to Capital Trades. It also represents one of only a couple of trades seemingly made by Senator Cruz.
While the reason for the sale is unclear, the Senator’s timing suggests he’ll avoid the 44.6% capital gains tax that’s being discussed in Washington, D.C. The Senator’s trade occurred on April 15. But it was only published on April 24, as members of Congress have a 30-45 day window to disclose their stock trades.
While Senator Cruz is not a member of the Banking, Housing and Urban Affairs committee, where he would be privy to sensitive information, his wife Heidi is a managing director at Goldman Sachs. She has been employed by the bank since 2005, according to her LinkedIn profile, and is listed as the owner of the shares. Since the Cruz couple sold the shares, GS stock has increased by 5.7%.
Senator Cruz’s committee assignments include Commerce, Science & Transportation, Foreign Relations, Judiciary, and Rules and Administration. In February, Sen. Cruz introduced a bill to ban central bank digital currencies (CBDCs), or a digital dollar, in an attempt to guard the privacy of Americans and their spending habits.
Inside Information
Contrary to popular belief, lawmakers are not prohibited from trading stocks. They are free to trade stocks, bonds, and other securities. In the three years leading up to 2021, close to 200 members of Congress reported having traded a stock or other financial asset themselves or through a relative. They traded thousands of securities over that span.
Over 50% of those politicians were reported to have been on committees in which they would be privy to inside information, per The New York Times. These activities are not exclusive to one party and tend to occur on both sides of the aisle. While attempts have been made to ban stock market trading on Capitol Hill, leadership has reportedly fought against it.
Goldman Gambit
When Senator Cruz chose to sell Goldman Sachs stock, shares weren’t all that far from their 52-week high of $425. With a 2.6% dividend yield, the financial stock is also popular for its cash distributions. Last year, Goldman increased its dividend from $2.50 to $2.75 per share for an annual dividend amount of $11.
The current high interest rate environment can work for and against big banks. On the one hand, they are able to charge higher interest rates on loans. But on the flip side, consumers expect higher yields on their savings. Goldman Sachs is behind savings product Marcus, which has a minimum account balance of $1,000.
Sell-side analysts are generally bullish on Goldman Sachs stock, with 18 buy ratings, per TipRanks. With an average price target of $452, the Cruz couple might have left some profits on the table.
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