collin-peterson

Dems Blast ‘Wall Street Crude Oil Casino’

by on May 11, 2011

Huffington Post…

WASHINGTON — A cadre of top Democrats said Wednesday that heavy Wall Street speculation was driving up gas prices and blasted Republicans for pushing a new bill to delay any crackdown on such speculation until the end of 2012. “What we have now on Wall Street is a crude oil casino, and it has been opened and is now being protected by the Republicans,” said Rep. Ed Markey (D-Mass.) at a press conference that included Reps. Barney Frank (D-Mass.), Maxine Waters (D-Calif.), Joe Courtney (D-Conn.), Peter Welch (D-Vt.), Collin Peterson (D-N.D.) and Carolyn Maloney (D-N.Y.). According to the Commodity Futures Trading Commission, the regulator which oversees speculation in the oil and food markets, the number of of speculative bets on oil is currently at an all-time high , above even the extreme levels associated with the 2008 run-up in oil prices, when oil hit its highest price ever. All of that speculation has driven up the price of oil, according to many economists and an analyst at Goldman Sachs. Sean Cota of the Petroleum Marketers Association said at today’s press conference that a “bubble is underway” in the oil markets and that excessive speculation costs consumers and retailers $400 billion a year. Oil prices have risen sharply this year but have been increasingly volatile of late, plunging a full ten percent during a single trading session last week. “There used to be a debate about whether or not speculation contributed to the price of oil,” Frank said. “Now there’s a consensus.” “We know this is having an impact,” Peterson added, arguing Republicans “didn’t learn a darn thing from the financial collapse.” Last year’s financial reform bill requires the CFTC to impose new rules limiting excessive speculation in the oil and food markets, but the agency has been slow to act, and House Republicans are now pushing a new bill to delay those rules until the end of 2012. Sen. Bernie Sanders (I-Vt.) sent a letter to President Barack Obama in April, urging him to demand action from the CFTC. Obama has formed an Oil and Gas Fraud Working Group to scrutinize fraudulent behavior that may be driving up prices at the pump, but has not spoken out about regulating speculative bets that are currently legal. In addition to delaying rules on oil and gas trading, the House GOP bill would push back all of the derivatives reforms required by last year’s Wall Street overhaul and repeal some aspects of a 1999 law requiring traders to register with the CFTC and the SEC. Experts say heavy speculation becomes particularly dangerous when combined with “high-frequency trading,” automated processes that execute thousands of trades in less than a second. “It’s like the movie ‘Wall Street’ combined with ‘The Terminator,’ except it’s a horror movie for the American consumer,” Markey said, echoing concerns from CFTC Commissioner Bart Chilton. During a May 4 House Agriculture Committee Hearing, Rep. Mike Conaway (R-Texas) said there was no evidence that speculation affects commodity prices. Rep. Frank Lucas (R-Okla.), author of the new GOP bill, was not immediately available for comment. While Democrats target commodities speculation, Republicans blame pain at the pump on limited offshore drilling for oil and gas in the U.S. However, many experts claim expanded drilling operations simply will not lower gas prices . Rep. Maxine Waters (D-Calif.) also criticized Republicans during Wednesday’s press conference for attempting to repeal consumer protections included in last year’s Wall Street overhaul, part of separate legislation aimed at watering down the powers of the new Consumer Financial Protection Bureau. Some Democrats, including Frank, have backed an effort to delay another part of the Wall Street reform bill targeting the swipe fees that banks charge retailers for processing debit cards. UPDATE (2:19 p.m. EST) : As lawmakers were holding their press conference, the Chicago Mercantile Exchange, one of two major exchanges trading crude oil futures, halted trading in crude, gasoline and heating oil contracts after gasoline futures plummeted by 25 cents per gallon, CME spokesman Chris Grams told HuffPost.

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Dems Blast ‘Wall Street Crude Oil Casino’

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Senator Says Loophole In Derivatives Regulation Undermines Reform

by The Huffington Post News Team on November 20, 2009

The effort to impose new restrictions on the financial system falls short of true reform if there’s a gigantic loophole for foreign exchange derivatives, Sen. Maria Cantwell (D-Wash.) said Thursday. “Most people who write about the ‘comprehensive reform’ — they’re missing the point, which is, you’ve got to have derivatives regulation,” she said in an interview with the Huffington Post. And indeed, bills being considered in Congress would bring transparency and accountability to the complex and opaque derivatives contracts that nearly brought down the financial markets last year — by forcing them to be traded through clearing houses or on exchanges. But the bills, based on a proposal put forth by the Obama administration, would exempt foreign exchange derivatives from disclosure requirements. That loophole is now facing opposition in both houses of Congress. As Cantwell explains it: “The whole foreign issue is a scapegoat. The real issue is that if you have a loophole that people can drive their tractor through, drive their volume through, you create a dark market.” This one loophole could be widely exploited, Cantwell argued, and “You can’t have exemptions that are 50-80 percent of the market or it won’t be reform.” Foreign exchange derivatives — private contracts to buy or sell currencies in the future -currently make up about eight percent of the largely opaque derivatives market. U.S. firms with extensive operations overseas like Nike and Apple use them as insurance against currency fluctuations. Virtually the entire market is traded in the shadows by the biggest banks. Wall Street wants to keep it that way. Banks made more than $18 billion off foreign exchange derivatives in 2007 and 2008, according to a report by national bank regulator the Office of the Comptroller of the Currency . By comparison, these same banks lost about $13.7 billion during the same period from all other types of derivatives trades. Supporters of the exemption argue that the system is working fine, and that any attempts to regulate it will simply drive the market overseas into much more opaque places, beyond the reach of meaningful regulation. Cantwell’s response to that concern: “The international community is waiting for the United States to stand up and have transparent markets before they themselves have transparent markets. Se we ought to be the beacon for how it’s done, not sit around and blame foreign countries that might have dark markets.” The two leaders responsible for shepherding derivatives reform legislation through the chamber — Financial Services Committee Chairman Barney Frank (D-Mass.) and Agriculture Committee Chairman Collin Peterson (D-Minn.) — have committed to closing the foreign exchange loophole, the Huffington Post reported earlier this week . In the Senate, the bill introduced by Banking Committee Chairman Christopher Dodd (D-Conn.) includes the loophole. However, since the Senate Agriculture Committee also has jurisdiction over how derivatives will be regulated (American farmers have been using derivatives for more than 100 years) it’s unclear what will ultimately emerge from the Senate. “This is a long battle,” Cantwell said. “It’s like a porous border. We’ve got to make sure we really are closing those loopholes.”

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Senator Says Loophole In Derivatives Regulation Undermines Reform

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Derivatives Regulation Proposals in U.S. House Move Closer to Obama’s Plan

October 9, 2009

Oct. 10 (Bloomberg) — House Democrats offered new proposals to regulate the $592 trillion over-the-counter derivatives market after Obama administration officials said an earlier plan left loopholes. Representative Collin Peterson , head of the Agriculture Committee, presented his draft legislation yesterday. Hours later, Representative Barney Frank , chairman of the House Financial Services Committee, circulated among colleagues changes he had promised in an effort to “tighten up” the plan he announced a week ago. President Barack Obama’s administration proposed regulatory changes in August, including imposing higher capital and margin requirements on derivatives markets and requiring certain contracts be processed through clearinghouses. The legislative proposals laid out yesterday hewed more closely to regulatory changes sought by the administration than did the draft Frank offered on Oct. 2. “Some of the perceived loopholes in the Frank bill, it looks like Peterson plugged a number of those up,” said Kevin McPartland , a senior analyst in New York at Tabb Group, a financial-market research and advisory firm, in an interview. Maneuvering over the legislation is a test of the administration’s call to tighten regulation in an effort to prevent a repeat of the global financial crisis. Opaque financial products, including derivatives, have contributed to almost $1.6 trillion in writedowns and losses at the world’s biggest banks, brokers and insurers since the start of 2007, according to data compiled by Bloomberg. Everyday Risks House lawmakers say they are trying to protect so-called end-users, corporations that rely on derivatives to hedge everyday operational risks, such as fluctuations in foreign currency rates, interest rates and commodity prices. The Obama plan would subject companies to higher collateral requirements whether they trade standardized or customized contracts. Frank’s original proposal would exclude companies if they use derivatives to hedge risk. Gary Gensler , chairman of the Commodity Futures Trading Commission, told lawmakers Oct. 7 that the provision could free from oversight all hedge funds and corporations that use derivatives, including mortgage-finance companies Fannie Mae and Freddie Mac. “Some of the stuff was inadvertent,” Frank said in an Oct. 7 interview. “We didn’t mean to undo this or undo that. It’s an ongoing process. Things go through many drafts.” ‘Significant’ Credit Losses The revised draft that Frank, a Massachusetts Democrat, circulated among colleagues and staff at the Capitol would continue to exclude most corporations that use derivatives to mitigate operational risk. In the new version, derivatives users that are large enough to “expose counterparties to significant credit losses” wouldn’t be eligible for the exclusion. Peterson’s measure would exempt all except the largest end- users from new disclosure, collateral and clearing requirements. Peterson, a Minnesota Democrat, gave Gensler much of what he asked for in an Aug. 17 letter to lawmakers, including tougher execution requirements for standard contracts and the authority to regulate over-the-counter foreign currency swaps. “This draft reflects the hearings the Agriculture Committee recently held looking at current OTC reform proposals, and it incorporates provisions that have been proposed by Chairman Barney Frank’s committee and the administration,” Peterson said in a statement yesterday. For Related News and Information: News on derivatives: NI DRV News on exchange-traded funds: NI ETF World credit-default swaps pricing: WCDS Biggest credit-default swaps movers: CMOV Top commodity news: CTOP

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