|
WASHINGTON – Homeland Security and Governmental Affairs Committee Chairman Joe Lieberman, ID-Conn., and Ranking Member Susan Collins, R-Me., Tuesday heard testimony from financial experts regarding three legislative discussion drafts put forth to control excessive speculation in the commodity markets. They promised to introduce legislation after the July Fourth recess to help prevent speculation in futures markets from raising the prices of energy and food.
Collins said, “High energy costs are having a devastating impact on our economy and our people, especially those in large, cold, rural states, like Maine. The increased cost of energy certainly reflects fundamentals, including increased demand from China and India, but institutional investors also appear to be driving up prices. Increased regulation and transparency in the futures markets is needed to guard against excessive speculation and price manipulation.”
Among the proposals that were discussed are:
• Close the so-called swaps loophole and create a seamless system of speculative position limits that would apply to all commodity trading – on the exchanges, over-the-counter, and on foreign exchanges;
• Create aggregate speculative limits that restrict the overall share of commodity markets that may be held by financial speculators; and
• Restrict commodity investments by large institutional investors that invest through index funds.
Senator Collins, however, said that she has concerns with the provision that would prohibit institutional investors from investing in energy futures markets. “An outright ban would have unintended consequences for retirees relying on these pension funds,” said Senator Collins. She said that she does believe that reforms are needed, including providing more resources for the Commodities Futures Trading Commission. The trading volume of commodity futures contracts and options has soared from 37 million contracts in 1976, to more than 3 billion contracts last year. Yet, there are fewer employees at the CFTC today than in 1976, leaving much more work for fewer staff.
Speculation is not illegal,” Lieberman said. “But that does not mean it isn’t hurtful… Motivated by the weakness of the dollar and rising demand for oil, speculators are moving enormous amounts of money into commodity markets for the obvious purpose of making more money. But in doing so they are artificially inflating the price of food and fuel futures and causing real financial suffering for millions of people and businesses…”
Across the board, the witnesses endorsed the first proposal, although several voiced concerns regarding the other two proposals. The Senators said they planned to introduce comprehensive bipartisan legislation to address excessive speculation after the July Fourth recess. The legislation will be based on the proposals and the additional testimony received today.
|
