NYT Business Section June 12, 2008 Lieberman Seeks Limits to Reduce Speculation By DIANA B. HENRIQUES A prominent Washington lawmaker said Wednesday that he would propose next week to ban large institutional investors, including index funds, from the nationâs booming commodity markets. The idea is one of several outlined by Senator Joseph I. Lieberman, independent of Connecticut, who is chairman of the Senate Homeland Security and Governmental Affairs Committee. That committee will hold a hearing on June 24 to continue examining whether financial speculation is affecting the prices of crops and fuel. âThere is excessive speculation in the commodity markets that is driving up the cost of food and energy,â the senator said in an interview. âThe question is, do large institutional investors play a positive role?â His concern, he said, is that they do not. Over the last five years, hundreds of billions of dollars have flowed into commodity futures markets, which play an important role in setting world benchmark prices for a variety of materials, including corn and crude oil. One steady source of money has been the growing number of new funds that mirror specific commodity indexes, like the Standard & Poorâs Goldman Sachs Commodity Index. More recently, exchange-traded funds â popular new investment vehicles that trade on stock exchanges but track commodity prices â have followed the index funds into the market. Other Washington lawmakers also turned up the heat this week on the investors they blame for sharp run-ups in food and energy prices. Two other Democratic senators, Jack Reed of Rhode Island and Carl Levin of Michigan, said Wednesday that the White House had agreed to their request for a new federal task force to investigate whether âmanipulative or deceptive practicesâ are adding to the run-up in energy prices. The task force would include members from the Treasury Department, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Reserve and the departments of energy and agriculture. Central to both proposals is the view that both oil and food prices are artificially inflated by financial speculators whose trades do not reflect fundamental factors of supply and demand. But most lawmakers also agree that increased food and fuel demand from China and India, widespread weather problems that have affected harvests, new mandates that have steered food crops into ethanol production, and a weakening dollar have all influenced these key prices as well. Besides what he called the âaggressiveâ idea of banning institutional investors from the commodity markets, Senator Lieberman said he would also put forward other ideas for discussion at the hearing on June 24. One less-sweeping proposal would be to strengthen existing regulatory limits on the size of the stake that each speculative investor can hold in a given market, called speculative position limits. And he plans to propose barring investment banks from using the regulated futures markets to hedge speculative bets their clients are making in the vast unregulated global swaps market â what he called âthe swaps loophole.â
Excellent Commentary ......................................................................... Kudos to Lieberman..... This is common sense....and this is the way to solve it.... ................................................................... Next step.... Get rid of Bush/Cheney and sharply soften middle east war unease.....which continually has caused the oil market to substante higher price logic.... .......................................................................... Next step.... Conservation and technology shift Both legally and actuals All vehicles.... 40mpg mandate or alternate propulsion.... Now....not later..... ..................................................................... Kudos to Common Sense Lieberman....
They'll have to have a provision about "constructive ownership"... so that an institution does not have several of its people hold positions at the speculative limit... then, they'll have to audit to enforce... but a proper concept I think.
We've need an energy policy for more than 30 years, but our spineless and greedy politicians can't do anything until it's a crisis... never wanting to step on anyone's toes (except taxing the rich, of course) in fear it might hurt their chance at reelection. Our Federal Gummint really is nothing short of PUKE!
Lieberman is in east coast hedgefund land and will be the point man. New England is 70% oil heated. Many of us have had it with this shit and have been hammering our Senators. A big part of the nonsense is evading pos. limits through scumbag "exchanges", swaps - - see ET thread Maine Wants Enron Loophole Closed. Lest any freemarket mumblers and "oil traders" think its going overseas (including that GS douchebag blankfein) - think twice - the next move if the HFs, SWFs, etc. wont accept restraint and disclosure, will be a nuclear attack via the payment system. Big money is bigger than the gumint, until it isn't.
I support rooting out speculation when it deals with an essential good such as oil, because oil is so necessary to 90% of U.S. commerce and national defense itslef. Having said that, Lieberman is a gasbag of epic proportions.
Yes, one minute he is aggressively verbal in stating the US may have to take possible military action inside Iran and the next he is the friend of the common man by stamping out excessive speculation... makes my head spin...
3 words FRACTIONAL RESERVE BANKING Restraining large speculators? lol How about restraining the banks, limiting the powers of the Fed to create money, i.e. finance the u.s. govt. deficit. There would be no "large speculators" without large banks creating money out of thin air, period. period, period, period...
For Immediate Release: June 12, 2008 Frank Announces Hearings on Financial Market Regulatory Restructuring Washington, DCâHouse Financial Services Committee Chairman Barney Frank today announced that the committee will hold a series of hearings on the policy implications of the transformation of domestic and international financial markets -- chief among them are the dramatic growth in the share of assets held outside the commercial banking system, the complex arrangements that link firms that are regulated differently (or not at all) and the increasing amount of leverage. The committee will explore the potential systemic risks associated with these developments, the adequacy of current oversight and tools, and the extent to which existing structures are adequate to respond to future problems. Specifically, the hearings will examine: The regulatory implications of providing investment banks and others access to the discount window. Various proposals including those from the Financial Stability Forum and New York Federal Reserve Bank President Timothy Geithner to improve the oversight and mitigation of systemic risk. The need for enhanced capital and reserve requirements for financial firms. The current powers of the Federal Reserve and other regulatory agencies to determine whether existing authority is sufficient to protect the financial system and the taxpayers. âAs the extraordinary measures utilized to respond to the Bear Sterns crisis demonstrated, we have failed to develop a regulatory system with the reach and capacity to protect the system against the large risks embedded in our increasingly interconnected markets. These hearings are designed to focus on indentifying how much reach and what new capacities are needed to avoid â or respond to â the next crisis,â said Chairman Frank Witness expected to be invited to testify before the committee include Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben S. Bernanke, New York Federal Reserve President Timothy Geithner, S.E.C. Chairman Christopher Cox, other federal regulators, academics, economists and market participants who can address the current state of Americaâs and other jurisdictions financial regulatory system and can testify on how best to measure and limit risk without stifling innovations and improve market liquidity and breadth. Beginning in July and continuing in the fall, the committee will examine the regulatory implications of the rescue of Bear Stearns through the intervention by the Federal Reserve. Subsequent hearings will examine, in light of the collapse of Bear Stearns, the ability of the regulatory structure to assess and mitigate systemic risk in order to avoid a similar or more serious crisis in the future. http://financialservices.house.gov/