Senator’s Lieberman (ID-CT), Collins (R-ME) and Cantwell (D-WA) introduced the Commodity Speculation Reform Act (S. 3248) today.
Here is an excerpt of a joint press release issued on the bill:
Following a series of hearings where financial experts said that one reason for the recent spikes in food and energy prices may be due to excessive speculation in the commodities market, Senators Joe Lieberman, ID-Conn., Susan Collins, R-Me., and Maria Cantwell, D-Wa., introduced the Commodity Speculation Reform Act of 2008.
“There is little doubt that excessive speculation has had an effect on rising prices,” Lieberman said. “Our bill will end that and help create a more orderly market for the industries and producers who must deal in commodities as a matter of business.”
Sen. Collins said, “While families are paying more for home heating oil and groceries, and businesses face failure from high energy costs, there is compelling evidence that speculators are playing a significant role in these price increases. This balanced legislation controls excessive speculation and provides greater transparency and accountability in the commodity markets that while often go unnoticed, play an important role in our daily lives.”
Senator Maria Cantwell said: “We need to establish a clear, bright line in the oil and gas markets from possible market manipulation. The American public and businesses are being crushed by out of control oil prices and need Congress to rein in excessive speculation and bring these markets back under control.”
Per the official press release, the bill would:
- Require the CFTC to consider the overall effect of speculation when it sets the position limits that restrict the amount that any one investor can invest in a commodity.
- Extend the existing rules that apply to the regulated exchanges to currently unregulated over-the-counter and foreign markets where trading has exploded over the past 10 years.
- Eliminate the swaps loophole that allows pension funds and other large investors to invest in index funds that circumvent existing position limits.
- Direct the CFTC to set speculative position limits, rather than have them set by the for-profit futures exchanges, and repeals the CFTC’s authority to substitute meaningless reporting requirements for actual speculative position limits.
- Remedy staffing shortfalls at the CFTC by adding 100 new staff to improve its market oversight and enforcement capabilities.
- Besides ending excessive speculation, this bill would also seek to return the commodities market to what it was meant to be – a place where producers and consumers of specific commodities can enter into futures contracts that help hedge the risks of price fluctuations common to their industries.
We should note that, for the sake of clarity, CFTC stands for the Commodity Futures Trading Commission. Updates will be provided if and when we hear any definitive news on the potential for floor time being given to this bill.
For more information:
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Official Bill Summary (pdf)
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Full Text of the Bill (pdf)
