Senator says regulator should go, if rules delay continues
April 3, 2012
WASHINGTON, D.C. - U.S. Senator Bill Nelson (D-FL) has called on President Barack Obama to oust a top Washington regulator if there are continued delays of new trading rules that could curb the rise in gas prices.
Nelson, in a letter today, said Gary Gensler, chairman of the Commodity Futures Trading Commission, should be held accountable over the commission’s delays in imposing new congressionally mandated restrictions on speculative trading of futures contracts, including for oil and gas.
“The CFTC was supposed to implement the new rules by January 2011,” Nelson wrote in his letter. “But intense pressure from industry lobbyists is delaying reform. … If Chairman Gensler doesn’t act soon to implement rules that will cut down on speculation in the oil futures markets, then you should consider not reappointing him.”
Gensler, a former Goldman Sachs executive, serves as chairman of the CFTC at least until later this month when his term expires. A law allows him to remain on the job through next January. Among the commission’s duties is to act as an overseer of speculators who trade in oil futures and other commodities.
There is growing evidence to show these speculators are bidding up the price of oil and flipping futures contracts for a quick profit, much like speculators who bought and resold condominiums during the real estate bubble. Based on one recent Wall Street analysis, 63 cents of every gallon of gasoline is due to speculation. The share of the oil futures market controlled by speculators has more than doubled over the past 10 years. And, during that same time, gas has gone from $1.15 a gallon to an average of $3.97 a gallon.
In order to diminish excessive speculation, Congress passed legislation two years ago directing the CFTC to draft new rules governing commodities trading. But the five-member commission, under Gensler, has been under pressure from the investment banking industry seeking to delay or derail the rules.
Following is the text of Nelson’s letter:
April 3, 2012
Dear Mr. President:
Congress gave the Commodity Futures Trading Commission (CFTC) the authority to impose new restrictions on unregulated speculative trading of futures contracts, including for oil and gas. I was, and continue to be, a strong supporter of this.
Among other things, I have proposed legislation that would prevent any single investor from holding more than five percent of the oil futures market. I believe there’s ample evidence that excessive oil trading by banks and hedge funds is hurting consumers at the gas pump - and it’s hurting our nation’s economic recovery.
In essence, middlemen are bidding up the price of oil and flipping futures contracts for a quick profit, much like speculators who bought and resold condominiums during the real estate bubble. Based on one recent Wall Street analysis, 63 cents of every gallon of gasoline is due to speculation. The share of the oil futures market now controlled by speculators has more than doubled over the past 10 years – while gas has gone from $1.15 a gallon to an average of $3.97 a gallon.
In order to diminish excessive speculation, the CFTC was supposed to implement the new rules by January 2011. But intense pressure from industry lobbyists is delaying reform.
A recent report by the Project on Government Oversight suggests the CFTC continues to have a revolving-door relationship with the industries it regulates. A New York Times editorial from March 25th suggests it is up to your administration to provide all-out support for implementing and enforcing the new trading rules.
Mr. President, if CFTC Chairman Gary Gensler doesn’t act soon to implement rules that will cut down on speculation in the oil futures markets, then you should consider not reappointing him.
Sincerely,
Bill Nelson
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