WASHINGTON -- Reacting to public concern that speculation may have played a role in high energy and commodity prices, the House Agriculture Committee approved a bill July 24 to bring greater transparency and accountability to energy and agricultural commodity markets.
The bill, titled the Commodity Markets Transparency and Accountability Act, passed on a voice vote that appeared to be unanimous.
House Agriculture Chairman Collin Peterson, D-Minn., said he hopes to bring the bill to the House floor during the last week of July.
The bill gives new powers and direction to the Commodity Futures Trading Commission in an attempt to address concerns about speculation in both the energy and agricultural commodity markets, particularly for cotton. The bill would require foreign boards of trade that offer futures contracts in the United States to provide more information to the CFTC. It would also require the CFTC to set limits on speculation in agricultural contracts.
Peterson said he hopes the bill can be combined with a Senate bill before the congressional session ends in September. Peterson said he is "not sure what they are up to the Senate," but that he thinks senators' comments that speculation have caused 20 percent to 50 percent of the increase in oil prices are too high.
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"I think it's having some effect that may be a little on the outside," he said.
Responsibility for prices
CFTC has contended that market fundamentals such as shortages of supply and increased demand are responsible for the price increases rather than any speculation. But consumer advocates, some energy users and agribusiness companies have questioned that analysis. Various farm groups also have noted that futures prices and cash prices have not been converging as agricultural futures contracts come to an end and led to questions about whether the prices are valid.
The bill is moderate in scope compared to a House bill offered by Rep. Bart Stupak, D-Mich., and another offered by Reps. Chris Van Hollen, D-Md., and House Agriculture Appropriations Subcommittee Chairman Rosa DeLauro, D-Conn., and to legislation under consideration in the Senate. Those bills would take stronger action to discourage speculation in the energy markets. Peterson said he would like to bring the bill up on what the House calls its "suspension" calendar, which would mean it would not be subject to amendment with the more radical measures.
Peterson made it clear during the committee discussion of the bill and to reporters that he wants to maintain the Agriculture committee's traditional jurisdiction over the CFTC and that he was afraid more radical proposals to limit speculation in the commodity markets could have unintended consequences. Peterson told reporters he considered banning pension funds from the markets, but instead put limits on pension funds and index funds, which invest in commodity futures as a hedge but do not have any interest in the underlying commodities.
Investor issues
Peterson said that during his recent hearings he had become convinced that investor money pouring into the markets was having some impact on commodity prices and on the ability of agriculture interests to use the markets for price discovery.
"The commodity market is not designed to be an investment market," Peterson said.
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Changes the CFTC made in its regulations and the 2000 Commodity Futures Modernization Act had "enabled" Wall Street firms to come up with "fancy derivatives" that have "exploded in the last few years" and could lead to market failure, Peterson said. He added he hopes the bill will avoid a commodity market failure like the housing failure that has required a congressional bailout.
Neal Gillen of the American Cotton Shippers Association, which has complained that investor speculation has made the cotton futures market unusable by traditional market participants, said the bill gives the CFTC "the potential to appropriately regulate the opaque over the counter market and swap dealers that have avoided speculative limits."
Republican Reps. Jerry Moran of Kansas and Ronald Neugebauer of Texas complained that Peterson was moving too fast. Peterson rejected those charges, saying that in addition to three days of hearings he invited various market participants to his office to battle with each other over various provisions of the bill. House Agriculture ranking member Bob Goodlatte, R-Va., defended Peterson, saying he had been "deliberative" and collaborative" and that his measure "appears to be an acceptable compromise."
