Durbin, Harkin Will Examine CFTC Resources, Authority
"MN Farm Union"07/11/2008
Thu. Jun. 12, 2008
by Jerry Hagstrom
MN Farmers Union
Senate Majority Whip Durbin, who chairs the Senate Financial Services Appropriations Subcommittee, and Senate Agriculture Chairman Tom Harkin announced Wednesday they will hold a joint hearing next week on strengthening the Commodity Futures Trading Commission, the agency that regulates oil and commodity futures markets.
Durbin and Harkin did not announce a day for the hearing, but indicated they would look at the agency's authorities and staffing level.
"It's time to open the books on the oil futures market," Durbin said in a release. "The agency in charge of regulating oil markets is currently blocked from accessing critical information on trades made on foreign exchanges or on over-the-counter trades. We can't expect the CFTC to properly monitor the market and keep gas prices stable if they don't have the information they need. Congress needs to give CFTC the authority to monitor these trades closely and the staff and IT systems to get the job done."
In recent weeks, CFTC commissioners have testified that while energy and commodity trades have increased dramatically, the number of CFTC staff has dropped, which raises questions about the agency's ability to monitor the markets, enforce laws and investigate possible market manipulations.
Durbin said the number of trades in commodity markets rose from 500 million in 2000 to more than 3 billion in 2007, while the number of full-time employees has dropped from 546 to 437. President Bush requested a 17 percent increase in the CFTC budget for FY09, which would bring it to $130 million.
CFTC commissioners initially said they believed the run-up in oil and agricultural commodity prices was due to market fundamentals but in recent weeks have announced efforts to investigate the role index funds and other institutional investors might play in the price increases.
On Tuesday the CFTC announced the creation of a task force including CFTC staff, the Federal Reserve, the Treasury, Energy and Agriculture departments and the SEC to examine investor practices, fundamental supply and demand factors, and study the role of speculators and index traders in the commodity markets.
CFTC Commissioner Mike Dunn said Wednesday the task force was needed to take a broader look at the run-up in prices because the CFTC has only "a half-dozen economists to serve the whole agency."
Dunn also told the National Council of Farmer Cooperatives Wednesday that the commission is particularly concerned that agricultural futures prices and cash prices are not converging when the contracts expire as they have in the past.
The CFTC is considering requiring that swaps, which are futures contracts between two entities, be settled on exchanges, but there is concern that such a requirement would change the nature of these deals. Dunn said the CFTC Agricultural Advisory Committee is expected to meet around July 29 to examine what the staff has learned in its investigations.