US Sen. Maria E. Cantwell (D-Wash.) probably recognized that the bill she introduced on Nov. 10 with Ronald L. Wyden (D-Ore.) and Bernard Sanders (I-Vt.) has little chance of being considered. Congress appears unlikely to let state regulators and attorneys general consider regulating over-the-counter financial derivatives trading as a form of gambling.
Cantwell wanted to make a point. "The derivatives market has done so much damage to our economy and is nothing more than a very high-stakes casino—except that casinos have to abide by regulations," she said.
"Even in Las Vegas at the blackjack tables, both the house and the player have to have capital behind their bets," she said, adding, "But we allow Wall Street to continue to operate in the dark and without capital to back up bets on derivatives. We remain at risk of further harm until we have the tools to stop abusive speculative practices."
Congress exempted derivatives traders from state gambling regulations when it passed the Commodity Futures Modernization Act in 2000. Cantwell's proposal would reveal this provision.
Much bigger now
The derivatives market has grown from $80 trillion, when CFMA went into effect, to more than $600 trillion now, Cantwell said. The lack of any regulations at the federal level meant that the 2000 law made it open season for rampant derivatives speculation that culminated in the economic collapse of 2008, she said.
Cantwell noted that Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) mentioned OTC derivatives when he unveiled his sweeping federal financial regulatory reform proposal the same day.
"Our ultimate goal is a strong, uniform set of federal regulations," she said, adding, "Congress must take a strong stand to prevent the kinds of abuses that have cost American workers and taxpayers so much."
Basic question
Cantwell's demand for tighter derivative regulations has grown more urgent as Congress considers instituting a carbon cap-and-trade program as part of global climate-change legislation. "The fact that the derivative market still has loopholes means we shouldn't start a carbon market too quickly," she said at a Nov. 10 Senate Finance Committee hearing on House and Senate climate-change bills.
Cap-and-trade proponents argue that the US Commodity Futures Trading Commission successfully regulated sulfur dioxide as a commodity under its acid rain program in the 1990s. Witnesses at the Finance Committee hearing said that cap-and-trade would be much bigger and not as focused.
"We're talking about a huge amount of the energy economy which would be put into these securities," said Kenneth P. Green, a resident scholar at the American Enterprise Institute for Public Policy Research.
Cantwell keeps raising an apparently basic question about cap-and-trade and probably will keep asking it until she gets satisfactory answers.
More Oil & Gas Journal Current Issue Articles
More Oil & Gas Journal Archives Issue Articles
View Oil and Gas Articles on PennEnergy.com
