House commodities bill heads for floor as Senate rejects Reid measure

The US Senate rejected the Democratic leadership's latest cloture motion on Majority Leader Harry M. Reid's (D-Nev.) energy commodities reform bill, but the House appears poised to debate a similar bill next week.

The US Senate rejected the Democratic leadership's latest cloture motion on Majority Leader Harry M. Reid's (D-Nev.) energy commodities reform bill, but the House appears poised to debate a similar bill next week.

The Senate motion on S. 3268 fell 10 votes short of the three-fifths majority necessary for adoption by a margin of 50 to 43. Seven senators did not cast votes. Democrats and Republicans accused each other immediately afterward of indifference to the impact of soaring gasoline prices on consumers.

The vote ended a week of legislative maneuvering by both sides. Democrats said Republicans were more interested in adding amendments to the bill than in enacting it. Republicans said Democrats were concentrating on a relatively minor aspect of a much bigger problem.

"Republicans once again have run away from an opportunity to provide a short-term solution to our energy crisis. While Democrats have worked to stop greedy speculators who artificially inflate oil prices, Republicans have chosen to protect them. There is widespread agreement that excessive speculation is contributing to high energy prices, and that curbing it would help lower [gasoline] prices right away. But Bush-McCain Republicans would rather talk endlessly about the problem than act to solve," said Reid.

"The American people have been telling us for months that the house is on fire, and the Democrats just showed up at the scene with a squirt gun. The vote we just took was their response to $4/gal gasoline. That's what a few of our friends on the other side are doing for all those people who are standing at the gas pump, hopping mad at what it just cost them to fill up their tank," Minority Leader Mitch McConnell (R-Ky.) said.

Focus moves to House

S. 3268's defeat effectively moved the congressional commodities market reform focus fully to the House, where the Agriculture Committee approved draft language of a bill with similar provisions late the afternoon of July 24 and sent it to the House floor. Speaker Nancy Pelosi (D-Calif.) indicated in her weekly conference that it will be debated next week.

"Although difficult to quantify, the potential influence of speculative trading on futures markets is a real issue, with the crude oil and agricultural markets seeing record volatility and a lack of convergence between futures and cash prices in some contracts. Today's action will bring much-needed transparency to commodities and futures markets, helping to restore the market as a mechanism for price discovery and risk mitigation that work to benefit producers, processors and consumers," said Agriculture Committee Chairman Collin Peterson (D-Minn.), the bill's sponsor.

Formally known as the Commodity Markets Transparency and Accountability Act, the measure would require foreign boards of trade to share data and adopt speculative position limits on US commodity contracts similar to US regulated exchanges. It would require the US Commodity Futures Trading Commission to set trading limits for all agricultural and energy commodities. It would limit hedge exemptions to traders actually seeking hedges.

The bill also would try to increase available trading information by breaking out index fund and other data in agricultural and energy markets as well as requiring detailed reporting from index traders and swap dealers. It also add of 100 full-time employees to the CFTC to prevent market manipulation and fraud, authorize the CFTC to act if it finds over-the-counter energy markets have been disrupted, and require the CFTC to study whether adopting position limits for over-the-counter markets would be effective.

Peterson led three days of hearings in the committee July 9-11 to examine bills which had been introduced already and various aspects of energy commodities markets. In addition to approving a manager's amendment containing technical changes, the committee also approved an amendment by Rep. Jim Marshall (D-Ga.) which would change the proposed public differentiation of index fund and other data in commodity markets from monthly to weekly.

Contact Nick Snow at nicks@pennwell.com

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