Business Leaders, Sen. Cantwell, Advocates Call for End to Reckless Speculation, Rebuild the Real Economy


DATE: February 3, 2010

Americans for Financial Reform, the Commodities Markets Oversight Coalition Band Together to Put Cops Back on the Futures and Derivatives Beat, Close Loopholes That Fostered Financial Meltdown

Washington, DC – Business interests ranging from fuel dealers to farmers, manufacturers and trucking companies joined U.S. Senator Maria Cantwell (D-WA) today in calling on Congress to stand up to the big banks and get serious about reining in the reckless and greedy speculation that brought our economy to near collapse and is still driving up prices and stifling job growth for everyone. They are calling for real regulation of derivatives without loopholes.

Under current law, certain kinds of complex financial transactions and trading in vital energy and agricultural commodities take place with no transparency and without any federal oversight. These include the credit-default swaps on mortgage-backed securities that fueled the housing bubble and brought down AIG; as well as speculative trading that helped create massive bubbles in a range of consumer goods, from gasoline, heating oil and natural gas to wheat, cotton and other commodities.

“Reining in the dark derivatives market is key to getting capital flowing to community banks and small businesses that are in the best position to stimulate economic growth on Main Street,” Senator Cantwell said. “To get our economy on track, we must bring full transparency and capital requirements to the entire derivatives market. This will prevent a repeat of the massive losses in unregulated derivatives trading – losses that taxpayers ultimately paid for.”

“After taking trillions of dollars in taxpayer dollars, the big banks are now doing everything in their power to protect their million-dollar bonuses, such as the $100 million dished out by AIG today, by blocking strong laws that would rein in the reckless speculation that nearly brought down our banking system and cost millions of Americans their jobs,” said Heather Booth, executive director of Americans for Financial Reform.

“The following phenomena all share a common heritage: Wildly volatile food and energy commodity prices. The failure of AIG, Lehman Brothers, and Bear Stearns. The collapse of our financial markets. The loss of trillions of dollars of wealth by investors in the United States and around the world. A residential and commercial real estate crisis. The failure of hundreds of banks. A surge in firings and layoffs by employers…What’s the connection? Unregulated and non-transparent derivatives markets,” said Michael Masters, founder and managing member of Masters Capital Management.

“Congressional action is essential for rebuilding confidence in these markets as price discovery and risk management tools,” said National Farmers Union President Roger Johnson. “It is important to reduce systemic risk and market volatility that has caused extreme artificial spikes in the market, hurting the industry and leading to a long term ripple effect. With the changes in the regulations comes an opportunity to prevent another artificial spike in agricultural commodity prices due to speculation, as occurred in 2009. Therefore, NFU urges federal lawmakers and regulators to consider the proposed limitations and take action to protect the state of the economy and those involved in the commodity markets.”

“It is essential that Congress act to bring transparency to all and ban retail index funds from participating in the futures market for both energy and food commodities. Index funds are destroying the fundamental price discovery of the futures markets and are impacting the price that consumers are paying for the energy needed to drive our cars, heat our homes, fuel our factories and feed our families,” said Paul Cicio, president of the Industrial Energy Consumers of America.

“If the markets were to value energy on a supply and demand of the physical energy as used to be done before the investment community took over the commodity markets, American consumers would be paying at least $1.00 per gallon less at the pump today,” said Sean Cota, owner of Cota & Cota, Inc., a fuel dealership in Bellows Falls, VT, and vice chairman of Petroleum Marketers Association of America.

“Speculation has been a factor in the growth in hunger at home and abroad. This is a serious moral issue that we can deal with if we face up to our responsibilities,” said Brother Dave Andrews, CSC, Senior Representative, Food & Water Watch.

“Increasing market transparency and establishing reasonable aggregate position limits have no potential downside that we can discern. These remedies likely would reduce speculative bubbles, restore investor confidence, and strengthen the link between commodity prices and market fundamentals,” said Randy Mullett, vice president of government relations and public affairs for Con-way Inc., a trucking and logistics company based in Ann Arbor, MI.