United States Senate
Washington, DC 20510
May 4, 2010
Re: Cantwell Amendment 3786 to Restoring Financial Stability Act of 2010 authorizing CFTC to effectively enforce manipulation of derivatives markets
Dear Senator:
The over 250 consumer, employee, investor, community and civil rights groups who are members of Americans for Financial Reform (AFR) write to express strong support for Amendment No. 3786 to S. 3217 offered by Senators Cantwell, Whitehouse and Sanders. The amendment proscribes reckless conduct that would result in manipulation of the commodities futures and derivatives markets, giving the CFTC the same anti-manipulation standard employed by the SEC for over 75 years, and that the FERC and the FTC now employ.
This amendment fills an important gap in an otherwise strong package of derivatives reform proposals. Current law does not provide the necessary tools to enable the CFTC to effectively enforce and deter market manipulation in critical commodity futures markets such as crude oil and agriculture products. For manipulation cases under the Commodities Exchange Act, the CFTC must prove that the defendant had “specific intent” to do harm, the ability to influence market prices, and that the defendant caused artificial prices. As a result, the CFTC is rarely able to charge participants with manipulation when compared with the SEC, FERC and FTC which use a “reckless conduct” standard.
It is now almost universally recognized that the fuse that lit the worldwide economic meltdown in the fall of 2008 was the $600 trillion, severely under-capitalized and unregulated and opaque derivatives market, dominated by the world’s largest banks. Strengthening regulation of the OTC derivatives markets is arguably the most important thing Congress can do to reduce the risk that the failure of a single institution will threaten the stability of the financial system. The Cantwell Amendment is an essential component of a comprehensive derivatives reform package. We urge its adoption.
Please contact Lisa Lindsley, Director, Capital Strategies, AFSCME, for more information: 202.429.1275 or llindsley@afscme.org.
Sincerely,
Americans for Financial Reform