Senator Dick Durbin Introduces Bill to Reform Oil Market Regulation

June 12, 2008 -- WASHINGTON, D.C. – United States Senator Dick Durbin (D-IL), Chairman of the Appropriations Subcommittee on Financial Services and General Government, introduced legislation today to increase the resources and authority of the Commodity Futures Trading Commission (CFTC).

The CFTC is the federal agency responsible for regulating oil and commodity futures markets. The legislation is cosponsored by Senators Harry Reid (D-NV), Carl Levin (D-MI), Byron Dorgan (D-ND), Diane Feinstein (D-CA) and Jeff Bingaman (D-NM).

“While gas prices climb every day, the understaffed and underfunded CFTC is virtually powerless to stop it,” said Durbin. “We need to give the agency in charge of investigating and regulating the oil market the resources and authority they need to do their job effectively. At this point, we simply don’t know what role speculation or manipulation is playing in price increases and with a market that is producing $4 or $5 gallons of gas, we simply can't waste any more time before getting to the bottom of this.”

Durbin’s legislation would take the following steps to address the problems at the CFTC:

* Authorize new resources for the CFTC – CFTC needs more cops on the beat and better information technology. These 100 new employees would immediately address the staffing shortfalls at the agency, and the technology funding would help the agency update woefully antiquated monitoring and analysis systems. Just last week, Walter Lukken, Chairman of CFTC said “we could hire 100 people and put them to work tomorrow given the inflow of trading volume. We are doing the best we can in difficult circumstances.”
* Improve Transparency in Market – CFTC currently has limited visibility of trades that take place on NYMEX and very little visibility of over-the-counter trades, such as trades from one hedge fund to another, or those that take place on International Commodities Exchange (ICE) in London. Durbin’s legislation would close the so-called “London Loophole” by requiring all traders on oil futures markets to report transactions in a detailed manner to the CFTC. The bill also directs the CFTC to investigate the impact of these trades on the price of oil. Finally, the legislation would move the CFTC’s Inspector General’s office out from under the office of the agency’s chairman, giving it clear independence.

Over the last seven years, trading in commodity markets has exploded from nearly 500 million trades in 2000 to over 3 billion trades in 2007. CFTC’s staffing levels however have not kept pace. Full-time employee levels have dropped over that same period of time from 546 in 2000 to 437 last year – nearly a 21 percent decline.

In addition to declining staff levels, despite monumental growth in the market, the agency’s budget has not kept pace with the agency’s technology needs. The President has requested a 17 percent budget increase for CFTC, bringing its budget to $130 million in fiscal year 2009.

Durbin is the Chairman of the Appropriations Subcommittee on Financial Services and General Government – the subcommittee responsible for overseeing the budget of the CFTC. Last month, Durbin chaired a hearing on the budget request for the CFTC.

Last week, at a hearing before the Senate Agriculture Committee, the agency charged with oversight of the agency, CFTC officials testified that additional resources, including more staff, are needed to help this agency carry out this mission.

Yesterday, Durbin and Senator Tom Harkin (D-IA), Chairman of the Committee on Agriculture Nutrition and Forestry, announced a joint hearing on the CFTC and its role in investigating and regulating US oil markets. That hearing is scheduled for Tuesday, June 17th.

Source: Senator Dick Durbin