Washington Extra – Oil up
How high is it? A 2-1/2 year high.
How high can it go? No one knows.
Energy Secretary Steven Chu expressed what is on many minds – that the oil price jump can hurt the economy. “We have a very delicate recovery going on and an increase in prices will make that vulnerable.”
Even with all options on the table, U.S. officials expressed great caution about imposing no-fly zones over Libya. “I think we are a long way from making that decision,” Secretary of State Hillary Clinton said.
Some Republicans saw the oil price scare as an opportunity to push again for expanding off-shore oil drilling. “To end this dangerous over-reliance on oil imports, we must find more domestic resources, improve our efficiency and improve international cooperation,” Senator Dick Lugar said.
We had the chance at the Reuters finance summit to ask CFTC Chairman Gary Gensler what a regulator does when a market takes a sharp turn, like oil has in response to Libya.
He asks the surveillance staff to do a briefing. “And I ask questions about whether there’s any concentration, and whether the surveillance staff is seeing any manipulation or trade practice violations, and get into a dialogue about what the exchanges are seeing.”
Think brussels sprouts and cauliflower are agricultural commodities? Think again.
While the financial bailouts tossed to automakers, banks and other groups during the recent economic crisis left a funny taste in the mouth of some Americans, one former U.S. regulator hopes efforts to prevent another panic doesn’t go rotten.
The U.S. Commodity Futures Trading Commission is immersed in drafting dozens of rules to assist it in increasing oversight of the once opaque over-the-counter derivatives market, widely blamed for exacerbating the recent financial crisis.
Among the rules it must craft is what the definition of an agricultural commodity is? Of course, corn, cotton, soybeans and livestock, among other items, fall into this realm.
But what about those “other foods” such as brussels sprouts, artichokes, cauliflower, or anything with curry? A former CFTC chairman says they are “abhorrent to American sensibilities” and should be banned.
“Like every U.S. citizen, there are certain agricultural commodities that are abhorrent to me,” said Philip McBride Johnson, who is now with the law firm Skadden, Arps, Slate, Meagher & Flom.
In a comment letter to his former agency, he said there is a “natural link” between defining an agricultural commodity and a provision in a law that requires the regulator to protect the public by forbidding the listing of certain products that “are abhorrent to American sensibilities.”
Clearly banned under this act are financial products based on wars, terrorism, and assassinations. If Johnson has his way, regulators will be able to protect consumers from a dozen foods that don’t mesh with his palate.
from Summit Notebook:
CFTC’s Gensler explains the present with the past
Gary Gensler, chairman of the Commodity Futures Trading Commission, likes to go to the past -- sometimes as far back as 1,000 years -- to explain the financial situations of today.
For example, derivatives existed for 145 years, since the Civil War, and they became regulated in the 1930s, he said at a Reuters Global Financial Regulation Summit in explaining that derivatives need regulation.
If you only want to go back a couple hundred years, Gensler had this to say: "Somebody in the 19th century invented street lights, somebody invented stop signs, somebody invented traffic lights."
And that probably raised costs just like regulation of derivatives may do. "Just like a street light protects you from dark and dangerous highways, we need something to protect us from the dark and dangerous market that right now is over-the-counter derivatives," he said.
Asked about the Goldman Sachs trader who's been in the headlines in recent days, Gensler said he would not comment on any specific firm, but he reached back even further for explanation. "For thousands of years there's been good people, there's been bad people."
Gensler, a former partner at Goldman, was asked how he felt about the firm that he left 13 years ago showing up in the headlines these days.
"My daughter called me up one day and said daddy you're in Rolling Stone magazine," Gensler said, adding that she said it was not a favorable article.
