Senate Proceeding 05-13-10 on May 13th, 2010 :: 3:53:05 to 4:10:25
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3:52:46 to 3:53:06( Edit History Discussion )

Dianne Feinstein: quorum call: the presiding officer: the senator from california. mrs. feinstein: thank you very much, madam president. i rise to speak to an amendment -- the presiding officer: we're in a quorum call. mrs. feinstein: i ask that the quorum call be dis the presiding officer: without objection. mrs. feinstein: thank you, madam president. i rise to speak to an amendment i have offered.

3:53:05 to 4:10:25( Edit History Discussion )
Speech By: Dianne Feinstein

3:53:07 to 3:53:27( Edit History Discussion )

Dianne Feinstein: it's amendment 3939, and i ask unanimous consent to add senator snowe as a the presiding officer: without objection. mrs. feinstein: thank you very much, madam president. this amendment is cosponsored also by senators levin and cantwell. the dodd-lincoln bill, as currently drafted, tak

3:53:28 to 3:53:48( Edit History Discussion )

Dianne Feinstein: steps to reform the $600 trillion derivative market. i don't think people understand how big this market is. it would require every trade to be reported in realtime to the commodities futures trading commission. it would require that all cleared contracts be traded on

3:53:49 to 3:54:09( Edit History Discussion )

Dianne Feinstein: an exchange or on a swap execution facility, therefore guaranteeing transparency. it would require that speculative position limits be set in aggregate for each commodity instead of contract by contract. again, transparency. it would require

3:54:10 to 3:54:30( Edit History Discussion )

Dianne Feinstein: of trade to adhere to minimum standards comparable to those in the united states, including reporting requirements. the provision is designed to address the underlying problem of the so-called lonn loophole. i very much support these positions. however, i am very concerned

3:54:31 to 3:54:54( Edit History Discussion )

Dianne Feinstein: at the bill doesn't go far enough to really address the london loophole. and this loophole has allowed for the trading of united states energy commodities, such as crude oil, on foreign exchanges?n?? without oversight states regulators. this means there's no cop on the

3:54:55 to 3:55:15( Edit History Discussion )

Dianne Feinstein: beat to shield u.s. oil prices from manipulation or excessive speculation when they're traded in foreign marke, like commodities exchanges in london, dubai or shanghai. the amendment i'm proposing along with my colleagues would allow the cftc to require

3:55:16 to 3:55:37( Edit History Discussion )

Dianne Feinstein: foreign boards of trade to register with the cftc, which would give the commodities futures trading commission the enforcement authority it needs. it is supported by the chairman of the cftc, larry gentzler. this provision was in president obama's original proposed

3:55:38 to 3:56:01( Edit History Discussion )

Dianne Feinstein: financial reform bill and i think it is critical to pass in this bill. now, let me explainha become known as the london loophole. in the wake of the california energy crisis, we learned that most energy trading had been exempted from regulation by the commodities futures

3:56:02 to 3:56:24( Edit History Discussion )

Dianne Feinstein: modernization act of 2000 at the urging of a company by the name of enron. using the enron loophole, this firm pioneered over-the-counter energy derivatives trading. it set up enron on-linen electronic market for trading physical and derivative energy contracts.

3:56:25 to 3:56:45( Edit History Discussion )

Dianne Feinstein: it was a marketplace with no transparency, no paper trail that could be audited, no speculative position limits, and absolutely no government oversight to prevent fraud, manipulation, or protect the public interest. enron was a participant in every trade and only enron knew the

3:56:46 to 3:57:06( Edit History Discussion )

Dianne Feinstein: prices. it used enron on-line and other trading forums to fleece california consumers for $40 billion over two years in increased energy prices. and shockingly, much of what enron had set up was legal

3:57:07 to 3:57:27( Edit History Discussion )

Dianne Feinstein: because congress had stripped the commodities futures trading commission of its enforcement power. terrible. from 2002 on, i worked with senators snowe, cantwell and levin and many others to restore regulatory oversight to energy derivatives.

3:57:28 to 3:57:48( Edit History Discussion )

Dianne Feinstein: we tried in 2002 on this floor, 2003, 2004 to regulate energy derivatives but we were stopped and stymied. opponents, such as alan greenspan, have since said their opposition was mistaken. finally, in 2008, six years

3:57:49 to 3:58:11( Edit History Discussion )

Dianne Feinstein: after we started, we were able to close this notorious enron loophole in an amendment to the farm bill, of all things. the amendment imposed meaningful regulation including speculative position limits and market oversight, so the cftc began monitoring these markets for

3:58:12 to 3:58:33( Edit History Discussion )

Dianne Feinstein: fraud and manipulation for the first time in ten years. but as congress took steps to establish regulatory oversight of domestic energy derivatives markets, wall street traders moved to avoid united states regulation. they began to turn to offshore

3:58:34 to 3:58:54( Edit History Discussion )

Dianne Feinstein: markets. the successor to enron online, the intercontinental exchange in atlanta, bought a london exchange, converted it into an electronic exchange, listing american oil futures abroad.

3:58:55 to 3:59:15( Edit History Discussion )

Dianne Feinstein: that's a way speculators could go right around american regulation and avoid it. west texas intermediate crude has been one of the highest-volume contracts on this london exchange since 2006. this contract has what's called

3:59:16 to 3:59:38( Edit History Discussion )

Dianne Feinstein: a price discovery impact because it's commonly referenced as the standard market price for oil. this new regulatory loophole has just become known as t london loophole. but firms also listed american energy commodity derivatives in

3:59:39 to 3:59:59( Edit History Discussion )

Dianne Feinstein: dubai and singapore and opened their electronic platforms to american traders. this new electronically traded marketplace allows american traders, simply put, to evade american market oversight and speculation limits. the practical implication of

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Dianne Feinstein: this is that united states traders can use offshore electronic exchanges to artificially drive up prices of united states commodities without any consequences from our nation's market regulators. this is a big problem.

4:00:22 to 4:00:42( Edit History Discussion )

Dianne Feinstein: a traders using this london exchange to trade u.s. crude oil futures held positions far larger than would be allowed by american regulators. in fact, from 2006 to 2008, at

4:00:43 to 4:01:05( Edit History Discussion )

Dianne Feinstein: least one trader position exceed united states speculation limits every single week on the london exchange, and british regulators have done nothing about it. the good news is that some steps have been taken administratively to address this loophole.

4:01:06 to 4:01:26( Edit History Discussion )

Dianne Feinstein: in 2008, the commodities futures trading commission negotiated an agreement with british regulators to bring greater oversight to american commodities contracts traded in london. the agreement called for speculation limits for the electronic trading of united states energy commodities like

4:01:27 to 4:01:48( Edit History Discussion )

Dianne Feinstein: crude oil on foreign exchanges and required record keeping and an audit trail, so you can look at them for fraud or manipulation. without an audit trail, it's all in the dark. but cftc -- and here's -- here's the crunner: irk the cftc has

4:01:49 to 4:02:09( Edit History Discussion )

Dianne Feinstein: limited legal authority to enforce this agreement. the bottom line: we need to make sure the cftc can oversee trading of american commodities, whether it happens through a computer server located on wall street or in singapore.

4:02:10 to 4:02:30( Edit History Discussion )

Dianne Feinstein: the dodd-lincoln bill currently before us includes some important provisions to help close the london loophole. as drafted, the bill will require foreign boards of trade that provide access to american traders to comply with comparable rules enforced by a

4:02:31 to 4:02:51( Edit History Discussion )

Dianne Feinstein: foreign regulator; to publish trading information daily; to supply data to the cftc,; and to enforce position limits. however, the cftc is unable to force a foreign board of trade to comply with those requirements.

4:02:52 to 4:03:14( Edit History Discussion )

Dianne Feinstein: and that's just fact. and this is because the cftc's current method of overseeing foreign exchanges has tenuous legal underpinnings due to a commodity exchange act provision "regulatorring" foreign boards of trade.

4:03:15 to 4:03:36( Edit History Discussion )

Dianne Feinstein: so in many instaes, our regulatory body, the cftc, can take action against a united states trader on a foreign exchange to prevent manipulation or excessive speculation only with the cooperation and consent of the foreign regulator. the other more controversial

4:03:37 to 4:03:57( Edit History Discussion )

Dianne Feinstein: option is for the cftc to completely ban the foreign exchange from all united states operations. and, not surprisingly, they oulshyaway from enforcing in the face of these regulatory obstacles. so we have a billere that

4:03:58 to 4:04:20( Edit History Discussion )

Dianne Feinstein: still doesn't provide strong regulation. still allows american derivatives traders to avo american regulations by trading on in dubai, in london, and in other places as well. that's why we, senator snowe,

4:04:21 to 4:04:41( Edit History Discussion )

Dianne Feinstein: senator levin, senator cantwell, and i are offering a proposal to allow the cftc to require foreign boards of trade to register with the cftc, which would give them the enforcement authority it needs. now quickly, here are the benefits of the amendment:

4:04:42 to 4:05:03( Edit History Discussion )

Dianne Feinstein: first, the registration process itself would give cftc the authority to oppose regulatory requirements as a condition of registration. secondly, a formal registration process would assure that foreign boards of trade all follow the same set of rules.

4:05:04 to 4:05:26( Edit History Discussion )

Dianne Feinstein: and, thirdly, the registration process would provide a much clearer basis for cftc decisions to refuse or withdraw permission to foreign boards of trade wishing to allow american traders on their exchange. finally and most importantly, all of cftc's existing

4:05:27 to 4:05:47( Edit History Discussion )

Dianne Feinstein: enforcement authorities apply to registered entities under the commodity exchange act. so this amendment would allow the commodities futures trading commission to enforce its own statute with regard to foreign exchanges operating in the united states. now, this is a moderate,

4:05:48 to 4:06:09( Edit History Discussion )

Dianne Feinstein: practical amendment to assure that we give our regulator the authority to enforce the statutory provisions already in the legislation. there are powerful interests out there that are opposed to this. they want to be able to avoid our law. they want to be able to trade over the london exchange, and we

4:06:10 to 4:06:32( Edit History Discussion )

Dianne Feinstein: negotiated with them to close the enron loophole. they agreed to it. it took six months of negotiation. and you k they then went the london exchange, changed it to an electronic trading platform to avoid the very

4:06:33 to 4:06:53( Edit History Discussion )

Dianne Feinstein: agreement theyad agreed with, that we legislated and enacted. and that's fact. and guess what? it burns me up. and i don't intend to quit, because don't like to be duped that way, whether it's goldman sachs and.c.e. or anybody else. you give your word, you make an

4:06:54 to 4:07:14( Edit History Discussion )

Dianne Feinstein: agreement, you don't go offshore to avoid that agreement. so, now that i've cooled down, this is a moderate, practical amendment to assure that we give the commodities futures trading commission the authority to enforce a statutory provision --

4:07:15 to 4:07:38( Edit History Discussion )

Dianne Feinstein: the statutory provisions already in t why would we want legislation which can't be enforced? why would we want legislation that ties their hands? why would we want legislation that avoid this law by trading what amounts

4:07:39 to 4:07:59( Edit History Discussion )

Dianne Feinstein: derivatives in dubai or in london or in shanghai or anywhere else? and guess what, mr. preside these electronic exchanges will be set up everywhere to avoid this bill, and that's w we have to give the commodities futures trading commission

4:08:00 to 4:08:21( Edit History Discussion )

Dianne Feinstein: authority to see that these foreign exchanges register with them and agree to abide by the laws of the united states of america. i think it's ally important that we do this, and i don't intend touit one way or another, if it takes me six years to get it done, as it did

4:08:22 to 4:08:42( Edit History Discussion )

Dianne Feinstein: the last one. i have no respect for traders that just look to go around united states law. so, as we crack down on traders in our markets, we must be ever-vigilant to assure that traders sitting on wall street

4:08:43 to 4:09:05( Edit History Discussion )

Dianne Feinstein: do not avoid our regulations by trading on electronic exchanges with computer servers in london or dubai or singapore. i think this amendment is an improvement of the london loophole provisions in the dodd-lincoln bill by making these provisions easily enforceable.

4:09:06 to 4:09:26( Edit History Discussion )

Dianne Feinstein: it is the final piece to go in, to really close the london loophole, have been in the first place, and to ensure that our government has what it needs to protect american markets from manipulation and excessive speculation, no matter where

4:09:27 to 4:09:48( Edit History Discussion )

Dianne Feinstein: united stateenergy commodities are traded. i mean, i expect the big boyce to speck out -- i mean, i expect the big boys to speak out ag it. but everybody to knows how they were fleeced by enron clearly will understand t value of

4:09:49 to 4:10:09( Edit History Discussion )

Dianne Feinstein: being able to enforce the law of this country. we should ask for no less. i know i can't call up the amendment at the present time, but i hope i will have that opportunity to do so later. i thank th i yield the floor. i suggest the absence of a

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Dianne Feinstein: quorum. the presiding officer: the clerk will call the roll.