Senate witness today described the chairman of the U.S. Commodity Futures Trading Commission (CFTC), which is allowing U.S. oil futures market speculation to be "regulated" by British and Dubai, instead of American, authorities. In a hearing on manipulation of the skyrocketing oil price, the expert witness, University of Maryland law professor Michael Greenberger, told seven angry members of the Senate Commerce Committee that 35% of U.S.-based trading in West Texas Intermediate Crude oil futures has shifted to "dark markets," completely unregulated, by agreement with Britain. On these markets in particular, Greenberger said, a few hedge funds and three investment houses--Goldman Sachs, Morgan Stanley, and JP Morgan Chase--are controlling 70% of the speculative buying of U.S. oil futures and driving the price of oil steadily upward, while "ironically, issuing `predictions' that it's going to $200/barrel." This London-Wall Street speculative manipulation of oil and energy prices, with the knowing wink of the CFTC and its chairmanWalter Lukken, was also targetted by Consumer Federation of America witness Dr. Mark Cooper, and by the Senators themselves, as "the London Loophole" accounting for anywhere from 35-50% of the current price of a barrel of crude oil. Cooper told the Senators, "Roll up your sleeves, assert the national authority of the United States, and regulate these markets." On May 25, Sen. Maria Cantwell and 22 other Senators had released a letter to the CFTC demanding that the "London Loophole" be closed. Lukken had responded on May 29 promising action "by Fall." That exchange alone was enough, said Greenberger, to brake the dizzying oil price rise at about $135-going-on-$200, and pull it back down to around $125/barrel. Senator Cantwell said after today's hearing, "Now there will be a lot more signers; and I believe CFTC will take the action required by the economy, and by the morality of the American people, now." If not, she believes the Senate will legislate to force CFTC's hand. Greenberger and Cooper laid out in detail, how 35% of West Texas crude futures are traded on a market headquartered in Atlanta, Georgia--the Intercontinental Commodity Exchange, or ICE--which by CFTC staff actions, is juridically a London offshore market overseen only by the British Financial Services Authority! And oil futures trading on the New York Mercantile Exchange (NYMEX) is now "regulated" only by the London-controlled financial authority of Dubai, under another CFTC staff agreement. On what are effectively British offshore markets, Greenberger said, the above-cited banks and hedge funds are simply "continuing and repeating the `subprime' crash of the securities markets, and all their derivatives, on the commodities markets." Adding a sobering note, Gerry Ramm of the Petroleum Marketers Association of America told the Committee that gasoline/diesel/propane dealers all over the country were facing bankruptcy and would start closing their stations, because "we can't get the credit to buy our receivables" which have doubled in price."<<
Ole Slorer = Henry Blodget.
It's not difficult to see what is going on here. What's surprising is the unmitigated gall these pumpers flaunt in such transparent surroundings.
Ole will be taking it up the sphincter in Leavenworth this time next year.
What is the link to this story with today's date? I found it was orginally reported as early as 6/3.
On what are effectively British offshore markets, Greenberger said, a group of banks and hedge funds are simply "continuing and repeating the 'subprime' crash of the securities markets, and all their derivatives, on the commodities markets." He named the investment banks—Goldman Sachs, Morgan Stanley—along with JPMorgan Chase. Some 70% of all oil futures trading in the United States is speculative, Greenberger said, and 30% of all U.S. oil futures trading is being done by Goldman Sachs, Morgan Stanley, and JPMorgan Chase.
The "London loophole" is actually at least two. The CFTC, deferring to the British FSA as "its model," is allowing these banks and hedge funds to be designated "commercial" rather than "speculative" traders—as if they were airlines or gasoline distributors which needed to buy future oil products—and thus subject to no speculative limits on how large their positions. And second, with one-third or more of futures trading for West Texas crude oil going through British offshore "dark markets," no reporting of trades and speculative positions is going to any U.S. regulatory agency. Add margin requirements of only 5-6% for trades (i.e., a debt leverage ratio of 15-20 to one, like that which blew out Bear Stearns and the debt securities markets nor required to report them), and you have London and Wall Street financial firms driving a wild speculative hyperinflation.