Senator Byron Dorgan (D, ND) has stated that "Oil speculation is a carnival of greed." And, while his fellow Democrats are pushing back against proposed offshore drilling, he's busy doing television appearances accusing hedge funds of driving up prices by speculating irresponsibly on futures markets, and accusing the Republicans of aiding them in doing so.
It seems Sen. Dorgan can't quite figure out that the real reason hedge funds, (and investment banks, and Wall Street broker dealers) can afford to speculate wildly in the commodities, equities, and bond markets is that the Federal Reserve, under Mr. Bernanke, has effectively given them the ability to borrow at a rate close to zero, a nearly infinite amount of money by simply running over to their friendly Fed window with a handful of copies of what are supposed to be mortgage and consumer debt backed securities of questionable value, no questions asked.
His proposed legislation is designed to “ring out” hedge fund speculation. The bill would require that the U.S. Commodity Futures Trading Commission (CFTC) “distinguish between what is commercial and what is speculative trading and then to treat the speculative trading in a different way, with higher required margins. Since when can the CFTC distinguish anything? These guys have been the foxes in the hen house for years.
By increasing the required margins, the bill would theoretically reduce the capacity of hedge funds to speculate in oil. Sure, all they have to do then is just borrow more from the Fed.
He said, “These markets were not established for this. It’s become a carnival of greed with an unbelievable amount of speculation by people who have no interest in oil. They only have interest in making money by speculating.”
In a rare demonstration of Congressional intelligence, Minority Whip Roy Blunt (R, MO) said, "The GOP isn’t keen on fighting speculation through regulation. I don’t think members of Congress are smart enough, frankly, to figure out how to block all the commodities speculation in the world.”
The Wall Street Journal (WSJ) has ridiculed the plan, and the Washington Post just loves it. The financial industry is lobby to block the plan.
The WST argues that to avoid tighter regulations on speculation, traders will simply up and move to another futures exchange market with looser regs. Our best bet is on the Dubai exchange.
Senator Schumer (D NY) one of our favorite Washington fools, did his politically correct but logically absurd writing to the WSJ, "That even if they did trade in a new exchange, they would still be U.S. traders and still be covered by U.S. law -- "which is exactly why I fought to ensure that the bill addresses futures trading at the trader level, not the exchange level."
Now, boys and girls - let's get real here, if we make it more difficult for folks to trade anything in a U.S. market, the trading will move to a non-U.S. market. If the traders are restricted from trading because they are U.S. citizens, either the trading jobs move offshore to non-U.S. citizens or the U.S. traders will let their foreign compatriots execute the trades for them.
Would someone please give Sen. Dorgan and Sen. Schumer a quick lesson instant messaging via a Blackberry?
Is there any wonder that, with this kind of logical thinking that the Democrats have accomplished basically nothing since we gave them control of the Congress two years ago?
The Best Money Guy
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