Wall Street insiders are trying to write their own rules and Sen. Elizabeth Warren wants them stopped, according to a letter (pdf) by the senator published Thursday.
In the Massachusetts Democrat's letter, a response to a report (pdf) criticizing trading restrictions known as "position limits," she accused a government advisory committee of reflecting "the highest hopes of industry."
The report by the Energy and Environmental Markets Advisory Committee (EEMAC), an advisory committee to the Commodity Futures Trading Commission (CFTC), recommended doing away with plans to impose limits on excessive speculation. "Such a reversal on so-called position-limits rules," the New York Times observed, "if ultimately adopted by the agency, would hand a big victory to Wall Street."
"This report, which bears the official stamp of a CFTC committee," the senator wrote, "is nothing more than a recitation of industry talking points, and it should be treated as such."
"These transcripts detail meetings that appear to be self-congratulatory, back-slapping sessions of like-minded industry officials and their close allies who fancy themselves 'in the business of providing modern civilization'—an actual quote from the proceedings."
— Elizabeth Warren
Position limits are "designed to curb runaway speculation in oil, gas, and other energy markets," David Dayen wrote in the New Republic, and the recent EEMAC report argued that such regulations are "not demonstrably necessary."
Position limits are required by the Dodd-Frank financial reform law, but like many of the law's requirements the limits have not yet been imposed.
"The debate around this proposed CFTC rule is more than simply a dispute about specifics in a committee report," writes Tyler Slocum, the executive director of consumer protection agency Public Citizen's energy program, in a statement released on Thursday. "The heart of the situation is whether the agency will do its job and protect consumers."
Slocum notes that "limits protect futures markets from excessive speculation that often create disastrous price spikes" which only serve to hurt consumers while wealthy traders and industry executives reap the benefits of falsely inflated prices.
The CFTC was successfully sued by the financial industry in 2012 and forced to throw out its first attempt to impose position limits, reported the Huffington Post, and it has proposed a new set of limits—supported by Warren—which have still not been enacted.
Meanwhile, the EEMAC met twice to discuss the proposed limits and its concluding report recommends that the CFTC toss them out and allow the financial industry to police itself.
The advisory committee did not call on witnesses who represent diverse interests for its investigation into position limits, Warren observed, and instead only consulted people with tight industry connections.
"The EEMAC appears to have reached its conclusions without hearing from a single objective economic expert witness without ties to the industry or government, Warren wrote, "let alone anyone representing the interests of consumers or the general public."
The meetings were hardly serious, Warren found after her staff combed through over 400 pages of transcripts.
"Instead of documenting a rigorous effort to analyze the need and impact of CFTC position limits," Warren wrote, "these transcripts detail meetings that appear to be self-congratulatory, back-slapping sessions of like-minded industry officials and their close allies who fancy themselves 'in the business of providing modern civilization'—an actual quote from the proceedings."
Not only did the committee fail to adequately analyze the proposed regulations, the senator discovered, but the group's final report does not even represent the views actually stated by committee members during the meetings, a finding that echoed Public Citizen's sentiments toward the proceedings.
"The final EEMAC report dramatically mischaracterizes the recorded position of its members," Warren wrote. "The report states that ‘the overwhelming majority of members of the EEMAC’ express support for the self-policing approach. But the report cites only four out of nine EEMAC members, one of whom said vaguely that 'if we can engage the expertise of the exchange to make this work better, then there ought to be a prudent course;' a second who said only that 'we think it’s a good idea to have the exchanges involved in this;' and a third who said merely that the Commission 'should evaluate' such an approach."
"Because of the legal, substantive, and procedural irregularities," Warren concluded, "I ask that you withdraw this report and refrain from submitting it to the CFTC for consideration."