By Ben Geman - 04/13/12 09:42 PM EDT
Nineteen senators are urging a federal court to uphold rules from the Dodd-Frank reform law that limit speculative trading in oil and other commodities.
A pair financial industry trade groups — with members including Goldman Sachs and other Wall Street powerhouses, many large global banks, and energy companies such as ConocoPhillips — is challenging the rules that regulators issued last fall.
The Democratic senators, in an amicus brief, say jettisoning the Commodity Futures Trading Commission (CFTC) rules would “subvert the clear intent of Congress.”
“This conclusion is further supported by the development of the key provisions during the legislative process, especially when set against the backdrop of seven years of Congressional investigations and findings regarding the existence of excessive speculation and the need for mandatory position limits,” the friend-of-the-court brief states.
The CFTC rules limit the amount of futures and swaps contracts that traders may hold for oil and some other energy commodities, and a range of metals and agricultural products.
Many Democrats say that speculative trading in oil futures markets is driving prices far above what supply-and-demand fundamentals should dictate.
But the Securities Industry and Financial Markets Association, in concert with the International Swaps and Derivatives Association, last December filed a lawsuit with the U.S. District Court for the District of Columbia Circuit challenging the rules.
The lawsuit alleges that the CFTC declined to analyze whether “excessive” speculation in commodity derivatives is a “real problem,” whether position limits would help address it, and whether the limits would harm businesses and consumers by causing more market volatility and other negative effects.
“Congress did not require the Commission to establish position limits without regard to whether they would harm the U.S. economy by increasing the cost of food, energy and other necessities,” the lawsuit states.
But Levin, in a statement issued alongside the amicus brief, attacked the industry lawsuit and said Congress clearly meant the issuance of the rules to be mandatory.
“Two years ago, the Dodd-Frank Act directed the CFTC to clamp down on excessive speculation by imposing trading limits on speculators, and the CFTC issued a new regulation to do just that,” Levin said.
Here’s the full list of senators who filed the brief: Carl Levin (D-Mich.), Mark Begich (D-Alaska), Richard Blumenthal (D-Conn.), Barbara Boxer (D-Calif.), Sherrod Brown (D-Ohio), Maria Cantwell (D-Wash.), Ben Cardin (D-Md.), Dianne Feinstein (D-Calif.), Tom Harkin (D-Iowa), Patrick Leahy (D-Vt.), Joe Manchin (D-W.Va.), Claire McCaskill (D-Mo.), Robert Menendez (D-N.J.), Barbara Mikulski (D-Md.), Bill Nelson (D-Fla.), Bernie Sanders (I-Vt.), Jeanne Shaheen (D-N.H.), Sheldon Whitehouse (D-R.I.), and Ron Wyden (D-Ore.).