Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2012

Floor Speech

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Mr. FRANK of Massachusetts. Mr. Chairman, having heard the subcommittee chairman's discussion of this amendment, I now understand why he didn't want to have a discussion of this amendment. He wanted simply to accept it so he would not have had to say nothing. Since it was not accepted, he did say nothing, he just took 5 minutes to say it.

I take it back, he did say one very important thing, and it defines this issue. He apparently believes that speculation in oil is no part of the reason that oil prices go high, and he quoted a Democrat. He found a Democrat, one of the three Democratic members of the commission. The other two, of course, vehemently disagree.

By the way, we did not say that this is something Goldman Sachs doesn't like. Goldman Sachs is on the gentleman's side. Goldman Sachs opposes regulation of derivatives. Goldman Sachs merely mentioned in an analyst report that they believe that $20 a barrel of the cost of oil comes from the speculation that they engage in. Maybe they were bragging. They certainly weren't objecting.

Here is what speculation means. By the way, in our legislation that the Republicans are trying to undo and in what the CFTC is trying to do, people who use oil are not regulated. An airline trying to hedge against volatility in prices, they are left alone.

Here is what we want to say. If you do not use oil, if you never go near a barrel of oil, in fact, if you are one of those people whole never goes near the gas pump because you have got somebody to pump it for you, if you never touch a barrel of oil and never use it, please do not buy it up, through derivatives, so that you put up only a little bit, large amounts so that you can keep it off the market and the price goes up. That is what we want to do.

The CFTC, we think, should be able to say to people who don't use the commodity, Please don't buy it up and hold it off the market so you can then sell it when the price goes up and make a profit. The gentleman from Georgia says speculation is not an issue. He says it's drilling. Mr. Chairman, I do not know a thoughtful person who thinks that complex issues like the price of a commodity have a single explanation, except the gentleman from Georgia. I wouldn't want to violate the rules by suggesting that I would exclude him from the ranks of the rational, but every other rational person says that things like the price are set by a number of factors.

No, I do not think speculation is the major cause. Neither does Goldman Sachs. Neither does Wilbur Ross, the great investor. They say it's perhaps 20 percent. So we're not saying we're going to cut the price in half. We are saying you can reduce it by 20 percent. And, by the way, it's not just oil. We just had a debate about food. Well, frankly, the WIC program that they are cutting wouldn't cost so much if we would also limit speculation in food prices.

And here's what we are talking about. Well, maybe the gentleman from Georgia speaks for his party. I've heard no dissent. The apparently official Republican position is: Speculation is fine. Let's not interfere with speculation. It's people who do not use the commodity, who don't use oil, who don't use the foodstuffs, if they want to buy it up and keep it off the market so they can then sell it when the price goes up--why else would they buy it? They're not collectors. This is not stamps. This is not a hobby. It's a way to make money. And how do they make money? By driving up the price of the commodity by buying it and withholding it and then selling it when they can make a profit. What we want is for the CFTC to tell people who don't use it, No, there are limits on what you can buy. And we believe that contributes to the price of oil, unlike the gentleman from Georgia, who said, No, price only has to do with exploration and drilling. No one I think really thinks that--maybe not even the gentleman from Georgia. What they do is to say, No, the CFTC won't have that money. They in fact in their budget will give the CFTC less money in the next fiscal year than they have this year.

We have given the CFTC new powers under the financial reform legislation, which they don't like, to cover swaps. By the way, it's not simply speculation that's at risk here. AIG helped plunge this country into an economic disaster by an absolutely irresponsible use of derivatives. And that's something, again, we would like the CFTC to be able to regulate. They were allowed to get in way over their heads.

So what we have here is part of a one-two punch from the Republicans. They want to do it legislatively--and that will come up later--but here they're telling the CFTC, You should get less money as we give you this complicated issue of derivatives than you had before. And by the way, they also have added a Catch-22. If you read the current Republican arguments, they are very critical of the CFTC for not moving quickly enough. They aren't using the authority they've got.

So, first, you complain that they aren't doing enough. Then you reduce the money that they need. And by the way, these are complicated things. They need to be able to hire very smart people. They need to be able to hire important information technology. You cannot have dumb people regulating. And I will give credit to those people out there manipulating derivatives and speculating--they're very smart. They have state-of-the-art equipment. And you want to put the CFTC in shackles. It is an effort to make speculation free of any regulation, with a consequent increase in food prices and energy prices. And I hope the bill is defeated.

I yield back the balance of my time.

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