January 18, 2020

DealBook: New Limits on Commodity Trades Are Approved

Bart Chilton, a Democratic member of the Commodity Futures Trading Commission, is a champion of the rule.Brendan Hoffman/Bloomberg NewsBart Chilton, a Democratic member of the Commodity Futures Trading Commission, is a champion of the position limits rule.

7:44 p.m. | Updated

A divided Commodity Futures Trading Commission has rebuffed a request from Wall Street to delay new restrictions on speculative commodities trading.

The commission’s decision, which was reached on Tuesday and announced on Wednesday, was split along party lines, with the three Democratic members voting to reject the request for a stay and the two Republican commissioners supporting the delay. The commission was likewise divided in October, when it adopted the so-called position limits rule, which would cap the number of futures contracts a trader can hold on 28 commodities, including oil and gas.

The Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association had asked the commission to stay the enforcement of the position limits while the groups pursued a legal challenge of the new rule. The two lobbying groups filed a lawsuit against the commission last month in the Federal Court of Appeals in the District of Columbia, a move that escalated Wall Street’s war against new regulations.

The commission’s adoption of the position-limits rule, which is expected to take effect in part later this year, was seen as a crucial step in the Obama administration’s effort to enforce the Dodd-Frank Act, the regulatory crackdown passed in response to the financial crisis.

“Congress was clear that we were to impose position limits promptly,” Bart Chilton, a Democratic commissioner who championed the rule, said in a statement on Wednesday. He added that the denial of the stay request was “a good step toward keeping the ball rolling, and getting these limits in place.”

A spokesman for the Securities Industry and Financial Markets Association said the decision would not affect the group’s broader legal challenge to the rule. “We disagree with the C.F.T.C.’s denial of the stay request and look forward to presenting the issue to the D.C. Court of Appeals,” said the organization’s spokesman, Andrew DeSouza.

In the lawsuit, the two lobbying groups accused the agency of failing to adequately assess the economic effects of the rule. They also said that Dodd-Frank left it to regulators to enforce position limits “as appropriate,” arguing that, in essence, no limits were appropriate. Mr. Chilton has called this argument “trying to dance on the head of a legal pin.”

The rule’s supporters say it will help protect consumers from speculative commodities trading. While the financial industry has increased its speculation in the futures market over the last few years, the prices of the underlying commodities have fluctuated wildly. In turn, energy costs and food prices have risen, pinching consumers at the gas pump and the grocery store.

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Deadline Near, Deal on Deficit Remains Elusive

Pessimism mounted among members of the committee about their ability to strike a deal by Monday and avert a high-profile failure that would demonstrate anew the inability of the two parties on Capitol Hill to reach consensus about how to attack the nation’s mounting public debt. The partisan divide was also showcased Friday by a vote in the House to reject a Republican-backed constitutional amendment requiring a balanced federal budget.

Despite time running out on the committee created by the summer agreement to raise the federal debt limit, negotiations were in disarray, with Republicans and Democrats even disputing what precisely divided them. One panel member said that he still had slim hope for a deal but that it would take an extraordinary development to end the stalemate and avoid a series of automatic cuts in 2013 that would reduce federal services and make substantial reductions in Pentagon spending.

Seeking to reach at least a partial accord, Republicans made their six Democratic counterparts on the committee an offer that would get to roughly half of its goal — a retreat for an earlier plan with cuts in spending and revenue increases — but Democrats rejected it out of hand as inadequate. Democrats said the proposal was unbalanced because it was overly dependent on spending cuts with only a small amount of new revenue.

“If they maintain this,” said Representative James E. Clyburn of South Carolina, a Democratic member of the committee, in an interview, “then this is not going to happen.” Mr. Boehner, stepping in to the talks as the deadline neared, helped devise the Republican proposal, which offered less in new revenues than a previous Republican plan. But Republicans said the proposal also would not touch Medicare, Medicaid or Social Security, so they said they were surprised it was spurned. Mr. Boehner left town on Friday pessimistic that a deal could be made by the Monday evening deadline, his aides said.

“This was a balanced, bipartisan plan,” said Kevin Smith, a spokesman for Mr. Boehner. “The fact that it was rejected makes it clear that Washington Democrats won’t cut a dime in government spending without job-killing tax hikes.”

Senator John Kerry, Democrat of Massachusetts and a member of the committee, said in an interview that he still had hope, but that “we’re really having a hard time bringing our colleagues to what is fair, what is balanced.”

Aides to lawmakers in both parties, speaking anonymously because they did not want to be seen as sabotaging the negotiations, were even more negative. “I do not feel any last-minute sense of urgency,” one said.

The group has until Monday to submit a plan to the Congressional Budget Office for evaluation before presenting it to the full Congress on Wednesday, leaving time for reaching the sort of last-minute breakthrough that often occurs on Capitol Hill when lawmakers face a deadline. But members said the divisions were so deep, and good will so lacking, that their expectations were eroding.

The divide was further illustrated by the House’s rejection of a constitutional amendment that would generally require the federal government to balance its budget. The House voted 261 to 165 in favor of the proposal, but that was 23 votes short of the two-thirds majority needed to advance a constitutional amendment. The vast majority of Republicans supported the measure. Democrats, even some who voted in favor of a similar measure in 1995, pushed it to failure.

The dynamic Friday mirrored that of other high-stakes fiscal fights in the 112th Congress, like the brawl last summer over legislation to lift the debt ceiling and avoid default and a fight over a spending measure that was also resolved within hours of a government shutdown. But without an immediate threat of fiscal calamity, as was the case in both those instances, the cuts to federal spending triggered by a committee failure would not take place until 2013, leaving Congress an opportunity to find other escape hatches.

Republicans and Democrats provided radically different descriptions of the Republicans’ latest offer, intended to reduce budget deficits by $643 billion over 10 years. Republicans said their proposal called for $229 billion in new revenue and fees, including taxes on owners of corporate jets, and $316 billion in cuts in spending, including $100 billion from the Defense Department. Republicans said these cuts would reduce the need for federal borrowing and thus reduce interest payments on the federal debt by $100 billion over 10 years.

Democrats said the amount of tax revenue in the Republicans’ plan — $3 billion from owners of corporate jets — was laughable.

Central to the impasse is a fundamental disagreement over how much revenue would be raised toward the $1.2 trillion, and what the role of the Bush-era tax cuts, which are set to expire at the end of next year, would play. Republicans want to maintain the cuts; Democrats want them eliminated for the nation’s highest earners.

Most members of the committee intend to stay in town over the weekend and continue talking. Half the members are scheduled to appear on the Sunday morning television talk shows, where they will almost certainly have to discuss whether their efforts are doomed. Members of the panel are trying to figure out how to manage the denouement of the panel’s narrative, which began with their first meeting 10 weeks ago.

One option is for the panel to meet and vote next week on deficit reduction plans devised by the two parties. However, Congressional leaders are cool to that idea, saying it makes no sense to have the public embarrassment of a meeting that would showcase a failure to solve some of the nation’s biggest problems.

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Solyndra Executives Take Fifth at House Hearing

Brian Harrison, the chief executive, and Wilbur G. Stover, the senior vice president and chief financial officer — each with a lawyer and a single sheet of paper with the text of a statement that he read over and over again, explaining that he was respectfully declining to answer questions — appeared before the oversight and investigations committee of the House Committee on Energy and Commerce. The committee is examining how the company failed after getting $528 million in government loans.

The case is an acute embarrassment for the Democrats because Solyndra was the first loan guarantee approved by the Obama administration under a program designed to generate jobs and invigorate the American solar industry. When the loan was approved, Vice President Joseph R. Biden Jr. announced it, and later, President Obama visited the factory in California.

“How does a company go from having the president of the United States visit it to having the F.B.I. come in and confiscate its files?” asked Representative Joe L. Barton, a Texas Republican.

Democrats addressed their chagrin as well; Representative Diana DeGette of Colorado, the ranking Democratic member, who had requested that the two executives be called as witnesses, recalled how Mr. Harrison had met with her and other members of Congress in late July. “I don’t know how they could paint such a rosy picture to us, and declare bankruptcy five weeks later,” Ms. DeGette said.

The witnesses had no friends on the committee, but after repeated questions from members about what the company did with the money and how the executives could have failed to see impending problems, Representative Henry A. Waxman, the California Democrat, complained to the subcommittee chairman, Representative Cliff Stearns of Florida, that the right against self-incrimination was meaningless if the witnesses had to sit through repeated accusatory questions that everyone knew in advance they would not answer. The atmosphere brought to mind newsreel depictions of the House Un-American Activities Committee questioning witnesses suspected of being Communists.

The bankruptcy’s timing could hardly be worse for the solar industry; about $9 billion in additional loan guarantee money is available, but by law, projects must break ground by Sept. 30. On Thursday, the sponsor of three major projects that had received tentative approval said that at least one of them would certainly not meet the deadline and that the two others might not either. About 1,000 megawatts of power is at risk, according to the industry’s trade association.

But the Republicans, with evidence in hand that the Solyndra loan was moved through quickly in the late stages, has publicly cautioned the Department of Energy and the White House not to act in haste in the last days of the program, which was paid for as part of the stimulus bill.

In fact, committee members were divided about whether the Solyndra bankruptcy was a reason to put the brakes on the whole program. Ms. DeGette said, “It would be to our long-term economic peril if we cede leadership to any other nation in clean-energy technology development.” But Representative Michael C. Burgess, Republican of Texas, referred to a vote on Thursday night by the House to cut money for loan guarantees for electric cars, to help pay for disaster relief.

“Yes, we took that money back,” Mr. Burgess said. “If the D.O.E. is going to be chumps, the very least we can do is corral what they’re doing.”

A prominent Democrat, Representative Edward J. Markey of Massachusetts, said, “The Republican majority is recklessly exploiting this one case to advance a political agenda that is very clearly aimed at wrecking” government support for renewable energy.

But Mr. Markey is pursuing a separate point: that the appropriate lesson to draw from Solyndra is that the much larger loan guarantee that has been promised for construction of a twin-reactor nuclear plant in Georgia deserves closer scrutiny.

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