MADELEINE BRAND, host:
Let's hear now from someone who's actually been a regulator. Michael Greenberger used to run the trading and markets division at the CFTC under President Clinton. He's now a professor at the University of Maryland School of Law. And Professor Greenberger, it seems there's a lot of dispute over whether what's going on is speculation, which is legal, and what is excessive speculation or manipulation which is not. How can you tell the difference?
Dr. MICHAEL GREENBERGER (School of Law, University of Maryland): Well, you can tell the difference by monitoring the trading on an exchange on a regular basis. This is what futures regulators have done for decades. The problem is that in December of 2000, Congress deregulated a large part of this market, so there's no oversight. And it was aggravated by a CFTC decision to allow certain U.S.-located companies to be regulated by foreign exchanges.
So the CFTC right now, for example, has no idea - or no solid idea of what's happening on 30 percent of the United States-traded crude oil futures market. And speculators, who are welcome as a general matter, if they're not policed, can buy up all the contracts they want to buy up and drive the price upwards. And even worse, they can engage in phony trades or misreport their trades to give the appearance that there's a demand problem that actually isn't there.
BRAND: Do you believe that's what's happening right now?
Dr. GREENBERGER: I believe that what's happening right now is we don't know what's happening right now. And my aggravation is that the Bush administration has reached the conclusion without any data at all that there's not a problem. And it's being dragged kicking and screaming by Congress to make an examination of those markets to see what is going on there. Unless we look, we'll never know.
And I'm very suspicious the American people are being manipulated up. And when they pay for a price of gasoline that has nothing to do with supply-demand, nothing to do with clean energy, nothing to do with global warming, and everything to do with putting money into the pockets of investment banks and hedge funds and pension funds.
BRAND: You know, people who say, no, there isn't excessive speculation. There isn't manipulation in these markets. They point to a wide variety of market forces, and they say there isn't any single factor responsible for rising food and energy prices.
Dr. GREENBERGER: Well, there's no doubt, and I don't want to be misunderstood. The price of oil is affected by supply-demand problems. The problem here is nobody's looking at the markets to see what's happening there. People are saying, gee, there may be a lot of reasons, but we won't look at 30 percent of the market to see what's happening, if that market is in a state of dysfunction.
Historically, futures markets - the farmers learned this at the turn of the 20th century - can be manipulated by speculators. That's why we have futures regulations. But we're seeing 30 percent of the U.S. West Texas Intermediate Contract, the major determinant of crude oil, gasoline, and heating oil and jet fuel, and we cannot see what's going on.
So we can only guess. Maybe it's all fine and dandy, and everything is going perfectly well. But right now, there's smoke, and nobody's looking to see if there's fire.
BRAND: Michael Greenberger is a former commissioner at the CFTC. He's now a professor at the University of Maryland School of Law. Michael Greenberger, thank you very much.
Dr. GREENBERGER: You're welcome.
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