Obama calls for closing 'Enron loophole'
Posted: Sunday, June 22, 2008 3:24 PM by Mark Murray
Filed Under:
Economy
From NBC/NJ's Athena Jones
The debate over how to bring down energy prices has occupied the center of the political stage in recent days, as drivers across the nation face sky-high gas prices, which in turn are driving up costs of food and other goods. Obama campaign's said today that he plans to ease the impact of rising gas prices by cracking down on excessive energy speculation through closing the so-called “Enron Loophole.”
VIDEO: What are the presidential candidates' positions on energy and taxes? NBC's Andrea Mitchell reports on the latest in politics, including recent polling numbers.
On the 25-minute call were New Jersey Gov.
Jon Corzine, economic policy director Jason Furman, and energy adviser Elgie Holstein, who was chief of staff at the Department of Energy during the Clinton Administration. The overall theme was a common one -- that
McCain is out of touch with the concerns of working people and more in touch with those of big business. Today, they applied that argument to the issue of energy policy.
"What we’re talking about today is one very important part of Barack Obama’s overall plan, and it’s an overall plan that John McCain disagrees with. In almost every instance, he sides with oil companies and Barack Obama sides with consumers,” Furman said.
McCain and Obama have been at loggerheads over several proposals for how to deal with an issue that is putting a strain on families, local governments, and even school systems. McCain has supported a summer gas-tax holiday -- which Obama calls a “gimmick” that would rob states of much-needed infrastructure money. McCain also supports lifting a moratorium on offshore oil drilling, which Obama says would produce no short-term benefit and little long-term impact on world oil prices. And McCain opposes the windfall profits tax on oil companies that Obama has proposed. Obama would use the money to help families pay energy costs and other bills.
Aides argued the changes to the regulatory structures could have at least some medium-term impact on gas prices. The “Enron Loophole” -- so named because it was added at Enron’s behest -- has kept the Commodity Futures Trading Commission from fully overseeing the oil futures market and investigating cases where excessive speculation may be driving up oil prices, the campaign explained in a policy paper. Obama would close the loophole by requiring that US energy futures trade on regulated exchanges. His plan also calls for legislation that would direct the CFTC to investigate whether further regulation is needed to end excessive speculation in US commodities markets, including higher margin requirements and position limits for institutional investors.
Obama would aim to ensure that US energy futures cannot be traded on unregulated offshore exchanges and would seek to work with our other countries to establish regulations to avoid excessive speculation in commodities futures markets. He would also call on the Federal Trade Commission to investigate market manipulation, including in the oil futures markets and ask the Justice Department to investigate whether energy traders have been engaged in illegal activities that have helped drive up oil and food prices.
Corzine said high oil prices were partly a result of increased demand from countries like China and India, but that most experts believed speculation was also a contributing factor and that the volatility in the price of oil on a daily basis was a clear indication of speculation in the marketplace.
“I think everyone believes there’s too much speculation in the oil markets and a lot it flows directly from that particular loophole,” he said. “"It might as well be called the Phil Gramm loophole, because it was snuck in at the 11th hour, 59th minute to the 2000 energy policy bill, and it just is, it really needs to be addressed. And it would have a lot of impact I think certainly in the intermediate term, if not in the short term with greater oversight here.”
Corzine said the "Enron loophole” Gramm had added to the bill took exchanges and derivative oil contracts out of supervisory oversight and had been a problem in electricity markets in California a few years ago. He said it was unlikely Gramm would push back against his own amendment.
The call participants declined to answer directly questions about how quickly the regulatory changes Obama has proposed could be put in place or how much they would lower gas prices in the short term.
McCain campaign fires back
McCain spokesman Tucker Bounds sent an email that pointed to McCain’s support for closing the “Enron Loophole," noting that he was “one of only three Republicans” to support an amendment to do so. Corzine, then a US senator, voted with McCain for the amendment, his campaign said.
“The truth is Barack Obama is following John McCain’s lead to close a Wall Street loophole that was signed into law by President Bill Clinton,” Bounds said. “John McCain has supported bipartisan efforts to close this loophole and will work to address abuses in oil speculation. Barack Obama has voted the party line for Democrats who claim the loophole is fixed. The fact that Barack Obama is attacking John McCain, despite McCain’s leadership on the issue, shows that Barack Obama is driven by the partisan attacks that Americans are tired of.”
