Political Points
Discussing the history of governmental regulation of position levels in the futures markets, Professor Craig Pirrong warns against the intervention that forced large traders to liquidate their positions "in an overtly politicized environment." Citing past intervention by the Grain Futures Administration-the great-grandfather of the CFTC-Pirrong observes that there is a history of intervention in the market "for political purposes, rather than on the basis of a well-reasoned and empirically supported concern that the market had in fact been distorted by the actions of a particular individual."
"Having watched closely-and up close-the fevered battles over commodity speculation in the past several years, I have no confidence that the same thing wouldn't happen under the points system. In fact, I would put that more strongly: I have every confidence that the same thing will happen again. Discretionary authority is subject to political pressure, not to mention the whims of regulators. Consequently, it is inevitable that such authority will be abused."
Publication
Streetwise Professor
Date
January 9, 2011
Cross References (links may require a Cabinet subscription)
Dodd-Frank Act, Title VII, Sec. 737