Public Citizen comment on House Financial Services Commt bills, Feb 2024

February 28, 2024

 

Chair Patrick McHenry

Ranking Member Maxine Waters

Honorable Members of the Committee

U.S. House Committee on Financial Services

2129 Rayburn House Office Building

Washington, D.C. 20515

 

Re: Bills Slated for Committee Vote on February 29, 2024

 

Dear Chair McHenry, Ranking Member Waters and Members of the Committee,

On behalf of more than 500,000 members and supporters of Public Citizen, we offer the following comment on a suite of bills scheduled for committee consideration February 29, 2024. We are pleased to support several measures, including the Systemic Risk Authority Transparency Act, and the Bank Safety Act. Fifty weeks ago, the nation revisited the unsettling landscape of financial uncertainty when three regional banks failed. Congress appropriately responded with hearings that highlighted a number of policies ripe for reform. Congress should repeal S. 2155 (Sec. 401), the Trump Administration supported bill that eliminated enhanced supervision for banks as large as $250 billion in assets. Congress should pass strong banker pay reform as compensation plans led to the regional bank failures. Unfortunately, partisan division widened by industry political spending stifled needed concrete reform. The bills we support here are unassailable, if modest, reforms.

Meanwhile, the balance of the bills simply feathers the financial industry nest at the expense of consumers. We are especially concerned with HR 7428 whose title implies that it would protect consumers taking advantage of what’s known as “earned wage access,” but would, instead,  leave Americans vulnerable to financial predators. We are also especially concerned with the mistitled HR 7440 regarding financial innovation. With the likes of Artificial Intelligence (AI) transforming the landscape of nearly every industry, this committee should be shaping needed guardrails, not raising the speed limits for corporations using AI. We also oppose the Congressional Review Act rescission of Securities and Exchange Act (SEC) guidance regarding cryptocurrency custody practices.

 

Bills We Support

 

HR 4116, the Systemic Risk Authority Transparency Act

This bill requires the Comptroller General to report to Congress a post-mortem on bank failures. This report must include “any mismanagement” as well as “compensation practices” of the failed institutions, along with supervisory and regulatory shortcomings. Public Citizen believes that badly structured compensation can explain much mismanagement and misconduct. We support this bill.

HR 4206 the Bank Safety Act

This proposal would prevent large banks from masking losses through an accounting loophole technically known as “Accumulated Other Comprehensive Income.” Silicon Valley Bank (SVB) minimized its losses in its portfolio of long-term Treasury bonds by using this loophole, claiming it would hold the bonds to maturity, and therefore, didn’t deduct the market value loss from the bank’s net income metric. SVB’s use of the loophole allowed it to show an accounting profit, triggering executive bonuses. SVB also exploited the loophole to escape stricter capital safety rules. Public Citizen supports this measure to close this loophole. We also believe that Congress should go further than this by approving banker pay reform, which can address numerous manipulations that lead banks to failure, misconduct and consumer abuse.

HR 7437 the Fostering the Use of Technology to Uphold Regulatory Effectiveness in Supervision Act

This legislation calls on federal financial regulators to assess the adequacy of their technology to oversee and respond to problems. We expect that agencies already conduct such internal reviews, many of which are reflected in their respective annual reports. This bill simply calls for an initial review within a half-year, and thereafter every five years. We ask that the SEC be added to those agencies that would report on their technology capabilities. We also believe Congress should highlight the risks of Artificial Intelligence, risks that this bill’s language subordinates. We otherwise support this bill.

HR 7156 the Combatting Money Laundering in Cyber Crime

This bill takes steps to improve investigating powers over cyber-crime by adding investigative powers for the Secret Service.  We support this bill.

 

Bills We Oppose

HR 7440 the Financial Services Innovation Act

This measure would create a new office in each federal financial regulatory agency dedicated to promoting what the bill vaguely calls “innovation,” otherwise known as a new product. In reality, “innovation” in financial services often means a novel way to separate a customer from his or her hard-earned income. If financial services innovations truly improved the economy, this sector would become more efficient and absorb less of an individual American’s expenses. Instead, the opposite has been true. AI, for example, looms as a major transformation with both promise and peril. Customer service call centers relying on newly developed large language models may “hallucinate,” rendering false and misleading information. Smaller banks reliant on third party computer services may find themselves herding into collectively destructive decisions. This bill presumes that new developments only present benefits and may shield damaging products from existing consumer protection laws. We strongly oppose this bill.

HR 7428 Earned Wage Access Consumer Protection Act

This bill effectively enables financial technology companies to evade the Truth in Lending Act restrictions on fees and other costs associated with payday loans. Among other problems, it would prevent employees from comparing an earned wage credit advance from other options. Earned wage advances exploit those who do not earn a living wage. Employers enter contracts with payday lenders, and both extract fees and interest from the underpaid worker before the paycheck period. This perpetuates a cycle of debt and simply empowers predatory lenders to prey on vulnerable communities.  Workers should not pay to be paid. We oppose this bill.

HJ Res 109

This is a Congressional Review Act measure to overrule guidance from the SEC regarding custody for crypto-related firms. Collapse of FTX and the subsequent conviction of CEO Sam Bankman-Fried highlighted the need for firms dealing in cryptocurrency to protect their customers’ investments. Bankman-Fried funneled billions in customer assets from the FTX exchange to his Alameda Research  hedge fund. As the SEC and other federal agencies investigated this fraud, the SEC guidance cautioned firms to account for cryptocurrencies they held as liabilities; these were owed to customers and were not assets of the custodian. Rescission of this guidance will not only put more investors at risk, it will chill the practice of guidance generally. Guidance can be important way for an agency to respond to emerging nuances and uncertainties, such as new risks posed by financial services providers.

 HR 5535, the Insurance Data Protection Act

This legislation would strip the Federal Insurance Office of important investigation tools such as subpoena power. Approved as part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, this office helps fill a void in the gaps caused by the nature of insurance company regulation, which is otherwise left to the states. Insurance giant AIG was the largest failure during the 2008 financial crash, a collapse that exposed the frayed patchwork of industry regulation. We oppose this bill.

 HR 6864 the HUD Accountability Act and HR 7280, the HUD Transparency Act

The HUD Accountability Act calls for annual testimony by the Secretary of Housing and Urban Development before the House Financial Services Committee. The HUD Transparency Act calls for annual testimony by the HUD Inspector General before the committee. While we support congressional oversight of federal agencies, we believe this pair of bills — among the first bills sponsored by Republicans on this committee regarding housing– fall embarrassingly short of the measures necessary to meet the nation’s pressing housing needs. Ranking Member Waters and other members promote responsible, sensible reforms and we ask committee leadership to bring them to a vote.

HR 802 the Respect State Housing Laws Act

This bill adds to the insult of woefully weak proposals on needed housing reform by eliminating a provision that requires a 30-day notice period before a landlord may begin eviction proceedings against a tenant in federally assisted or federally backed housing. Eviction traumatizes struggling Americans. Dwindling to non-existing affordable housing options make it especially difficult for individuals and families to find suitable alternative housing, making them vulnerable to homelessness. Many residents suffer economic problems beyond their control, including emergency medical issues that argue in favor of at least 30-day notice before eviction. We strongly oppose this bill.

For questions, please contact Bartlett Naylor at bnaylor@citizen.org.

Sincerely,

 

Public Citizen

 

Subsidizing Executive Pay? End it Now.

By Bartlett Naylor

By the time the CEO of a major corporation clocks out after a day’s work, he’s pocketed what the typical American must work an entire year to earn. In the 1960s, a CEO earned about 20 times that of average employees. Now, the ratio is 300. Polls affirm bipartisan opposition to this yawning gap. Among other ills, Americans believe it’s unfair.

In his state of the union address March 7, 2024, President Biden proposed an important reform aimed at the inequity of excessive pay: “I also want to end the tax breaks for . . . massive executive pay. . . . End it now.”

CEO pay has skyrocketed in the last 50 years since the executives essentially pay themselves through control the corporate boards that officially cut the checks. This looting certainly should not count as a legitimate business expense deducted from the firm’s tax bill.  “Corporations shouldn’t be able to get out of paying their fair share of taxes by lavishing executives with jumbo bonuses at the expense of taxpayers, workers, and shareholders,” said Sen. Jack Reed, (D-R.I.).

Congress, even when controlled by Republicans, agrees with this policy. Until 2017, corporations could not deduct the pay for the CEO that exceeded $1 million, a law  established led by President William Clinton in 1993. A major loophole, however, perforated that change: if a bonus beyond $1 million was performance-based, the deduction would qualify as a deduction. This led many firms to, first, increase base pay to $1 million, then, second, add easy-to-hurdle performance goals.

In 2017 the Republican Congress and President Trump approved a law that was otherwise a sweeping tax giveaway to corporations. But they included a provision increasing the group whose pay beyond $1 million could not be deducted. They added the CFO and the three most highly compensated employees of the firm to the list. This Republican-led law also closed the performance loophole.

Following this, President Biden’s 2021 American Rescue Plan added the next five highest paid employee of the firm to the group. This brought the total to the ten most highly paid executives whose pay beyond $1 million could not be deducted as business expense.

Now, President Biden proposes that this deduction be denied to corporations for all employees paid more than $1 million. The White House estimates this would generate $270 billion in additional tax revenue over ten years. Yearly, generating about $27 billion in new tax revenue, means that corporations are paying the 11^th, 12^th, 13^th, etc.  best paid executives  a collective $128 billion in compensation (above $1 million each.)

Sen. Reed has long promoted this policy in his important bill, the Stop Subsidizing Multimillion Dollar Corporate Bonuses Act, which is also cosponsored by Sens Tammy Baldwin (D-Wi), Jeff Merkley (D-Or), Chris Van Hollen (D-Md), Sheldon Whitehouse (D-RI), Bernard Sanders (I-Vt), and Elizabeth Warren (D-Ma). In the House, Rep. Lloyd Doggett (D-Tx)  introduced a companion bill that enjoys 23 co-sponsors.

This tax change can help address the unjust inequality in the tax code. When companies slather pay on the C-suite and deduct it as an expense, that means other hard-working Americans must fill the gap with more taxes.  In his budget released March 11, the President explained that the change “would discourage companies from giving their executives massive pay packages.”

Reducing excess pay may require more robust measures, a goal admittedly difficult in this Congress where agreeing to popular bipartisan policy isn’t exactly a daily event. In a more enlightened Washington, lawmakers would improve corporate governance, and we’d see a raft of reforms. For example, pay packages that fail advisory shareholder votes should lead to automatic pay cuts for the board directors who approved them. Corporate boards should also include line workers who would be more judicious with executive pay levels.  Taxes should be raised where the ratio between the CEO and median-paid workers exceeds certain levels, and tax rates on compensation above a certain amount should be confiscatory, as they were in the 1950s.

What President Biden outlined in his State of the Union speech is important and should be considered by Congress. Afterall, Congress already agrees that pay in excess of $1 million shouldn’t be deducted as a legitimate business expense. It has already accepted that this not only applies to the pay of the CEO, but to  pay of the second, and third and ninth and tenth best paid executive at a firm. It is a small step to move towards this reform and they should take it.

Average Americans should not subsidize overpaid executives. As the president enjoined, “End it now.”

Internships

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Tell Biden: Pause Trade Talks Until Kenyan President Commits to Veto Anti-LGBTQI+ Legislation

Trade Transition Memo

Climate Program – Legal Internship

Public Citizen is a national, non-partisan, public interest group with more than 500,000 members and supporters. We hold the government and corporations accountable with campaigns and advocacy before Congress, administrative agencies, and the courts, on issues including money in politics, open government, financial regulation, energy and the climate crisis, fair trade, consumer protection, access to justice, tax policy, workplace safety, drug and medical device safety, healthcare, and more. We are the reason why there are air bags in cars and there were no red M&Ms for a decade. And much more.

GENERAL DESCRIPTION

Public Citizen’s Climate Program is looking for smart, creative, resourceful, and diligent interns to assist our policy development and advocacy at the intersection of climate and financial regulation. This is a new and exciting policy area, and we are making a big impact.

We are advancing a broad, ambitious agenda of financial policies that advance a swift, safe transition away from fossil fuels and promote rather than impede racial, economic, and intergenerational justice. We advocate for market rules, including on disclosures, credit ratings, claims that investment products or services are “green,” and more, to empower investors to avoid climate-related risks and use their dollars to advance their values. We are also working to incorporate climate considerations into a broad set of banking and insurance regulatory tools—supervisory guidance and examinations, scenario analysis, the designation and supervision of systemically important nonbank financial companies, capital regulation, community reinvestment rules, and the use of concentration limits, portfolio limits, or other activity limits.

Responsibilities:

The Climate Program legal internship is designed to provide law students with a better understanding of the role of legal research in policy advocacy and to provide exposure to a range of strategic tactics for advancing public policy. Law student interns will engage in legal research and writing to support policy advocacy and legislative priorities on climate-related financial regulation. Interns will assist with drafting white papers, reports, fact sheets, letters, testimony, and comments on proposed rules. Interns may also have opportunities to participate in public education, media, and campaign strategies. 

Requirements:

• Knowledge: Current law school enrollment or completed Juris Doctor degree. 
• Skills: Excellent legal research, analytical thinking, oral and written communication, and organizational skills.
• Qualities: Eagerness to learn and ability to learn quickly. Collaborative spirit, high energy, and enthusiasm. Ability to balance multiple projects and priorities. 

To Apply:

Our internships are up to 40 hours a week for around eight weeks. 

Public Citizen offers unpaid internships (credit can be arranged) and a small number of paid internships ($17 an hour).  The application for a paid internship will include an essay outlining why you want to intern at Public Citizen and any other information about you that you wish to have considered, including your need for financial support (500 words or less), as well as a copy of your Student Aid Report (SAR) if you have completed the FAFSA. Paid Internship application for the fall must be submitted by March 25, 2024 and you will be notified if you are selected on April 15, 2024.**

Submit a single document that includes a cover letter, resume, and writing sample of no more than five pages to climateaction@citizen.org. Please include your last name and the position for which you are applying in the subject line of your email and the filename of your attachment. Women, people of color, people who identify as LGBTQ+, and multilingual speakers are encouraged to apply. No phone calls please.

 

Democracy Fellow – Congress Watch

Democracy Fellowship – Fall 2022

Help Pass Legislation to Advance Voting Rights, Curb Big Money in Politics & Combat Corruption with the Declaration for American Democracy

Housed in Public Citizen’s CongressWatch Division, the Declaration for American Democracy is an anti-oppression coalition of over 240 organizations working together to make the promise of democracy real for all of us.

We believe our democratic systems, institutions, and leaders must reflect, represent, and respect the diverse, multicultural nation that we are and have always been. For democracy to work for us, it must include all of us. As America’s diversity continues to grow, so must our democracy. And in order to make progress on issues Americans care about, we must have a democracy that is representative and responsive to the American people.  

We are seeking a Fall Fellow to help advance the mission of the coalition: to pass transformative democracy legislation on a national level. Fellows on our team will work about 20 hours a week for 8 weeks.

Fellows will have the opportunity to gain experience both in national advocacy efforts as well as to get in depth training in community organizing so that they can organize their own communities around sweeping democracy reform. 

For years, we’ve seen our democracy and the power of the people diminish each day, with legislatures across the country ramping up voter suppression efforts targeting communities of color and corporate and big monied interests corrupting our politics. We saw this culminate on January 6th in the violent attack on our Capitol, but our democracy held – this time. We have an opportunity to rebuild and transform our democracy for the better, into one that truly represents the American people, join us!

Responsibilities include but are not limited to:

• Attending regular weekly training sessions and team meetings
• Working with activists around the country, including locally and in key states, to get them involved in strategic campaigns;
• Organizing campus and/or local community with skills gained through training
• Building a coalition of local allies in democracy work
• Meeting directly (or virtually) with members of Congress
• Planning and hosting events (virtual or socially distanced) in support of democracy reform
• Develop issues and/or organizing expertise through dedicated assignments;
• Conduct social media and online outreach to build campaign visibility and assisting with press outreach and events;
• Research and write on current topics regarding our work.

Qualifications:

• Passion for democracy reform
• Interest in learning more about organizing (no prior organizing experience is required)
• Ability to be both a strong team player and to be self driven in your work
• Strong communications skills a plus

To Apply

To apply for a paid internship, please send a resume and a short cover letter (no more than 500 words) to christine@dfadcoalition.org by July 24th at 5pm/ET. In acknowledgement that many internships are unpaid and therefore are only available to students from higher income levels, we prioritize applicants that demonstrate financial need. To do that, please outline your need for financial support in your cover letter. If you have completed the FAFSA, please also submit a copy of your Student Aid Report (SAR). The pay for this position is $16.10 per hour. 

DFAD is committed to a work environment based on equal opportunity and a value of a diverse and inclusive workforce. To this end, DFAD welcomes and encourages applicants of color, people in the LGBTQ+ community, those of varying socioeconomic status, and women to apply.

April 2022 Public Citizen Letter to Jamie Dimon

Final Letter to Jamie Dimon

Mr. Jamie Dimon
Chief Executive Officer
JPMorgan Chase
270 Park Ave
New York, NY 10172

CC: Darren Woods, ExxonMobil; Ryan Lance, ConocoPhillips; Michael J. Hennigan, Marathon Petroleum; Brian Moynihan, Bank of America; Alfred F. Kelly Jr., Visa

 

April 4, 2022

Dear Mr. Dimon,

We, the undersigned groups, write to you with deep concern over your recent meeting with the Biden administration on a domestic energy “Marshall Plan.”

A domestic energy Marshall Plan is a fine idea if it drives real solutions to American and European energy needs and the dependence on Russian oil and gas—those solutions are the deployment of energy efficiency and renewable energy sources. By contrast, your proposal would do nothing to ease current problems and would only compound them in the long term. It would further lock us into energy sources that are overly expensive and subject to wild price swings, and that exacerbate rather than ease global conflict.

Oil and gas are fueling Vladimir Putin’s war machine. Fossil fuels account for 40% – 50% of Russia’s government budget. As companies around the world divest assets from, close stores, and pause sales in Russia, JPMorgan Chase announced that it is pulling out of operations in Russia, though in recent years it has stood out as the largest funder of Gazprom among the world’s 60 biggest banks. Gazprom is Russia’s state-owned energy company, and its profits have paid for the tanks and missiles being used to massacre Ukrainians. Between 2016 and 2021, JPMorgan Chase provided Gazprom with nearly $4.7 billion in financing.

Lobbying for fossil fuel expansion, including expanded liquefied natural gas (LNG) facilities, pits JPMorgan Chase’s short-term, profit-driven interests against the safety and stability of a world facing an unfolding climate crisis. Your proposal is not only a bad idea for the climate, it is financially unsound and risks further expanding the market’s “carbon bubble.” As the leading banker of fossil fuel infrastructure worldwide, JPMorgan Chase stands to reap significant profit from new fossil fuel projects proposed in the fallout of Russia’s unprovoked and unjust invasion of Ukraine. Such self-interest in a time of war has a name: war profiteering.

Your continued bankrolling of the fossil fuel industry and request for oil and gas expansion disregard the immense human, ecological, economic, and societal costs our world already faces as a result of climate change. Your request for an expansion of LNG facilities is at odds with your commitments to align with the Paris Agreement and achieve net-zero financed emissions by 2050. The International Energy Agency (IEA) has stated that “In the NZE [net zero scenario], no new [gas] fields or export projects are developed.” Moreover, investments in fossil fuel expansion will relieve nothing in the short term, and lead to more consequences for financial markets in the future. It will take years to build LNG export terminals and even longer to have a practical impact on energy prices. New research suggests wealthy oil and gas producers, like the U.S., must phase out all fossil fuel production by 2034. Further, the IEA NZE makes clear that developed-country electricity systems must be fully decarbonized by 2035 – meaning that financing the expansion of a dying industry via development of new LNG terminals will lead to pre-stranded assets, adding additional strain to our financial systems.

The IEA’s 2021 Roadmap to Net Zero clearly states that new coal, oil, and gas development is not aligned with a net zero by 2050 pathway. As a consequence, investment in new development is not aligned either. It is imperative that fossil fuel production peak immediately, followed by a swift and managed decline of all fossil energy. The Biden administration and private sector should be driving investments in a renewables-only plan that reduces absolute emissions, not heeding your call for more gas and unproven technologies like carbon capture.

In response to your commitments to align your financing activities with a 1.5°C pathway, you stated: “There must be collective ambition and cooperation by business and government to tackle climate change. Setting our Paris-aligned targets is an important step toward accelerating the transition to a low-carbon economy and meeting the goals of the Paris Agreement.” You also stated your commitment to reducing emissions, despite your firm providing $382 billion in financing to the fossil fuel industry since the Paris Agreement was adopted.

Humanity is at a momentous crossroads. As this year’s Intergovernmental Panel on Climate Change report concluded, any further delay in global action to mitigate climate change “will miss a brief and rapidly closing window of opportunity to secure a liveable and sustainable future for all.”  A transition away from fossil fuels is inevitable. It’s time to correct your course and stop digging JPMorgan Chase’s own stranded-asset hole.

Mr. Dimon, investing in coal, oil, and gas will only entangle us further in fossil fuel-driven wars and compound ecological and economic instability. A swift transition to renewable energy is the only way for the U.S. to be truly energy independent. We implore you to back up your climate commitments with support for a rapid decarbonization of our economy that will lead our world towards a more promising future for all.

Sincerely,

Amazon Watch

Center for International Environmental Law

Connecticut Citizen Action Group

CDP – Energy and Environmental Initiative

Citizens for Clean Air and Water in Brazoria County

Clean Energy Action

Climate Action Rhode Island – 350

ClimateMama

Earth Action, Inc.

Empower our Future

Extinction Rebellion San Francisco Bay Area

Friends of the Earth US

Frontera Water Protectors

Green America

Greenpeace USA

Indivisible TXLege

New Mexico Climate Justice

Nuclear Information and Resource Service

Port Arthur Community Action Network

Positive Money US

Public Citizen

Rainforest Action Network

Revolving Door Project

Save Rio Grande Valley

Sierra Club

Sunrise Project

Texas Campaign for the Environment

Texas Solar Energy Society

Third Act – Virginia

Turtle Island Restoration Network

Waterway Advocates

Youth Climate Finance Alliance/Future Coalition

350 Conejo / San Fernando Valley

350 Hawaii

350 Seattle

350 Silicon Valley

350NYC

Download the pdf of this letter here.

Letter to President Cyril M Ramaphosa

Commodity Futures Trading Commission Letter on Speculation

Download a copy of the letter here.

March 24, 2022

 

Chairman Rostin Behnam
U.S. Commodity Futures Trading Commission
1155 21^st Street, NW
Washington, DC 20581
Dear Chairman Behnam,

Energy, metal and agricultural commodities are once again experiencing significant price and trading volatility.  Wild price swings have stressed our markets during an unprecedented stretch of climate-induced severe weather, a global health pandemic, and war in Europe. We value your leadership and commend Commission staff for their dedication and perseverance during these calamitous times.

Commodity markets are perceived to maximize efficiencies for price discovery, allowing producers and end-users alike to hedge against price risk. But reliance on these markets during climate change-induced storms and war-related upheaval is testing limits on effective price formation. It is difficult for markets to work efficiently when extreme events render market fundamentals dysfunctional.

The past two years have seen an extraordinary surge in commodities market volatility. From WTI oil’s April 2020 nosedive into negative territory after speculators panicked over the possibility that counterparties could demand physical delivery upon expiry to the early March spike above $120 per barrel to the collapse of global nickel trading―extreme weather and other disruptions are exposing flaws in market design and operations. The resulting high prices are driving punishing inflation harming American families and small businesses already suffering from economic hardship under the COVID pandemic.

We offer four suggestions to address recent commodity market challenges:

First, the Commission must unambiguously reject any bailout for commodity traders. Earlier this month, a lobbying group representing some of the largest traders in U.S. markets―including BP, Shell, Vitol and Trafigura―wrote to European officials demanding government financial intervention.[1] The traders’ gripe is that high and volatile commodity prices are triggering significant margin calls, resulting in a cash liquidity crunch. But this development is proof that regulations are working, as the margin requirements ensure the integrity of clearinghouses. Challenges with traders’ access to credit due to margin requirements won’t result in energy not being produced or delivered, but it will ensure the solvency of the market.

Second, the Commission should ensure that automated trading strategies are not disrupting energy markets. When the Commission last examined the issue three years ago, it determined that 80% of energy trades were being executed through automation.[2] It is crucial for the Commission to determine the role automated trading has in contributing to excessive speculation.[3]

Third, the Commission should produce status report on whether recently-enacted position limits require strengthening. Nearly a decade after Congress ordered the establishment of position limits to “prevent excessive speculation” in commodity markets,[4] the Commission finalized the rule in October 2020―over the admirable and articulate dissent of now-Chairman Behnam for the rule’s failure to be strong enough.[5] The finalized rule has resulted in exchanges implementing aspects of the limits prior to the initial, formal phase in beginning in January 2022. Section 719(a) Dodd-Frank requires a study on the effects of implemented position limits, which is essential to determine whether the limits need strengthening, in light of evidence of excessive speculation in today’s commodity turmoil.

Fourth, enhanced public data reporting in the Commission’s Commitment of Traders reports is necessary to ensure fully transparent, competitive markets.[6] Bolstering the level of trader-level detail and augmenting price reporting information to the public will improve commodity market operations.

Mr. Chairman, we appreciate your consideration, and thank you for your leadership.

Best,

Tyson Slocum, Energy Program Director
(202) 454-5191
tslocum@citizen.org
Member, CFTC Energy & Environmental Markets Advisory Committee, and
CFTC Market Risk Advisory Committee

Download a copy of the letter here. 

[1] https://twitter.com/JavierBlas/status/1504182020649504775

[2] Impact of Automated Orders in Futures Markets, Market Intelligence Branch, Division of Market Oversight, U.S. CFTC, March 2019, www.cftc.gov/sites/default/files/2019-03/automatedordersreport032719.pdf

[3] Gillian Tett, “Beware the algorithms driving up oil prices,” Financial Times, February 10, 2022, www.ft.com/content/6e24689d-679f-4b45-ac73-dc1ace2ff69e

[4] Section 737(3)(B)(i), Position Limits, Dodd-Frank Wall Street Reform and Consumer Protection Act, www.congress.gov/111/plaws/publ203/PLAW-111publ203.pdf

[5] www.cftc.gov/PressRoom/SpeechesTestimony/behnamstatement101520c

[6] www.cftc.gov/MarketReports/CommitmentsofTraders/index.htm