Back in 2008, I was puzzled by President Bush blaming the subprime mortgage crisis on "irresponsible homeowners." I knew of no reason why homeowners should all of a sudden become irresponsible en masse. So I began looking into what had really caused the crisis. That's when I began to get acquainted with derivatives and other weapons of mass financial destruction. I found out that one of McCain's top financial advisors, Phil Gramm, had not only helped cause the subprime mortgage crisis by deregulating derivatives, he was also still a lobbyist for UBS, while he was counseling McCain. I pitched the story and wrote it up.
In the course of my research, I realized that Gramm had also helped create the Enron Loophole--which deregulated trading of oil and other commodities on electronic platforms (like, computers). We did another report on that, too. But closing the Enron Loophole was not enough. Speculators have overwhelmed the trade of oil and other commodities. Airlines and bakeries and other end-users of these commodities are now far outnumbered by Wall Street speculators in these markets. Which means that these consumers can no longer count on futures (contracts that set prices now for purchase later) to keep their costs stable. And, of course, both the resulting instability and the speculation itself lead to costs that get passed on to you the consumer. So gas goes up and so do food prices (an estimated 3.5% this year, according to the USDA).
The agency in charge of all this is the Commodity Futures Trading Commission. So, we kept an eye on the CFTC as the Obama Administration took over. Despite a lot of concern about how Obama's CFTC Chairman Gary Gensler would do, he seems committed to position limits and seems to have all those desperate end-users in his corner. Last year, the Dodd-Frank Wall Street reform bill specifically charged the CFTC with imposing position limits on commodities--meaning that Wall Street could own no more than a specified maximum portion of all the futures contracts out there. The point, of course, is to prevent the genuine end-users from getting overwhelmed by Wall Street speculators.
So how come gas and food prices are still spiking? One of the Democratic commissioners, a Bush appointee, doesn't believe in position limits. So Democrats haven't had the votes on the CFTC to implement position limits. That commissioner's term is almost up, however. And what the Obama White House decides to do about that appointment could well determine what happens to gas prices now, and what happens to Obama in 2012. We'll be breaking news on The Ed Show tonight about where the president is going with this. We've been working on this series with Chris Hayes of "The Nation"--he'll be writing about this tomorrow and will join Ed tomorrow night. Please join Ed tonight and all week for this special series on gas prices, food prices, and the president's decision.