Tuesday, June 24, 2008

Plan to bar funds from commodities garners few fans

From MarketWatch:

Of Lieberman's three proposals, most extreme finds fewest adherents

A proposal to ban large pension funds and other institutional funds from commodities trading was sharply criticized Tuesday, with a U.S. senator who is working on legislation to curtail energy speculation also arguing against the ban.

"While I believe that the influx of money by pension funds" and other financial investors "has had a detrimental impact on prices, prohibiting investments risks harming future and current retirees," said Sen. Susan Collins, R-Maine, at a hearing before the Senate's committee for homeland security and government affairs, which was Web cast....

... One exemption under scrutiny by both regulators and lawmakers is what's known as the "swaps loophole."

It effectively gives investment banks such as Goldman Sachs Group, Inc. and Morgan Stanley an exemption from limits on speculative futures positions when they buy these contracts as a hedge against their contracts with pension funds and other large investors. Masters and others claim the exemption has allowed pension funds to build large futures positions while avoiding the CFTC's rules on speculation....MORE