Friday, September 25, 2009

The Possibility of Carbon-Trading Fraud Elbows Into Senate Climate Debate

Well duh.
Anyone who says we can legislate against traders acting as traders is either a liar or a fool. Period.
The whole reason for the existence of traders is to make as much money as possible, consistent with what's legal...I lived through this: if you didn't manipulate the market and manipulation was accessible to you, that's when you were yelled at.
-Former Goldman Sachs trader
New York Times, May 8, 2002*
From ClimateWire via the New York Times:
A year after the collapse of Lehman Brothers touched off a global crisis, concern that wild financial speculation and trading abuses would undermine a U.S. greenhouse gas emissions market has put the "trade" part of the proposed national cap-and-trade program on trial.

Distrust of commodity traders and suspicion about the motives behind Wall Street's brassy support for a sprawling global market are fueling skepticism on both the political left and right that trading emissions allowances can curb the economic cost of addressing climate change.

In testimony before the House Agriculture Committee on Tuesday, the chairman of the Commodity Futures Trading Commission sought to allay concern on Capitol Hill that policymakers have been too slow to push unregulated financial trading onto commodity exchanges and under federal oversight.

"The law must cover the entire marketplace, without exception," Gary Gensler assured lawmakers. Agriculture committees in the House and Senate are poring over the Obama administration's plan for regulating over-the-counter (OTC) derivative contracts, such as commodity "swaps" traded by financial brokers.

The freewheeling financial dealing eluded regulators and was blamed for runaway energy prices and unscrupulous trading practices in recent years. From the perspective of the Senate's toughest critics of using a cap-and-trade program to combat global warming, the size and scope of a potential carbon market look too much like those of the market that created mortgage securities and credit default swaps that collapsed the housing bubble....MORE
Related posts:

Climateer Investing on Carbon Trading and Traders
...The carbon markets are an entirely artificial construct, beholden to political paymasters for their very existence. Which may be why so many political types are planning to profit from them.
Directly, think Al Gore's Generation Investment Management's investment in carbon project developer Camco or Lord Nicholas Stern's Vice-Chairmanship of IDEACarbon's parent IDEAGlobal or indirectly as a source of campaign contributions for pols still in office, or an unaccountable slush fund in the case of the U.N.

The word artificial led me to think of it's cousin, artifice. Here's the Oxford Pocket definition:
ar·ti·ficen. clever or cunning devices or expedients, esp. as used to trick or deceive others: artifice and outright fakery.
The securities attorneys among our readers will recognize the word from the common state security law usage "...employ any device, scheme, or artifice to defraud".
Enron on Cap-and-Trade

Here Comes Another Bubble: Gigantic Loophole in Europe Carbon Market

Goldman Faces Carbon Market Curbs in Senate Proposals (GS; JPM)

Scrap Cap-and-Trade: Emissions-Trading Inventors Now Leery

Goldman, Morgan Stanley Threatened by CFTC Review (GS; MS)

California's cap-and-trade won't work