BF fuel dealer testifies in D.C.

By CHRIS GAROFOLO, Reformer Staff

Tuesday, February 3

BRATTLEBORO -- A Windham County fuel dealer will testify before the U.S. House Agriculture Committee today to support legislation that would bring greater accountability to commodity markets.

Sean Cota, co-owner of Cota & Cota, Inc., will speak in favor of the Derivatives Markets Transparency and Accountability Act of 2009 as a representative for Petroleum Marketers Association of America and the New England Fuel Institute to encourage greater reporting and record keeping requirements.

This is important legislation to every American because this type of manipulation on Wall Street and within the housing market led to the economic collapse, said Cota.

"The reason all these markets have collapsed is that its been wild gambling with other people's money at very high leverage with no oversight," he said. "It's like Las Vegas without the Nevada Gaming Commission, on steroids."

Since the issue came to the attention of Congress that the markets are not operating ethically, the agriculture committee drafted this legislation to strengthen the oversight of within the Commodity Exchange Act, according to a spokeswoman for the committee.

"This is one of the highest priorities of the Congress ... to regulate the markets," said Cota, who recently appeared on the CBS news program "60 Minutes" to describe how speculation caused the record oil prices last year. This will be the sixth time Cota would have appeared on Hill.

The hearing is an opportunity for industry representatives to highlight the need for lawmakers to combat excessive speculation, and the dominance of investment banks over energy futures markets.

In short, the derivatives markets act would set speculative limits and establish more transparency regarding offshore trading while providing more detailed reporting and disaggregation of market data.

The legislation outline (available on the committee's Web site) states the U.S. Commodity Futures Trading Commission is required to "publicly provide the number and total value of positions of index funds -- and other passive, long-only and short-only investors -- in all regulated markets, and data on speculative positions relative to their bona fide physical hedgers."

U.S. Rep. Peter Welch, D-Vt., although not on the committee, has been involved with prior legislation due in part to his contact with Cota.

The two met during the Welch's visit to Bellows Falls in October 2007 and discussed the amount of money hedge fund investors were making from the oil Cota's company delivers to residents in Vermont and New Hampshire.

"We must continue to root out market speculation that artificially raises the price of fuel for Vermonters," said Welch. "Consumers deserve protection from Wall Street traders who hijack these markets to make a quick buck."

Shortly after the meeting, Welch introduced a bill in the U.S. House to close the loophole allowing speculators to benefit from oil sales, which helped drive the nationwide cost of heating fuel through the roof.

The drafted legislation also puts forth trading limits to prevent excessive speculation, requiring the trading commission to set appropriate position limits for all commodities while also requiring over-the-counter transactions for all commodities to be recorded for five years.

Additionally, the proposal would make entering into a "naked" credit default swap a violation of the Commodity Exchange Act. "A party could not enter into such a contract unless it has a direct exposure to financial loss should the referenced credit event occur," according to the outline.

Along with Cota, seven other witnesses are scheduled to testify in front of the full committee to review the legislation.

Tom Buis, president of the National Farmers Union, John Damgard, president of Futures Industry Association and Terrance Duffy, executive chairman of CME Group Inc., are among the representatives providing testimony before the committee.

The hearings will continue Wednesday morning. The Senate Banking Committee and the House Financial Services Committee are also expected to hold forums on the legislation in the coming months.