Energy Traders Avoid Scrutiny

[acmavm]

As Commodities Market Grows, Oversight Is Slight

By David Cho
Washington Post Staff Writer
Sunday, October 21, 2007; Page A01

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One year ago, a 32-year-old trader at a giant hedge fund named Amaranth held huge sway over the price the country paid for natural gas. Trading on unregulated commodity exchanges, he made risky bets that led to the fund's collapse -- and, according to a congressional investigation, higher gas bills for homeowners.

But as another winter approaches, lawmakers and federal regulators have yet to set up a system to prevent another big fund from cornering a vital commodity market. Called by some insiders the Wild West of Wall Street, commodity trading is a world where many goods that are key to national security or public consumption, such as oil, pork bellies or uranium, are traded with almost no oversight.

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Some who work in the commodities markets question whether the CFTC, even if it got more money, would be an effective monitor because much of the trading occurs in private and is untraceable. Others criticized Levin's bill as overly broad, saying it could stifle markets that, Amaranth notwithstanding, have been working well.

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But homeowners lost out, too, because many utilities locked in prices for natural gas at just the wrong moment when gas prices were high. The ultimate cost nationwide has not been tallied, but one utility, the Municipal Gas Authority of Georgia, calculated that its 243,000 customers paid an extra $18 million in the 2006-07 winter season because of Amaranth. More than half of American homes are heated by natural gas.

The CFTC filed a civil suit this summer accusing Hunter, who is still trading natural gas, of attempting to manipulate natural gas prices in 2006. Hunter, through his spokesman, denied the charge and said he would prove his innocence in court.

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Why the hell would this administration have money to help the poor stay warm this winter? They're allowing us to be fleeced. They're as guilty as these guys.