Senate Agriculture Committee Chairman Tom Harkin (D-IA) expects the two candidates for seats on the Commodity Futures Trading Commission (CFTC) — one a former lobbyist for a commodity trading group and the other a lobbyist for a farmers association — to be confirmed by the full Senate, a committee spokeswoman said Thursday.

A committee vote on the two candidates was expected Friday, but that is now in a “holding pattern” because the Senate may not be in session, said spokeswoman Kate Cyrul.

One of the candidates up for confirmation is Jill E. Sommers, former head of U.S. regulatory affairs at the International Swaps and Derivatives Association, a trade organization for participants in the market for over-the-counter (OTC) derivatives. Previously, she was the associate director of government affairs at the Chicago Mercantile Exchange. Sommers also interned for former Sen. Robert Dole of Kansas while attending the University of Kansas. She has been nominated for the remainder of a term expiring on April 13, 2009.

Sommers was approved by the Senate agriculture panel last year, but her nomination was put on hold by Sen. Dianne Feinstein (D-CA) due to her concerns over the lack of oversight in the OTC energy markets, the Wall Street Journal reported.

The other nominee, Bart H. Chilton, currently is chief of staff and vice president for government relations at the National Farmers Union. He also was senior advisor to former Senate Majority Leader Tom Daschle of South Dakota, and served in the Clinton administration. He has been nominated for the remainder of a term expiring April 13, 2008.

At their confirmation hearing Wednesday, Agriculture Committee Chairman Tom Harkin, D-IA, noted there was a “great deal of interest” in giving the CFTC greater authority to monitor and take appropriate regulatory action in energy derivatives markets. “I give the CFTC credit for filing energy-related complaints against more than 50 firms and collecting some $300 million in penalties in recent years,” but “it is essential that the CFTC erase any doubts about its aggressiveness in pursuing energy-related violations and that Congress restore to [the] CFTC the authority it needs over energy derivatives markets,” he said.

The nominees face a Democratic-controlled Senate that is increasingly dissatisfied with the performance of the CFTC. Earlier this week, the Senate Permanent Subcommittee on Investigations held a hearing and issued a report that found that the CFTC was severely under-staffed and under-budgeted to effectively regulate energy trading markets (see Daily GPI, June 26). The under-staffing was further aggravated when CFTC Chairman Reuben Jeffery III announced his resignation Wednesday.

Jeffery is leaving to join the State Department. His departure comes two weeks before the CFTC is due to appear before the Senate investigations subcommittee in a follow-up hearing to respond to allegations about excessive speculation in the natural gas trading markets. His departure leaves the five-member agency with three vacancies.

In testimony before the Senate investigations subcommittee earlier this week, Michael Greenberger, a professor at the University of Maryland School of Law in Baltimore, urged the Senate to nominate someone to the CFTC who is more consumer oriented. He charged that the agency is controlled by big banks such as Morgan Stanley, Goldman Sachs and Bank of America. With several vacancies at the agency, he said the opportunity was ripe for the Senate to approve a candidate who represents the interests of the consumer.

During the hearing, Subcommittee Chairman Carl Levin (D-MI) called on Congress to take steps to regulate all energy trading markets equally, impose a limit on traders’ positions, enforce the statutory prohibition against excessive speculation and give the CFTC a bigger budget to prevent a replay of the collapse of the Amaranth hedge fund last year, which took a major toll on consumers.

“The first step is [for Congress] to close that Enron loophole, which never should have been opened,” said Levin during the hearing into excessive speculation in natural gas markets less than a year after the collapse of Greenwich, CT- based Amaranth Advisors LLC last fall, which experienced an estimated $4 billion in gas trading losses (see Daily GPI, Sept. 19, 2006).

The closing of the loophole would make the New York Mercantile Exchange (Nymex), which currently is regulated by the CFTC, and the nonregulated electronic exchange IntercontinentalExchange (ICE) subject to the same oversight by the CFTC, he said.

Levin said the CFTC’s latest proposal to require traders in regulated markets to disclose their holdings on unregulated exchanges was a “step in the right direction,” but Congress still needed to close the Enron exemption loophole (see Daily GPI, June 25).

Levin said Congress also should give the CFTC the authority to collect user fees from the markets it regulates to conduct better oversight of the energy industry. He noted that currently the CFTC has an annual budget of $98 million to oversee commodity trades that are in the billions of dollars. “The CFTC suffers from antiquated technology, shrinking staff and inadequate oversight resources,” he said.

“We need to get the regulatory cop back on the beat,” Levin said. “It’s one thing if gamblers gamble with their own money, if speculators gamble with their investors’ money, but it’s a totally different thing when the U.S. energy markets are turned into a casino.”

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