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Obama targets 'Enron loophole'

Addressing high oil prices, he says he will discourage speculation and bring oversight to unregulated trading.

June 23, 2008|John Dunbar | The Associated Press

WASHINGTON — Sen. Barack Obama on Sunday said that as president he would strengthen government oversight of energy traders, whom the Illinois Democrat blames in large part for the skyrocketing price of oil.

The candidate's campaign singled out the so-called Enron loophole as allowing speculators to run up the cost of fuel by operating outside federal regulation. Oil futures closed near $135 a barrel on Friday -- almost double the price of a year ago.

"My plan fully closes the Enron loophole and restores common-sense regulation as part of my broader plan to ease the burden for struggling families today while investing in a better future," Obama said in a campaign statement.

Obama's campaign blamed the loophole on former Sen. Phil Gramm, a Texas Republican who serves as Republican candidate Sen. John McCain's co-chairman and economic advisor. The Obama campaign accused Gramm of inserting a provision into a bill in late 2000 "at the behest of Enron lobbyists" that exempted some energy traders from government oversight.

Houston-based Enron collapsed in scandal in 2001, when it was discovered that the company had vastly overstated its income.

McCain spokesman Tucker Bounds said the senator from Arizona had supported efforts to close the loophole and noted that the bill in question was signed into law by then-President Clinton.

"The fact that Barack Obama is attacking John McCain, despite McCain's leadership on the issue, shows that Barack Obama is driven by the partisan attacks that Americans are tired of," Bounds said.

McCain's campaign supplied a copy of a letter Gramm wrote to Sen. Byron L. Dorgan (D-N.D.) on June 13 in which the former senator denied that the provision was a "secret maneuver." Gramm said he had "nothing to do with the writing of the provision" on regulating energy trading.

Obama's plan was outlined Sunday by New Jersey Gov. Jon Corzine, the former chairman of Wall Street investment firm Goldman Sachs, during a conference call with reporters. Corzine said the volatility in the price of oil "is absolutely indicative of speculation in the markets."

Congress already has acted to close the loophole, including a provision in the huge farm bill that passed this year. But Obama's campaign said the candidate would go further by requiring that energy futures be traded on regulated exchanges.

Obama also would ask the Commodity Futures Trading Commission to consider whether traders should be subject to higher margin requirements.

He also would work with other countries to regulate energy markets and press the Federal Trade Commission and the Department of Justice to investigate possible market manipulation.

The campaign said Obama's proposal was part of his broader energy strategy, which calls for reducing oil consumption 35% by 2030.

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