End Oil Speculation Act of 2008

Mr. President, reserving the right to object, and I will not object, I ask unanimous consent that following Senator Vitter--he is going to speak next for approximately 5 minutes--I then be recognized to speak for up to 20 minutes.

Mr. President, is it necessary that I ask to speak as in morning business? I am taking time off my postcloture time.

I thank the Chair.

Drilling in Pristine Areas

Mr. President, I am going to discuss, in about a 20-minute timeframe, a couple issues that are swirling around this country and the Senate, and I wish to go on record on both of them. One has to do with President Bush and Senator McCain's proposal to open pristine areas off America's coastline to offshore oil drilling as an answer, they say, to high gas prices. I am going to, hopefully, debunk that argument, and I hope I can do it convincingly.

The second area is going to be my feeling on the FISA bill, which is coming to us tomorrow--the Foreign Intelligence Surveillance Act bill.

I think I can start off where Senator Dorgan ended. He has been brilliant on the point that speculation in oil futures is what is responsible for a good deal of this horrific runup in the price of gas at the pump. We need to do something about these speculators. We have been blocked from doing that by the Republican leadership. I wish to quote Michael Greenberg, a former director of trading and markets for the Commodity Futures Trading Commission, who testified before the Senate Commerce Committee. He said:

Going after the speculators will bring down the price of

crude oil to get at least a 25 percent drop in the cost of

oil and a corresponding drop in the cost of gasoline.

Testifying Monday before a House Energy and Commerce Committee subcommittee, Michael Masters, of Masters Capital, said:

The price of crude oil would drop to a marginal cost of $65

to $75 a barrel, about half of the current $135.

Imagine, the experts are telling us speculation is responsible for about 25

to 50 percent of the cost runup of gasoline. We are trying desperately to close that Enron loophole, to ensure that the speculators are once again regulated. There is a Bill Nelson bill, S. 3134, which would say all energy future contracts will fall within the regulatory format they were at before. So we can do this.

Where are President Bush and Senator McCain on going after the speculators? I don't hear them suggesting that. I don't see my Republican friends embracing this. They have already stopped us a couple times from doing it. If we want to do something about the price of gas, let's go after the speculators, and it will result in a very quick reduction in these outrageous price increases. We have the Strategic Petroleum Reserve which is 97 percent full. George Bush's father took some oil out of there after the first gulf war. President Clinton also took some out of there, and it had the impact of lowering the price. In other words, they are adding a supply from the Strategic Petroleum Reserve. Again, it is 97 percent full. This is the moment when we could tap it. It will make a difference, and it will get to the people, within a few short days. Thirteen days from a Presidential decision, we could have more oil on the market.

Our colleagues agreed with us to stop filling SPR, but we don't have their support for taking some out--and, of course, you would return it at another time.

Here is a big one, and I will show you this chart. Remember, the President and Senator McCain said open all the coastal areas to drilling--these pristine areas. So you have to ask yourself: Well, have we run out of places to drill offshore? The answer is no. What about onshore? No. Oil companies hold leases to nearly 68 million acres of Federal lands that are not producing oil. This land could produce 4.8 million barrels of oil each day--six times the peak production from drilling in the Arctic--and it would double total U.S. oil production. Let me say that again--68 million acres of oil leases are being held today by the oil companies. I say they should use it or lose it. Here we have people saying: Oh, give them more. That is akin to saying to a kid, whom you are trying to get to do something, I will buy you an ice cream cone if you do XYZ; but they are holding two ice cream cones in their hands now.

Let me show you what 68 million acres looks like. First, I will show you the onshore, which is about half of that. Look at the red areas on the map. This is onshore, 34.5 million acres that are unused by the oil companies. They will not drill there, but now they want more leases in the most beautiful parts of America.

This is ridiculous. It is a phony idea. It is not going to bring down gas prices 1 cent, according to the Bush Energy Department. It will have no impact--maybe by 2030. I am looking at some of the Senate pages, and they will be moms and dads by then.

Let's look at the offshore leases. Look at this. These are the offshore leases that the oil companies hold. They are not using them. Yet, still, President Bush and Senator McCain--and this is a flip-flop by Senator McCain; he has always supported protecting the beautiful areas, but they are now saying it is necessary now to sell off the family jewels.

I have to tell you, coming from a State--and the Senator in the chair does as well--where an unspoiled coastline is our ticket to a tourist industry, a fishing industry, a recreation industry, an industry in America that provides, today, $70 billion in a coastal economy--$70 billion and millions of jobs. In my State, it is about $11 billion or $12 billion and a quarter of a million jobs.

So you have to ask this question to the President and Senator McCain: We all want to help our middle class and our working poor pay for the price of gas. We want to bring down the price of gas, or we want to give them alternatives to having to fill their cars; we all want to do that. Let's give real answers. Let's not give an answer that could threaten a huge coastal economy. Our families are having a very hard time paying for gas. Imagine what happens when they lose their jobs because the coastal economy is now going to go. What good is that? Millions of jobs are at stake.

So rather than go after the speculators, rather than look at the Strategic Petroleum Reserve, rather than tell the oil companies, look, you can double production and you are not doing it, rather than ask the Federal Trade Commission to investigate supply manipulation--and I can give you story after story of supply manipulation. In my own State, we had a large company--Shell Oil--try to close down a refinery. They said it wasn't making money and there were no buyers. Untrue. We called our State attorney general. He got involved. We found out they were making money and that there were buyers. They just want to manipulate the supply. Because of our involvement, and especially the attorney general, that refinery was sold. That was 2 percent of our State's supply at the pump.

So these oil companies do not come to this with clean hands. We know it. This administration gives them a pass, saying let the speculation fly, and let the oil companies sit on these leases; forget about using the CFTC, forget about going to the World Trade Organization and lodging a complaint against OPEC because they are anticompetitive. They don't do that. They are not doing anything to extend the tax credit for the most fuel-efficient vehicles. That expired because they put a cap on it, on how many cars would have to be sold before you no longer get this tax credit. They don't do any of the things that would help us now. I don't see them saying: Let's make sure our transportation districts locally have enough funds to add more buses and to add more ferry boats. We could be doing these things now.

What is their answer? Drill, drill, drill, drill, drill. Where? The most pristine areas of our coasts--these areas that are a gift from God. Millions of dollars have gone into setting aside marine sanctuaries. We will put it all at risk because oil companies see it as an opportunity to get more leases, increase their portfolio, and increase the assets on their books.

I have to say I hope the American people will look at this proposal the same way they looked at the gas tax holiday. When that first came up, having a gas tax holiday, John McCain recommended it, saying this is going to mean good news at the pump. The truth is it threatens the highway trust fund because those are the funds that go into the highway trust funds so we can take care of our highways. There was nothing in the proposal that would have led to a lowering of the price of gasoline. Other costs could have been passed right on to the consumer.

So it is amazing to me that we now have another proposal that is basically the same kind of proposal: Drill, drill, drill, and put at risk a $70 billion coastal economy. First, the gas tax holiday put at risk the highway trust funds. This proposal puts at risk a $70 billion coastal economy and millions of jobs that go with it, and it doesn't even account for the fact that there are so many acres--68 million acres--leased to oil companies that they have not produced.

It seems to me the American people will understand that this so- called solution to high gas prices, which the President's own Energy Department says will not save a penny, is another phony solution. It is not real. When we look at the long term, what we know is we have to pass global warming legislation. When we do that, when the private sector puts a price on carbon, we are going to see technologies erupt from America that are going to make us competitive. We will export those technologies.

We know when we take care of our environment, in the long run, our economy gets stronger. We need to invest in transportation. We need to go after OPEC. We have to go after the speculators. We know we will see, with global warming legislation, investments in cellulosic ethanol, which is going to compete with fossil fuel, and we know it is going to work.

So there are short-term answers to these gas prices, and I laid them out, and there are long-term answers, and I laid those out. I am not the only person in the Senate who has these ideas. But to put out a phony solution to a real problem does not help us and it jeopardizes a lot of jobs and a coastal economy.

I look forward to working with my colleagues on going after the speculators and doing all I need to do.

I ask unanimous consent that I be given an additional 10 minutes on my time.

Mr. President, this debate over gas prices and the long- term and short-term solutions is going to go on for a while. I look forward to addressing them, both in my committees of jurisdiction and on the floor.

Foreign Intelligence Surveillance Act

Mr. President, we are about to get a Foreign Intelligence Surveillance Act bill that is going to come to the Senate probably tomorrow. I know that a lot of my colleagues worked very hard and very long to try to get a compromise on this bill. I have to say that there is a portion of this bill that I believe is egregious and will prevent me from voting for this bill. It is because I believe one of the most basic tenets of our freedom is justice. Looking at justice, we have to see what lies at the heart of justice. And what lies at the heart of justice is the search for the truth. If you block the truth from coming out, if you don't allow a search for the truth, you don't find justice. I worry very much about that.

Throughout our history, whenever the U.S. Government has violated the trust of the American people, we have worked to regain that trust by seeking the truth and allowing for a full examination of the abuses of Government power. We can see that in the history of America. Sometimes these egregious acts take many years to uncover. I am thinking of the Tuskegee experiments. Of course, we have to go back to the days of slavery. Go back to the Jim Crow laws. Go back to the era of the Vietnam war and the tenure of J. Edgar Hoover, who headed the FBI. We knew in that particular case that the CIA and the FBI, under J. Edgar Hoover--he headed the FBI--he engaged in spying on the political activities of American citizens. He was spying on famous, important people, such as Martin Luther King. He was spying on people at the highest levels of Government. He was also spying on the American people. Pictures were taken at rallies where people were trying to argue for an end to the Vietnam war.

In 1975, the Church Committee, which would later become the Senate Committee on Intelligence, looked into allegations of covert and illegal spying by the Federal Government on Americans. What did the committee find? The committee found that, indeed, there had been spying on Americans by the FBI and the CIA.

Here is what is interesting. What did the Congress do when they found out, in horror, that the Government was spying on the people? They passed the Foreign Intelligence Surveillance Act in 1978. It set up a new court with authority to approve electronic surveillance but only on a case-by-case basis. Since that time, we have updated FISA to reflect the changes in the threat we face in America and to reflect the new technologies.

Suddenly, in late 2005, we learned that the U.S. Government--our Government, the Bush administration--had violated the trust of the American people again when the New York Times published a story exposing a warrantless surveillance program authorized by President Bush shortly after 9/11. Since that time, Congress and the American people have been grappling with the disclosure and working, with no help from this administration, to find out what happened. We cannot find out exactly what happened, who was spied upon. Was I spied upon? Were you spied upon? How many people were spied upon? What information was gained?

In putting together the FISA bill, I do believe House and Senate members tried hard to find a balance and figure out a way to get to the truth, but I feel they have fallen short because what we will have before us when this bill comes before us is not only a bill that will deny the court the ability to make a judicial determination as to the legality of the spying program, but it will effectively guarantee immunity for the telecommunications companies that cooperated with the administration and violated the privacy of their customers.

You have to know that we had laws in place that specifically said to telephone companies: You cannot invade the privacy of your customers. What apparently happened was the Government went to them and said: We are asking you to disregard the law.

I understand the predicament of the companies, although there was one company that refused to cooperate. One company refused to cooperate. They said: No, we are not going to do it. But all the others cooperated. And now we have a situation where we know the telephone companies responded to the Government and said: OK, we will disregard that law on your say-so.

I would support granting the telecom companies indemnification--in other words, having the Government step in and be the party that has to pay the price--but this immunity provision that is in the bill blocks us from finding the truth. Remember what I said when I started: The essence of justice is to get to the truth, and we are not going to be able to get to the truth. We are not going to know exactly how this program ran. We don't know enough. The Bush administration, in my view, trampled on the Constitution, and we are not doing anything in this bill to provide accountability. Frankly, if we just left out this provision and passed the rest of the bill, we would let the courts do their job. Fine. But, no, no, we have to add this provision and essentially set up kind of a new law now to deal with this spying operation.

I don't think we can hold up the Constitution when it suits us and set it aside when it hinders us. That is not what the Constitution is.

The supporters of this compromise will say: Wait a minute, Senator Boxer, we have a provision in there that says the telecom companies have to prove they were asked by the Government to do this activity. We know they were asked by them. That is why I don't want to punish the telecom companies.

Mr. President, I tell you what I do want to do: find out the truth. That, the truth, I want to find out. I have to believe that if we don't change Title II of this bill, we are perpetuating a coverup. I use that word advisedly because I don't think we will ever get to the truth of what happened here.

I support giving our country every tool necessary to track down the terrorists. I voted to go to war against bin Laden, and I am disgusted that he is still out there taunting us, all these days, all these years, despite George Bush. Dead or alive, we will get him. Where is he? I want to go after al-Qaida. I want to go after bin Laden. I think we do have to provide all the tools that are necessary, but we also must uphold the Constitution and the rights of our citizens.

This granting of immunity will block the courts from moving forward and learning whose privacy was violated. I want to be able to look in the eyes of my constituents in California, 38 million people, and say: I know you were in that group of people, and I feel terrible, and we are going to make it right for you; or, I know you were not involved in being caught up in this net.

These are extraordinary and difficult times. Our sons and daughters were sent to Iraq to fight for our freedoms. We have to listen to what former Justice Marshall says:

History teaches us that grave threats to liberty often come

in times of urgency, when constitutional rights seem too

extravagant to endure.

Our Constitution is not an extravagance. It is the centerpiece, the very essence of a democracy. It is what our sons and daughters are fighting for abroad. How could we say on the one hand to our soldiers: Go fight for our freedoms, go fight for the freedoms in our Constitution, while at home we are covering up the erosion of those freedoms?

The bill was improved upon, and I am glad Title I improved the way we go about protecting the rights of our citizens and balances it with the need to get this information. I am very pleased with that. But it seems to me, if you believe in the truth, then I don't see how you grant this type of immunity.

Again, I would substitute the Government, I would indemnify these companies. I am not interested in hurting them. But I want to get to the truth. We have a really good way to do that, which is to strip this part from the bill. We will have our rights protected then. We will have the tools we need to fight terrorism. We must do better than this.

So unless there is some miracle that happens overnight and we see some changes, I will be forced to oppose this bill. I am hoping we will have an opportunity to vote on a substitute that will

keep the rest of the bill intact but eliminate this egregious provision which really is very troubling. Anyone who lived through the days of J. Edgar Hoover and the kind of spying that went on, who understands FISA was passed to protect Americans has to be alarmed.

I yield the floor.

Madam President, I want to speak directly to the folks at home right now. In the last few days, we have heard Senators say that we are in a historical crisis that requires action by the Federal Government. Supporters of this bill say it directs relief to homeowners who desperately need it, and deserve it. But they are trying to sell you on the cover of a book without letting you see what is inside. I like to know what kind of product I am buying before I open my wallet. As U.S. Senators, we have a responsibility to dig through any piece of legislation before we open up your pocketbook.

This bill is over 600 pages long. I have seen portions of it in the Banking Committee and the Finance Committee, but for the first time we are seeing the whole package here on the Senate floor. I am not buying it, and I do not think you, your children, and your grandchildren should have to either. Let me tell you why.

This bill puts you, the taxpayer, at risk. It creates a new, permanent tax on mortgage business done by Fannie Mae and Freddie Mac. That tax threatens the solvency of those institutions and permanently punishes the shareholders, many of which are institutional investors such as pension funds. The tax also reduces the amount of capital these GSEs can provide to the mortgage lending system in a moment of serious liquidity issues in the market.

Furthermore, the FHA is already projecting losses of over $4.6 billion from existing loans, which will wipe out 22 percent of its capital reserves. The Congressional Budget Office has estimated that participants in the FHA refinancing program will re-default at a rate of 35 percent. That is more than one out of every three loans refinanced through the program. We are putting more bad loans on an already broken program that can't handle the risks it currently has. Is that a good idea? Of course not.

The author of this bill says it does not put the taxpayer on the hook. That is just not true. First, the tax on Fannie Mae and Freddie Mac will be paid by ordinary Americans, either through higher costs for future mortgages or through lower share prices in their retirement accounts. Is that fair? No.

Second, taxpayers are on the hook for any losses beyond what is being taken from the GSEs. Supporters of this legislation say that will not happen, but even their own numbers show just how likely it is for this program to be bankrupt in a few years. The CBO score for losses only fits within the GSE tax set aside for the program because they assume less than a third of the refinancing authority is used. I think time will prove all those assumptions wrong. The real question in my mind is when will we have to bail out FHA and who is going to pay for it?

This bill not only creates a dangerous new tax, but also uses that revenue to fund housing initiatives off the books of the Federal Government. Under this bill, Fannie Mae and Freddie Mac will be assessed $500-800 million annually by the Federal Government. At least for the first year, that money will be used to cover the inevitable losses to the FHA from a bailout program for irresponsible and undeserving lenders and borrowers. The balance of that money will pay for a permanent slush fund for housing causes that will end up benefitting partisan groups, some of whom have recently had workers indicted for voter fraud. Additionally, there is an extra $150 million in counseling funds for these partisan groups, with even less accountability attached to those funds.

Another provision that has received little attention is $4 billion in emergency spending to buy foreclosed homes. That is nothing more than a gift to the banks, who by definition are the ones who have foreclosed homes to sell. These funds will have the perverse effect of increasing foreclosures because banks know there is going to be a willing buyer.

And if these tax and spend policies weren't enough, this bill vastly increases an already overreaching Federal bureaucracy. It nearly doubles the size of the FHA. It assigns important decisionmaking responsibilities with regard to this program to a board created of various agency heads, not Congress. It creates a new trust fund for ``affordable housing'' that is permanent and mandatory, outside the normal appropriations process. It requires loan originators to participate in a National Mortgage Licensing System and Registry. If you are a fan of big government, this bill definitely delivers.

But I am only skimming the surface. Unfortunately, it gets much worse. Make no mistake--this bill is a huge bailout for our Nation's lenders. The bill's author has said this bill is going to help the everyday man. Let's take a closer look and see what you think.

The FHA program created by this bill refinances borrowers who have defaulted on their mortgages into government-insured loans. Just how much of those loans does the government insure? One hundred percent. By creating this program, this bill limits how much lenders can possibly lose through mortgage transactions. When you invest in a business venture or in the stock market does the Federal Government cap your losses? No. But when it comes to big banks this bill willingly transfers downside risk of future losses right to the FHA and you, the American taxpayer.

As I said before, CBO estimates at least one in three mortgages refinanced under this bill will default again. Therefore, we have put in motion a scenario where taxpayers take the hit rather than the lenders who made that loan to a risky buyer who bought a house he could not afford, with a mortgage he could not afford. That is a bailout for the lender any way you slice it.

Probably the most glaring flaw is that the bill offers no way to keep out irresponsible and undeserving borrowers. In fact, borrowers are not required to show that they did not lie on their original mortgage application. To qualify for the bailout, borrowers get to sign a piece of paper saying they did not lie the last time they signed for a mortgage. This bill subjects the FHA to another wave of fraud that these no-documentation loans experienced in the primary market.

Borrowers who have not demonstrated an ability to pay can get a bailout because there is no requirement that borrowers have made any timely payments on their original mortgage. There is no income cap on eligibility for the program. As written, this bill would allow homeowners with houses valued at up to $550,000 to qualify for a bailout. In my county in Kentucky, which is one of the most expensive in the whole State, the median home price is $270,000. So this bill would give a bailout to people with homes valued at twice the median price. The American people are compassionate and often willing to help those in need. But I do not think giving a bailout to anyone who owns such an expensive home is fair to the average American. If you recall from the economic stimulus debate, my colleagues on the other side of the aisle vehemently opposed rebates for ``rich'' taxpayers. Now when it comes to bailing out banks that made risky loans, all income classes of borrowers can qualify.

The list of problems goes on and on. Mortgage professionals, people who by definition should have known better, can qualify for the bailout. People who defaulted on government loans before can come back to the trough. People who drained all the equity in their homes to buy flat screen TVs and new cars can qualify. This seems to me like a surefire way to set a program up for failure at a time when the FHA is reporting record losses.

The tax division of this bill also is flawed in several respects. In particular, it includes a $9.8 billion tax increase on small businesses that the Senate Finance Committee has never held hearings to review. This credit card reporting provision will result in a vast increase in paperwork for credit card companies and in millions of confusing and possibly misleading notices sent to the IRS and taxpayers.

Another provision that needs more work is the new limitation on the gain exclusion for the sale of a second home. This provision applies to any second property owned by the taxpayer, including an investment home. That means that taxpayers who lose their principal residence and move into a vacation home or investment property will also lose the benefit of gain exclusion. Is that the drafter's intent? This legislation has not been well thought out. That scenario should be excluded, and I have no doubt it would have been if this bill had followed the normal course through the Senate Finance Committee.

There are a few provisions in this bill which are worthwhile and needed. Most importantly, the bill creates a strong new regulator for Fannie Mae and Freddie Mac. Congress has been trying to pass such a bill for years, and it is sorely needed and worth passing on its own. But the proponents of the bailout are holding those needed reforms hostage to get their bailout.

I and many others hoped to offer amendments to try to mitigate the damage this bill could do. Unfortunately we have been blocked from doing so. On a bill of this magnitude that is irresponsible and unacceptable.

One of my amendments would have made refinancing more affordable for the vast majority of homeowners by allowing them to write off interest points paid on a home mortgage in the year paid. For no good reason, the Tax Code requires homeowners to treat points differently, depending on when they are incurred. If they are incurred in an original purchase financing, the points are deductible, just as they would be under my amendment. If they are incurred in a refinancing, the points can only be deducted ratably, over the life of the loan. The difference is so significant that it will affect the ability of millions of homeowners to afford refinancing.

The whole idea of bailing out people who took a gamble and lost is an irresponsible way to spend the taxpayers' money. I do not think the people back in Kentucky sent me to Washington to bailout speculators, Wall Street executives, and people who drained the equity in their homes to buy flat screen televisions and new cars.

This bill is simply the wrong kind of housing policy for Congress to be engaging in and is fatally flawed. Even the sponsor of the bill has admitted on the Senate floor that he is not even sure it is going to work, but he hopes it will. As the most deliberative body in the world, I think we can do better. In fact, we owe it to our grandchildren to do better. Who is going to bail them out when FHA is left with $300 billion in bad debt? On behalf of the people of Kentucky, this Senator is not buying this bailout bill.

Mr. President, I rise to introduce a piece of legislation on behalf of myself, Senator Nelson of Florida, and Senator Carper dealing with the subject of energy speculation. I want to run through a couple charts, and I want to describe the reason for the introduction of this legislation.

This chart shows the price of oil and what has happened to the price of oil. The price of oil has nearly doubled in a year. There is no justification for it, no fundamentals of supply and demand that explain what has happened to the price of oil.

These commodity contracts, by and large, are traded in this country on something called the commodity exchange--NYMEX, it is called. This is what it looks like. They trade back and forth, and there are legitimate reasons to trade on the exchanges. Those reasons to trade on the exchanges are for legitimate hedging for actual physical petroleum products for future delivery. The problem is, with respect to the oil markets, the legitimate hedging has become a smaller part of what is traded. There is now this unbelievable speculation going on in the commodity markets. That speculation has perverted the market, broken the market, causing the price of oil and gasoline to be well above that which is justifiable.

We have an organization in the Government called the Energy Information Administration, the EIA. They are the ones who know what there is to know about energy issues. As shown on this chart, here is what they have told us. Back in May of 2007--last year--here is where they said the price of oil would be. Back in July, they said it would be on this line, as shown on this chart; back in September, on this line. I hope they were not buying any commodities on the basis of their advice--they would be flat broke in a month. Here is what happened to the price. It went straight up. All the while, the EIA did not seem to have the foggiest notion of where the price was going to go. Why? Because the fundamentals do not justify what is happening.

Now I have the EIA coming down to testify before my subcommittee this week. I want to ask them these questions. They insist there is very little speculation in this marketplace. But most experts insist this has become an unbelievable spectacle of speculation that injures America's drivers and consumers, injures our industry, and causes great damage to our economy.

A House study, just in the last few days, from the House Subcommittee on Oversight and Investigations, said here is what has happened to the commodities market with respect to oil. As to the oil futures market: 37 percent used to be speculators in that market. Now it has gone to 71 percent. The speculators have taken over that market.

When the Commodity Exchange Act was passed by the Congress in the 1930s, here is what the congressional report said: This bill authorizes the Commission--the Commodity Futures Trading Commission; that is supposed to be the regulating body--to fix limitations on purely speculative trades and commitments.

Hedging is exempted. But for purely speculative positions, we provided the authority to the Commodity Futures Trading Commission to deal with that because we did not want this market to be taken over by speculators.

I have used these charts many times.

This one has to do with Fadel Gheit, the top energy analyst for Oppenheimer & Co. Here is what he says:

There is absolutely no shortage of oil. I'm convinced that

oil prices shouldn't be a dime above $55 a barrel.

I call it the world's largest gambling hall. . . . It's

open 24/7. . . . Unfortunately, it's totally unregulated. . .

. This is like a highway with no cops on the beat and no

speed limit and everybody's going 120 miles an hour.

I will not show all the charts I have shown in the past, but the CEO of Marathon Oil says:

$100 oil isn't justified by the physical demand in the

market.

It was recently reported Americans drove 4.5 to 5 billion fewer miles in the last 6 months than in the previous 6 months. So we are driving 4 or 5 billion fewer miles, using less energy. Four of the first 5 months of this year, crude oil inventories were up--not down, up. So if the supply of the product is going up and the use of the product is going down, the marketplace would have you believe--or at least you would expect--the price would come down. Instead, the price has gone up, which demonstrates this is not about market fundamentals. It is about an unbelievable orgy of speculation in the marketplace that is not justified.

Now the question is, Will Congress do something about it or will it just apply some lip gloss? Is this just something where we act as if we are doing something or are we going to drive the speculators out of this market? I am introducing legislation that is tough and real and will address this issue.

The regulating body here is the Commodity Futures Trading Commission. It has acted like most regulating bodies in recent years. Most of them are run by people who came to the Government not liking Government and not wanting to regulate. It all goes back to Mr. Pitt, back in 2001, in which he said: The Securities and Exchange Commission is going to be a business-friendly place. Well, we have seen a lot of these agencies that are business friendly. They just get out of the way and pretend they are in a deep Rip van Winkle sleep, and they are not going to see anything and they are not going to know anything and they are not going to care much about anything.

This agency is not much different--the Commodity Futures Trading Commission. The fact is, it has been asleep on its feet, just dead from the neck up. It is time for us to say to this agency: It is your job to regulate. The fact is, Franklin Delano Roosevelt, when he signed this legislation some 70, 80 years ago, said:

It should be our national policy to restrict, as far as

possible, the use of these exchanges for purely speculative

operations.

Franklin Roosevelt knew it. Why doesn't this Commodity Futures Trading Commission know it?

The legislation I am introducing today does a couple things. No. 1, it demands the Commodity Futures Trading Commission by date certain to distinguish between that which represents normal hedging transactions between producers and consumers of a physical product and the rest, which is speculation. It says this market is designed for normal hedging of risks between producers and consumers of a physical product. Others who are engaged in excess speculation are going to be slapped with a higher margin--a 25-percent margin requirement--that is either quadruple or quintuple the current requirement, depending on what is assessed between the 5- and 7-percent rate. But this essentially says to speculators: It is going to cost you more to speculate in this marketplace if you are one of these folks who just want to speculate to make a lot of money.

Will Rogers talked about this long ago. He talked about people buying things they will never get from people who never had it. That is what is going on with investment banks, hedge funds, and a lot of others who are neck deep in this marketplace. They have never seen a barrel of oil. They don't want a barrel of oil. All they want to do is speculate and make a bundle of money. The problem is, it is damaging this country.

My legislation, No. 1, requires the separation of legitimate traders verses speculators. It puts an increased margin requirement on the speculators to try to wring some of that speculation out of the market.

No. 2, it requires position limits that are significant, imposed by the Commodity Futures Trading Commission.

No. 3, it requires the Commodity Futures Trading Commission to revoke or modify any previous actions they have taken in which they have prevented themselves from being able to regulate and see the transactions that exist in this futures market.

Unbelievably almost, the Commodity Futures Trading Commission, which is the regulator, decided, on its own volition, that it would allow, for example, a London exchange, largely owned by American interests, to come in and trade on computer terminals in Atlanta, GA, and pretend they are not American. So the Commodity Futures Trading Commission said: Do you know what, we will do a letter of no action so we can't regulate and can't see it. That is unbelievable, in my judgment. It is an unbelievably irresponsible position for a regulator to have taken. It is taken, I suppose, by those who believe ``regulations'' is a four- letter word. It is not. If ever we wonder about that, take a look at what has happened to the price of oil and gas in a situation where speculators have taken over.

The Commodity Futures Trading Commission is a regulator of this market. It has done a miserable job. It has nearly all the authority it needs to do the right thing. What I propose to do with the Commodity Futures Trading Commission is wring the speculators out of this market. They have distorted the market, broken the market, and we end up in a situation now where the price of gasoline is devastating this economy. The price of oil is not justified by supply and demand. When that happens, there is a responsibility for this Congress to act. It is an urgent responsibility, in my judgment, now for this Congress to say what is happening is wrong, it is hurting this country's economy, it is hurting industries and the American people, and we need to do something about it. The best start, in my judgment, would be to pass this legislation I am introducing today.

One final point. I am reaching out to Democratic and Republican offices in the hopes that this will be a bipartisan piece of legislation that will address a very serious issue on an urgent basis and begin to do something that moderates the price of oil and gas that many experts have told us is 20, 30, and in some cases 40 percent above that which is justified by the marketplace. We should not stand for it. We do not have to. We ought to pass this legislation soon.

Mr. President, I rise to introduce a piece of legislation on behalf of myself, Senator Nelson of Florida, and Senator Carper dealing with the subject of energy speculation. I want to run through a couple charts, and I want to describe the reason for the introduction of this legislation.

This chart shows the price of oil and what has happened to the price of oil. The price of oil has nearly doubled in a year. There is no justification for it, no fundamentals of supply and demand that explain what has happened to the price of oil.

These commodity contracts, by and large, are traded in this country on something called the commodity exchange--NYMEX, it is called. This is what it looks like. They trade back and forth, and there are legitimate reasons to trade on the exchanges. Those reasons to trade on the exchanges are for legitimate hedging for actual physical petroleum products for future delivery. The problem is, with respect to the oil markets, the legitimate hedging has become a smaller part of what is traded. There is now this unbelievable speculation going on in the commodity markets. That speculation has perverted the market, broken the market, causing the price of oil and gasoline to be well above that which is justifiable.

We have an organization in the Government called the Energy Information Administration, the EIA. They are the ones who know what there is to know about energy issues. As shown on this chart, here is what they have told us. Back in May of 2007--last year--here is where they said the price of oil would be. Back in July, they said it would be on this line, as shown on this chart; back in September, on this line. I hope they were not buying any commodities on the basis of their advice--they would be flat broke in a month. Here is what happened to the price. It went straight up. All the while, the EIA did not seem to have the foggiest notion of where the price was going to go. Why? Because the fundamentals do not justify what is happening.

Now I have the EIA coming down to testify before my subcommittee this week. I want to ask them these questions. They insist there is very little speculation in this marketplace. But most experts insist this has become an unbelievable spectacle of speculation that injures America's drivers and consumers, injures our industry, and causes great damage to our economy.

A House study, just in the last few days, from the House Subcommittee on Oversight and Investigations, said here is what has happened to the commodities market with respect to oil. As to the oil futures market: 37 percent used to be speculators in that market. Now it has gone to 71 percent. The speculators have taken over that market.

When the Commodity Exchange Act was passed by the Congress in the 1930s, here is what the congressional report said: This bill authorizes the Commission--the Commodity Futures Trading Commission; that is supposed to be the regulating body--to fix limitations on purely speculative trades and commitments.

Hedging is exempted. But for purely speculative positions, we provided the authority to the Commodity Futures Trading Commission to deal with that because we did not want this market to be taken over by speculators.

I have used these charts many times.

This one has to do with Fadel Gheit, the top energy analyst for Oppenheimer & Co. Here is what he says:

There is absolutely no shortage of oil. I'm convinced that

oil prices shouldn't be a dime above $55 a barrel.

I call it the world's largest gambling hall. . . . It's

open 24/7. . . . Unfortunately, it's totally unregulated. . .

. This is like a highway with no cops on the beat and no

speed limit and everybody's going 120 miles an hour.

I will not show all the charts I have shown in the past, but the CEO of Marathon Oil says:

$100 oil isn't justified by the physical demand in the

market.

It was recently reported Americans drove 4.5 to 5 billion fewer miles in the last 6 months than in the previous 6 months. So we are driving 4 or 5 billion fewer miles, using less energy. Four of the first 5 months of this year, crude oil inventories were up--not down, up. So if the supply of the product is going up and the use of the product is going down, the marketplace would have you believe--or at least you would expect--the price would come down. Instead, the price has gone up, which demonstrates this is not about market fundamentals. It is about an unbelievable orgy of speculation in the marketplace that is not justified.

Now the question is, Will Congress do something about it or will it just apply some lip gloss? Is this just something where we act as if we are doing something or are we going to drive the speculators out of this market? I am introducing legislation that is tough and real and will address this issue.

The regulating body here is the Commodity Futures Trading Commission. It has acted like most regulating bodies in recent years. Most of them are run by people who came to the Government not liking Government and not wanting to regulate. It all goes back to Mr. Pitt, back in 2001, in which he said: The Securities and Exchange Commission is going to be a business-friendly place. Well, we have seen a lot of these agencies that are business friendly. They just get out of the way and pretend they are in a deep Rip van Winkle sleep, and they are not going to see anything and they are not going to know anything and they are not going to care much about anything.

This agency is not much different--the Commodity Futures Trading Commission. The fact is, it has been asleep on its feet, just dead from the neck up. It is time for us to say to this agency: It is your job to regulate. The fact is, Franklin Delano Roosevelt, when he signed this legislation some 70, 80 years ago, said:

It should be our national policy to restrict, as far as

possible, the use of these exchanges for purely speculative

operations.

Franklin Roosevelt knew it. Why doesn't this Commodity Futures Trading Commission know it?

The legislation I am introducing today does a couple things. No. 1, it demands the Commodity Futures Trading Commission by date certain to distinguish between that which represents normal hedging transactions between producers and consumers of a physical product and the rest, which is speculation. It says this market is designed for normal hedging of risks between producers and consumers of a physical product. Others who are engaged in excess speculation are going to be slapped with a higher margin--a 25-percent margin requirement--that is either quadruple or quintuple the current requirement, depending on what is assessed between the 5- and 7-percent rate. But this essentially says to speculators: It is going to cost you more to speculate in this marketplace if you are one of these folks who just want to speculate to make a lot of money.

Will Rogers talked about this long ago. He talked about people buying things they will never get from people who never had it. That is what is going on with investment banks, hedge funds, and a lot of others who are neck deep in this marketplace. They have never seen a barrel of oil. They don't want a barrel of oil. All they want to do is speculate and make a bundle of money. The problem is, it is damaging this country.

My legislation, No. 1, requires the separation of legitimate traders verses speculators. It puts an increased margin requirement on the speculators to try to wring some of that speculation out of the market.

No. 2, it requires position limits that are significant, imposed by the Commodity Futures Trading Commission.

No. 3, it requires the Commodity Futures Trading Commission to revoke or modify any previous actions they have taken in which they have prevented themselves from being able to regulate and see the transactions that exist in this futures market.

Unbelievably almost, the Commodity Futures Trading Commission, which is the regulator, decided, on its own volition, that it would allow, for example, a London exchange, largely owned by American interests, to come in and trade on computer terminals in Atlanta, GA, and pretend they are not American. So the Commodity Futures Trading Commission said: Do you know what, we will do a letter of no action so we can't regulate and can't see it. That is unbelievable, in my judgment. It is an unbelievably irresponsible position for a regulator to have taken. It is taken, I suppose, by those who believe ``regulations'' is a four- letter word. It is not. If ever we wonder about that, take a look at what has happened to the price of oil and gas in a situation where speculators have taken over.

The Commodity Futures Trading Commission is a regulator of this market. It has done a miserable job. It has nearly all the authority it needs to do the right thing. What I propose to do with the Commodity Futures Trading Commission is wring the speculators out of this market. They have distorted the market, broken the market, and we end up in a situation now where the price of gasoline is devastating this economy. The price of oil is not justified by supply and demand. When that happens, there is a responsibility for this Congress to act. It is an urgent responsibility, in my judgment, now for this Congress to say what is happening is wrong, it is hurting this country's economy, it is hurting industries and the American people, and we need to do something about it. The best start, in my judgment, would be to pass this legislation I am introducing today.

One final point. I am reaching out to Democratic and Republican offices in the hopes that this will be a bipartisan piece of legislation that will address a very serious issue on an urgent basis and begin to do something that moderates the price of oil and gas that many experts have told us is 20, 30, and in some cases 40 percent above that which is justified by the marketplace. We should not stand for it. We do not have to. We ought to pass this legislation soon.

Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. President, we are on the bill having to do with homes and foreclosures. I want to speak on the bill, and then I would ask unanimous consent that I be allowed to speak thereafter as in morning business.

I will be offering an amendment which I think will be adopted or embraced, approved, cleared by both sides. It is a bipartisan amendment with Senator Coleman. It is to give some commonsense relief to homeowners who are trying to stay in their home while their home is under foreclosure.

If a homeowner is there and doesn't have any cash, the homeowner has fewer options of what to do if the bank is foreclosing on the home. But suppose the homeowner has a retirement fund, a private retirement fund, a 401(k) retirement fund. We have allowed, under current law, for the ability of a homeowner to take money out of that retirement fund, without paying the 10 percent penalty, to take it out of the retirement fund before retirement for

the purpose of purchasing a home. But if it is a homeowner with a home that is under foreclosure and they need cash, under current law, if their only source of cash is that retirement fund, in order to pull it out, they have to pay a 10-percent penalty. It seems it is common sense and the kind of public policy that we would want to adopt to give the homeowner the means of avoiding foreclosure by being able to tap into some of their cash in their retirement fund in order to save their home.

That is what the amendment is all about. It is simple. It waives the 10-percent penalty for folks wishing to make an early withdrawal from their retirement fund in order to avoid foreclosure.

We put some parameters, some boundaries around it so it cannot be abused. We say homeowners have to show they are participating in a government- or industry-sponsored foreclosure prevention program, such as the ones we are setting up in this bill, the HOPE NOW or the HOPE for Homeowners programs. Both of those are established in the bill before us today. That is one parameter. Another parameter is, we make this thing limited for 2 years so it will not go on and on. The foreclosure crisis is right now. We want to help homeowners stay in their homes. We limit it for 2 years.

The third parameter, we put a limit of $25,000 on what they can take out of their retirement fund. We are going to give that homeowner, once they take the money out and they save their home, the ability to put that money back into their retirement fund within a 3-year period and not have to pay income tax on that money. A normal retirement fund, you take money out of the fund, you will have to pay income tax on it. If the purpose is to get a ready source of cash to help them stay in their home under foreclosure, we want to give them that opportunity to get it back in their retirement fund and not have to pay income tax. They have to do that--another one of those parameters--within 3 years.

The cost is fully offset. I want to give an example. We all, from our States, get horror stories. I got one from a retired Air Force sergeant who lives in Stuart, FL. He recently lost his job and, in order to stay in his home, pay his mortgage, he liquidated his 401(k) savings and paid the 10-percent penalty. The bill we are considering today gives, in another provision, a tax credit for first-time homeowners to buy their first home. But unless we do it with this provision, we are going to penalize folks such as Wayne who didn't have any source of cash except his 401(k) in order to try to do his best to save his own home using his own money.

It is true that for most people, a home is the greatest single source of wealth. It seems to me it is common sense that we would have this narrowly defined, limited exception to allow homeowners to use every tool available within their power to stay in that home and not have it foreclosed. That is the amendment I will be offering at an appropriate time. I believe we have received clearance from Senator Grassley. I am trying to get clearance from Senator Baucus, then the two managers of the bill, and the Banking Committee, to get clearance from them.

Oil Futures

Why has oil hit, last week, $140 a barrel, and why is it, within the last couple days, somewhere in the high 130s? We have had testimony now from the president of Shell Oil Company. We have had testimony from an executive of ExxonMobil. The two respective testimonies say that under the normal marketplace for oil, a world marketplace of supply and demand, one of them testified oil ought to be at $55 a barrel, not $140, and the other one testified it ought to be somewhere between $35 and $65 a barrel, not $140. So why is it at $140?

It is true that little ``jitterations'' in the marketplace, any little minicrisis in any part of the world is going to send jitters into the financial marketplace. That is going to cause upward pressure. The fact is that China and India, of course, having so much consumption of oil, makes it tighter. But even so, with all that, they said it ought to be in the range of somewhere between $35 and $65 a barrel.

The reason it isn't is because 8 years ago, in the dead of night just before Christmas in the year 2000, the Senate, adjourning to go home, a provision was slipped into an unrelated bill that deregulated energy futures contracts. It was called the Enron loophole because it benefited Enron. We saw that a couple years thereafter in electricity contracts in California having been bid up and bid up and bid up, and that caused a great crisis that ultimately caused blackouts in California. Then, when Enron unraveled financially, we found out about that. But nothing was done to reregulate the agency, the Commodity Futures Trading Commission, the CFTC.

A lot of our colleagues here think we just reregulated them last Thursday night in the farm bill. But we only partially reregulated them when we passed the farm bill over the President's veto. What that was, was new power of the CFTC to go in on an ad hoc basis on an individual oil contract, with certain other limitations, to examine it and then determine if it wants to regulate it. I don't want to do that.

The bill I have filed--and I have Senator Dorgan, Senator Obama, and Senator Boxer as cosponsors--takes us back to the status quo before the Enron loophole was passed, which is the trading mechanisms attached to the United States have to be regulated if it is energy futures contracts. It is very simple. As a matter of fact, my bill is only two words. It inserts the words ``or energy'' in there to reregulate energy futures contracts.

What is regulating? That Commission would decide, for example, that they are going to require that if you are going to bid on these future contracts for oil, you are going to have to use that oil. It is people now who don't have any intention of using oil who go into these markets and speculate and bid up the price. It is believed that if we plugged this loophole, the price of gasoline will drop by half. That is pretty dramatic. Yesterday, the House of Representatives had testimony that the price of oil per barrel would drop by over half. That is pretty dramatic.

People are hurting. Every Senator knows that. Our people are hurting. This $4 gas is hurting our people financially. They are not able to make financial ends meet. So if we want to do something, we have to get to where we can do something about it.

Why did the price of oil futures jump $11 in 1 day? Do you know what the airline industry has told us? That 1-day jump of $11 a barrel cost the airline industry $4 billion extra. They can't survive like that. This is an entity we want to survive. They transport us about the country and the world. We can do something about it, if we have the political will.

This Senator is going to continue to pound on this issue to try to get the attention, and we are getting some heft, when Dorgan and Obama and Boxer all start signing up. It is a very elegant, very simple thing. You go back and plug the loophole that was unplugged back in December of 2000 and allow the Government to do what it ought to do by saying that the commodity exchanges have to regulate the trading of oil futures contracts.

I yield the floor and suggest the absence of a quorum.