Over-the-Counter Speculation Act

Mr. President, energy prices are on a roller coaster, taking American consumers and the American economy on an unpredictable, expensive, and damaging ride. Just over a year ago, a barrel of crude oil sold for $70 a barrel. In less than a year, the price doubled to nearly $147. Last week, that same barrel of oil cost $91, a price drop of $56 over a few months. Just in the past week crude oil prices have jumped from about $96 per barrel to $130 per barrel and then back to $106 per barrel. No one knows whether, by the end of the year, the price of oil will stay around $100, drop lower, or climb back up. The huge price spikes we experienced can't be explained by changes in supply and demand; about half the trading in oil futures results from speculation as to whether oil prices will rise or fall by traders without any interest in actually using the oil they are buying and selling.

The natural gas, gasoline, and heating oil markets have also seen huge price swings. The prices are up, they are down, they are unpredictable--making it impossible for many businesses and consumers to afford even basic goods and services.

The sky-high oil and gasoline prices in effect for the last year are taking a tremendous toll on millions of American consumers and businesses. Speculation--not supply and demand--is keeping prices high, and our economy is forced to respond to erratic price changes. Unless we act to protect our energy markets from excessive speculation and price manipulation, the American economy will continue to be vulnerable to wild price swings affecting the prices of transportation, food, manufacturing and everything in between, endangering the economic security of our people, our businesses, and our Nation.

Congress should act now to help tame rampant speculation and reinvigorate supply and demand as market forces.

Today, I am introducing legislation, along with Senators Bingaman and Harkin, that represents our collective effort to enact the strongest and most workable measures to prevent excessive speculation and price manipulation in U.S. energy markets. It will close the loopholes in our commodities laws that now impede the policing of U.S. energy trades on foreign exchanges and in the unregulated over-the-counter market. It will ensure that large commodity traders cannot use these markets to hide from CFTC oversight or avoid limits on speculation. The bill will strengthen disclosure, oversight, and enforcement in U.S. energy markets, restoring the financial oversight that is crucial to protect American consumers, American businesses, and the U.S. economy from further energy shocks.

More specifically, this legislation would make four sets of changes.

It will require the CFTC to set limits on the holdings of traders in all of the energy futures contracts traded on regulated exchanges to prevent traders from engaging in excessive speculation or price manipulation. Since we closed the Enron loophole this year all futures contracts must be traded in regulated markets.

It would close the ``London loophole'' by giving the CFTC the same authority to police traders in the United States who trade U.S. futures contracts on a foreign exchange and by requiring foreign exchanges that want to install trading terminals in the U.S. to impose comparable limits on speculative trading as the CFTC imposes on domestic exchanges to prevent excessive speculation and price manipulation.

It will close the ``swaps loophole'' by requiring traders in the over-the-counter energy markets to report large trades to the CFTC, and it would authorize the CFTC to set limits on trading in the presently unregulated over-the-counter markets to prevent excessive speculation and price manipulation.

It will require the CFTC to revise the standards that allow traders who use futures markets to hedge their holdings to exceed the speculation limits that apply to everyone else.

My Permanent Subcommittee on Investigations' investigations have shown that one key factor in price spikes of energy is increased speculation in the energy markets. Traders are trading contracts for future delivery of oil in record amounts, creating a demand for paper contracts that gets translated into increases in prices and increasing price volatility.

Much of this increase in trading of futures has been due to speculation. Speculators in the oil market do not intend to use oil; instead they buy and sell contracts for crude oil in the hope of making a profit from changing prices. According to the CFTC's data, the number of futures and options contracts held by speculators has gone from around 100,000 contracts in 2001, which was 20 percent of the total number of outstanding contracts, to almost 1.2 million contracts, which represents almost 40 percent of the outstanding futures and options contracts in oil on NYMEX Even this understates the increase in speculation, since the CFTC data classifies futures trading involving index funds as commercial trading rather than speculation, and the CFTC classifies all traders in commercial firms as commercial traders, regardless of whether any particular trader in that firm may in fact be speculating.

There is now, as a result, 12 times as many speculative holdings as there was in 2001, while holdings of nonspeculative or commercial futures and options is up but three times. The greater the demand there is to buy futures contracts for the delivery of a commodity, the higher the price will be for those futures contracts.

Not surprisingly, therefore, this massive speculation that the price of oil will increase, together with the increase in the amount of purchases of futures contracts, in fact, helped increase the price of oil to a level far above the price that is justified by the traditional forces of supply and demand.

In June 2006, I released a subcommittee report, ``The Role of Market Speculation in Rising Oil and Gas Prices: A Need to Put a Cop on the Beat.'' This report found that the traditional forces of supply and demand didn't account for sustained price increases and price volatility in the oil and gasoline markets. The report concluded that, in 2006, a growing number of trades of contracts for future delivery of oil occurred without regulatory oversight and that market speculation had contributed to rising oil and gasoline prices, perhaps accounting for $20 out of a then-priced $70 barrel of oil.

Oil industry executives and experts have arrived at a similar conclusion. Late last year, the President and CEO of Marathon Oil said, ``$100 oil isn't justified by the physical demand in the market. It has to be speculation on the futures market that is fueling this.'' Mr. Fadel Gheit, oil analyst for Oppenheimer and Company describes the oil market as ``a farce.'' ``The speculators have seized control and it's basically a free-for-all, a global gambling hall, and it won't shut down unless and until responsible governments step in.'' In January of this year, when oil first hit $100 per barrel, Mr. Tim Evans, oil analyst for Citigroup, wrote ``the larger supply and demand fundamentals do not support a further rise and are, in fact, more consistent with lower price levels.'' At the joint hearing on the effects of speculation we held last December, Dr. Edward Krapels, a financial market analyst, testified, ``Of course financial trading, speculation affects the price of oil because it affects the price of everything we trade. . . . It would be amazing if oil somehow escaped this effect.'' Dr. Krapels added that as a result of this speculation ``there is a bubble in oil prices.''

The need to control speculation is urgent. The presidents and CEOs of major U.S. airlines recently warned about the disastrous effects of rampant speculation on the airline industry. The CEOs stated ``normal market forces are being dangerously amplified by poorly regulated market speculation.'' The CEOs wrote, ``For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities.''

As to reining in speculation, the first step to take is to put a cop back on the beat in all our energy markets to prevent excessive speculation, price manipulation, and trading abuses.

With respect to the futures markets, the legislation we are introducing today requires the CFTC to establish limits on the amount of futures contracts any trader can hold. Currently, the CFTC allows the futures exchanges themselves to set these limits. This bill would require the CFTC to set these limits to prevent excessive speculation and price manipulation. It would preserve, however, the exchanges' obligation and ability to police their traders to ensure they remain below these limits.

This legislation would also require the CFTC to conduct a rulemaking to review and revise the criteria for allowing traders who are using the futures market to hedge their risks in a commodity to acquire holdings in excess of the limits on holdings for speculators.

Another step is to give the CFTC authority to prevent excessive speculation in the over-the-counter markets. In 2007, my Subcommittee issued a report on the effects of speculation in the energy markets, entitled ``Excessive Speculation in the Natural Gas Market.'' This investigation showed that speculation by a hedge fund named Amaranth distorted natural gas prices during the summer of 2006 and drove up prices for average consumers. The report demonstrated how Amaranth had shifted its speculative activity to unregulated markets, under the ``Enron loophole,'' to avoid the restrictions and oversight in the regulated markets, and how Amaranth's trading in the unregulated markets contributed to price increases.

Following this investigation, I introduced a bill, S. 2058, to close the Enron loophole and regulate the unregulated electronic energy markets. Working with Senators Feinstein and Snowe, and with the members of the Agriculture Committee in a bipartisan effort, we included an amendment to close the Enron loophole in the farm bill, which Congress passed this past spring, overriding a veto by President Bush.

The legislation to close the Enron loophole placed over-the-counter-- OTC--electronic exchanges under CFTC regulation. However, this legislation did not address the separate issue of trading in the rest of the OTC market, which includes bilateral trades through voice brokers, swap dealers, and direct party-to-party negotiations. In order to ensure there is a cop on the beat in all of the energy commodity markets, we need to address the rest of the OTC market as well.

Previously, I introduced legislation, S. 3255, along with Senator Feinstein, the Over-the-Counter Speculation Act, to address the rest of the OTC market not covered by the farm bill. A large portion of this OTC market consists of the trading of swaps relating to the price of a commodity. Generally, commodity swaps are contracts between two parties where one party pays a fixed price to another party in return for some type of payment at a future time depending on the price of a commodity. Because some of these swap instruments look very much like futures contracts--except that they do not call for the actual delivery of the commodity--there is concern that the price of these swaps that are traded in the unregulated OTC market could affect the price of the very similar futures contracts that are traded on the regulated futures markets. We don't yet know for sure that this is the case, or that it is not, because we don't have any access to comprehensive data or reporting on the trading of these swaps in the OTC market.

The legislation introduced today includes these same provisions to give the CFTC oversight authority to stop excessive speculation in the over-the-counter market. These provisions represent a practical, workable approach that will enable the CFTC to obtain key information about the OTC market to enable it to prevent excessive speculation and price manipulation. These

provisions are also included in the legislation introduced by the majority leader and others, S. 3268, to stop excessive speculation.

Under these provisions, the CFTC will have the authority to ensure that traders cannot avoid the CFTC reporting requirements by trading swaps in the unregulated OTC market instead of regulated exchanges. It will enable the CFTC to act, such as by requiring reductions in holdings of futures contracts or swaps, against traders with large positions in order to prevent excessive speculation or price manipulation regardless of whether the trader's position is on an exchange or in the OTC market.

The bill we are introducing today, unlike S. 3255, gives the CFTC the authority to establish position limits in the over-the-counter market for energy and agricultural commodities in order to prevent excessive speculation and price manipulation. The CFTC needs this authority to ensure that large traders are not using the over-the-counter markets to evade the position limits in the futures markets.

Earlier this year I introduced legislation with Senators Feinstein, Durbin, Dorgan and Bingaman, S.3129, to close the London loophole. This loophole has allowed crude oil traders in the U.S. to avoid the position limits that apply to trading on U.S. futures exchanges by directing their trades onto the ICE Futures Exchange in London. The legislation we introduced also was incorporated into the legislation to stop prevent excessive speculation introduced by the majority leader, S. 3268. These provisions are now included in the legislation we are introducing today.

After this legislation was first introduced, the CFTC imposed more stringent requirements upon the ICE Futures Exchange's operations in the United States--for the first time requiring the London exchange to impose and enforce comparable position limits in order to be allowed to keep its trading terminals in the United States. This is the very action our legislation called for. However, the current CFTC position limits apply only to the nearest futures contract. Our legislation will ensure that foreign exchanges with trading terminals in the U.S. will apply position limits to other futures contracts once the CFTC establishes those limits for U.S. exchanges.

Although the CFTC has taken these important steps that will go a long way towards closing the London loophole, Congress should still pass this legislation to make sure the London loophole stays closed. The legislation would put the conditions the CFTC has imposed upon the London exchange into statute, and ensure that the CFTC has clear authority to take action against any U.S. trader who is manipulating the price of a commodity or excessively speculating through the London exchange, including requiring that trader to reduce positions.

The legislation we are introducing today also includes a number of provisions in the majority leader's bill, S. 3248, that require a variety of studies, investigations, and reports designed to improve the transparency and regulation of the energy markets. It also provides authorization for the CFTC to hire an additional 100 employees to oversee the commodity markets it regulates.

On September 11, the CFTC issued a ``Staff Report on Commodity Swap Dealers and Index Traders with Commission Recommendations.'' The legislation we have introduced embodies several of the CFTC's recommendations to improve the transparency and regulation of swap dealers and commodity index traders. These recommendations include: develop and regularly publish reports on the activity of swap dealers and commodity index traders; more accurately assess the type of trading activity in the CFTC's weekly reports on commercial and noncommercial trading; review whether to eliminate the bona fide hedge exemption for swap dealers and create new limited risk management exemption; provide additional staff and resources for the CFTC.

Our legislation also is consistent with CFTC Commissioner Chilton's dissenting views on the CFTC's recommendations. In his dissent, Commissioner Chilton requested that Congress provide: ``specific statutory authorities to allow the Commission to obtain data regarding over-the-counter transactions that may impact exchange-traded markets; ``specific statutory authorities to allow the Commission to address market disturbances or violations of the Commodity Exchange Act, based on the data received regarding over-the-counter transactions;'' and authorization and appropriation for 100 additional employees.

Our bill provides the CFTC with the statutory authorities requested by Commissioner Chilton and authorizes the requested employees.

In summary, the legislation we are introducing today will give the CFTC ability to police all of our energy commodity markets to prevent excessive speculation and price manipulation. This legislation is necessary to close all of the loopholes in current law that permit speculators to avoid trading limits designed to prevent the type of excessive speculation that has been contributing to high energy prices. We hope our colleagues will support this legislation.

Mr. President, I ask unanimous consent that a bill summary be printed in the Record.

Mr. President, I support the Housing and Economic Recovery Act because it contains a number of provisions that will assist communities in Wisconsin and around the country as they continue to respond to the foreclosure crisis. Many housing analysts say that the foreclosure crisis and its drain on our economy could get worse before it gets better. With more than 2 million American families facing foreclosure, Congress must act both to help those Americans going through foreclosure now as well as to help prevent Americans from facing foreclosure in the future. While not perfect, this bill contains both reactive and proactive provisions that should help States, local communities, and American families as they deal with the foreclosure crisis and its effects on our Nation.

Last month, the Joint Center for Housing Studies at Harvard University released its annual report, ``The State of the Nation's Housing.'' This report looks at a variety of housing statistics, including figures related to affordability issues and foreclosures. The report indicates just how grim the housing situation in our country is right now. According to the report, ``the number of homes in foreclosure proceedings nearly doubled by almost one million by the end of 2007.'' While the foreclosure rate in my State of Wisconsin is not as high as in other parts of the country, Wisconsin's foreclosure rate also continues to grow. The Milwaukee Journal Sentinel has compared foreclosure rates in 2008 and 2007 and reported that for the first half of this year, the foreclosure rate in Milwaukee County increased by over 40 percent when contrasted with 2007's foreclosure rate. Additionally, the Capital Times recently reported about the substantial increase in foreclosures throughout Wisconsin over the past few years, noting that ``foreclosures have more than doubled from 2005 to 2008.'' I also continue to hear from housing advocates about the individual families' stories behind these foreclosure statistics and about the rising number of foreclosures in urban, rural, and suburban parts of Wisconsin. With foreclosures continuing to rise, Congress has a duty to act. Although there are provisions in this bill that I have serious concerns about and hope to see changed, on balance, this housing package represents a step in the right direction.

Last month's report from the Joint Center for Housing Studies at Harvard also highlights the problem of affordability of housing and notes that there are over 17 million families whose housing costs consume more than half their income. I continue to hear about the lack of affordable housing, both for renters and homeowners throughout Wisconsin. Some housing analysts have also said that the lack of affordable housing helped to contribute to the growth in subprime lending and nontraditional mortgage products in recent years as families increasingly struggled to meet rising housing costs. I am pleased that this Senate bill addresses the lack of affordable housing in this country by creating a housing trust fund financed by resources from the Government-sponsored enterprises, Fannie Mae and Freddie Mac. Over the past few years, I have heard from a number of housing advocates throughout the State of Wisconsin about the need to create a national affordable housing trust fund to supplement the affordable housing work that is going on at the local, city, and State level. Hundreds of affordable housing trust funds have been created throughout the country, including in the city of Milwaukee, and help finance the rehabilitation, production, and preservation of affordable housing. These trust funds not only create affordable housing, but they can also create good-paying jobs and help bring stability to our communities.

In the fall of 2006, I introduced the Affordable Housing Expansion and Public Safety Act, which among other things called on Congress to create a national affordable housing trust fund with the goal of supplying affordable housing units and sufficient income targeting to address the housing affordability burdens faced by extremely low-income and very low-income families. I am pleased this legislation we are considering takes the first steps toward the creation of a national housing trust fund and contains deep income targeting to benefit extremely low-income and very low-income families. Research shows that these families often face the most severe housing cost burdens and have a difficult time finding affordable housing whether they live in urban, suburban, or rural communities. I commend Senators Reed and Dodd for working to ensure this provision was included in the legislation and I hope that the final housing package sent to the President will retain this provision.

I have also heard from advocates in Wisconsin in strong support of the nearly $4 billion that is included in CDBG funding to States and local communities hard hit by the housing crisis. These funds can be used to buy and redevelop foreclosed upon homes with the intention to sell, rent, or redevelop these homes. This provision was also included in the Senate Foreclosure Prevention Act that this body passed in April of this year and, at that time, I noted that the flexibility of the CDBG program will allow States and local communities to use this funding in a way that best fits the indiviaual needs of their States and communities. I am

pleased that the Housing and Economic Recovery Act retains the requirement that 25 percent of the CDBG funds included in this bill be used to redevelop foreclosed homes for families or individuals whose income is at 50 percent of the area median income or less. This targeting will help ensure that those most in need are not left out of the Federal assistance provided in this legislation. I am disappointed that the President has issued a veto threat over this provision of the legislation given its broad support from housing advocates and State and local governments.

This provision would provide much needed assistance for a number of States, including Wisconsin. According to the Center for American Progress, the CDBG funds in the bill will bring Wisconsin $57.2 million in direct funds for housing assistance and restore over 1,815 properties. The Senate has designated this funding as emergency funding, and while I would prefer to see this CDBG funding fully offset, this critical funding is needed in our communities now. The Senate will soon be sending this bill back to the House of Representatives, and I urge my colleagues in the other body to offset this CDBG funding rather than strike it out of this package entirely.

I also support the provisions in this bill providing increased funding for mortgage counseling programs as well as provisions that enhance mortgage disclosure requirements. These provisions were also included as part of the Senate Foreclosure Prevention Act that this body passed in April, and I am pleased the provisions were kept in as part of this current package. Reports indicate that the mortgage counseling dollars are a cost-effective use of Federal dollars and increased funding will provide even more families with the necessary assistance to try to reach workable solutions with their lenders in order to remain in their homes. The enhanced mortgage disclosure requirements included in this legislation will help future borrowers who are taking out their first mortgage or refinancing their existing mortgages better understand the terms of their loans and how much they can expect to pay every month. There are a number of reports indicating that some borrowers were misled into troublesome loan products and these enhanced disclosures will help to prevent some of these egregious practices from happening in the future.

This legislation also contains a regulatory overhaul of the Government Sponsored Enterprises, Fannie Mae and Freddie Mac, as well as the Federal Home Loan Bank system. Congress has been working to overhaul the regulatory structure of Fannie Mae and Freddie Mac for years in response to the accounting scandals at the two GSEs in 2003 and 2004. This legislation creates a single regulator for the GSEs that will help to oversee the stability of the GSEs, including setting up management standards for Fannie Mae and Freddie Mac. More effective oversight of the GSEs is needed and should this legislation be enacted, Congress must closely follow the implementation of these substantial GSE reforms to ensure the reforms are effective.

This comprehensive housing package includes the FHA Modernization Act which has already passed the Senate twice--once as a stand-alone bill in December of last year and earlier this year as part of the Senate Foreclosure Prevention Act. The Federal Housing Administration is an important Federal agency providing expanded access to the housing market for homeowners by offering mortgage insurance to families throughout the country. There is bipartisan support for modernizing the FHA to help the agency better assist homeowners in today's housing market. As with the GSE reforms contained in this bill, I will monitor the implementation of the FHA reforms to ensure that these reforms truly benefit low-income and middle-income homeowners who are the very homeowners the FHA and the GSEs are supposed to serve as part of their affordability missions.

Another piece of this legislation is the Hope for Homeowners Act, which will establish a new Federal Housing Administration program that will allow homeowners facing foreclosure to refinance their mortgages into an FHA-insured mortgage. It is important to note that this voluntary program is not permanent and contains a sunset ending the program in 2011. While this program is certainly not perfect, the Congressional Budget Office has estimated that the program could help 400,000 of the over 2 million homeowners facing foreclosure stay in their homes. This program should be given a chance to work with careful oversight from Congress, the FHA, and HUD to ensure that borrowers and lenders are not taking advantage of the program. The Hope for Homeowners program contains a number of provisions to help ensure that the program is targeted to borrowers facing foreclosure, rather than speculators who gambled on the housing market. For example, the borrower has to certify to the Federal Government that he or she has not defaulted on his or her mortgage intentionally or provided untrue information to obtain a mortgage. The legislation also specifies that the Hope for Homeowners program is only available to mortgages that cover an owner-occupied primary residence, and not speculators who own multiple homes. Lenders will also have to agree to write down the value of the existing mortgages to be no more than 90 percent of the current value of the property. Finally, the borrowers will have to share any future equity and appreciation in their homes with the Federal Government if the borrower decides to sell his or her home or refinance his or her mortgage.

This bill is not perfect. I have some concerns related to certain provisions in the bill that I hope can be addressed in ongoing negotiations with the House of Representatives.

For example, I am disappointed that this bill does not include Senator Durbin's legislation which would have removed a provision in bankruptcy law that prevents mortgages on primary residences from being modified during bankruptcy. According to advocates, the Durbin legislation could help approximately 600,000 individuals or families remain in their homes. We tried to pass this legislation as an amendment to the Senate Foreclosure Prevention Act in April, but, unfortunately, the amendment met with stiff resistance in the lending community. Due to the complex nature of the foreclosure problem, we need to enact a wide range of legislative proposals to help families facing foreclosure, and the Durbin legislation is an important part of any legislative response. I voted for Senator Durbin's stand-alone legislation in the Judiciary Committee, and I hope the Senate can move this proposal forward in the coming weeks and months.

We also need to address predatory lending practices that have taken place around the country and ensure that such abuses are not repeated. Senator Dodd has introduced a predatory lending bill that should serve as the foundation for comprehensive predatory lending legislation. Predatory lending practices and abusive subprime lending practices have contributed to one of the most significant challenges to our national economy in years and in order to more effectively address these challenges, Congress should pass predatory lending legislation this year.

As foreclosure rates continue to grow in Wisconsin and around the country, Congress must address the problems associated with increased foreclosures. Subprime lending and rising foreclosure rates are complicated issues to unravel and any response, whether legislative or regulatory, will bring with it a set of consequences, some intended and some unintended. As this legislation moves forward, Congress and the relevant Federal agencies must monitor its effects and consider whether modifications are necessary. This package of reforms and new programs will likely not correct all of the subprime and foreclosure problems our country continues to face. But a number of the provisions in this bill will provide some help for families, local communities, and States as our country continues to respond to these serious housing issues, and I hope the House will pass and the President will sign this bill into law quickly.

Mr. President, I wish to take a few moments to talk about the Air Force's KC-X tanker competition. There was a House hearing on that matter this week, and a number of our colleagues have spoken on it. I have discussed it on the floor a couple of times.

As you will remember, that contract was awarded to the Northrop/EADS team back in February, after a competition that the Air Force adjudicated. That team--the Northrop/EADS team--plans to build a new tanker, which our military desperately needs, in my hometown of Mobile, AL. It is important to the people of Alabama, and they are watching it very closely.

However, Boeing objected to the decision. They protested. They cited 100 concerns with the Air Force's award--more than 100. The Government Accountability Office, whose duty is to review such complaints, did so and concluded that out of the 100-plus complaints, only eight elements of the protest had merit. So it was then up to the Department of Defense, after the GAO report was issued, to decide how it would address GAO's concerns. That is the way the system works, and every bidder has that opportunity. The DOD was not legally bound to accept or acknowledge these criticisms. They legally could have gone forward with the process and affirmed their own decision and gone forward with it. However, Secretary Gates considered the matter carefully. He announced that in order to ensure this selection process is totally fair, transparent, and beyond reproach, that the Secretary would order a ``limited recompetition'' of the contract. This new competition will be

personally overseen, he said, by the Under Secretary of Defense for Acquisition, Technology, and Logistics, Mr. John Young, and Mr. Young will be advised by a completely new Source Selection Advisory Committee.

Secretary Gates announced he will amend the original solicitation and allow both Boeing and Northrop Grumman to submit revised bids. The amended contract will address each of the eight complaints that were upheld by GAO. Wisely, I think, it ignored the extraneous issues that some have raised over the past few months, such as WTO disputes or industrial base matters.

So let me repeat, each of the concerns raised by the GAO would be addressed, but political considerations here in Washington, the Secretary said, will not affect this process.

So as the Secretary said in his press conference yesterday:

Industry, the Congress and the American people all must

have confidence in the integrity of this acquisitions

process. I believe the revised process will result in the

best tanker for the Air Force at the best price for the

American taxpayer.

I think that is what Congress asked of him, and that is what he has committed to do.

The GAO affirmed the Secretary's decision yesterday in testimony before the House Armed Services Committee. Daniel Gordon, the Deputy General Counsel for the GAO--I think he headed the team or supervised the team at GAO--said that, based on the Department of Defense press conference earlier this week, ``it certainly sounded to me like Secretary Gates was acting in good faith to implement the recommendations'' made by the GAO. This expedited process, it is hoped, can lead to a new source selection soon.

There are some additional points I wish to make to respond to those who say the GAO's decision suggests a preference for one aircraft--for the Boeing aircraft. In other words, some have contended that their decision indicated that GAO was suggesting that a wrong decision was made. Others have suggested that this report should, therefore, invite the Congress to somehow take over this competition, which I submit would be unprecedented and unwise since we are not aircraft engineers, we are not pilots, we are not responsible for managing these aircraft, nor are we capable of making the final decision about which aircraft is the best.

So I would make these points: No. 1, the GAO did not say Boeing should have won the competition at all, nor did it say the award should now be sole-sourced to Boeing or any other contractor. GAO said clearly when they released their decision:

Our decision should not be read to reflect a view as to the

merits of the firm's respective aircraft. Judgments about

which offeror will most successfully meet the governmental

needs largely is reserved for the procuring agencies, subject

only to such statutory and regulatory requirements as full

and open competition and fairness to potential offerors.

This point was reinforced yesterday in testimony before the House Armed Services Committee by Mr. Daniel Gordon, who is the deputy general counsel for the GAO:

We found serious errors in the procurement process that

could have affected the outcome of, again, what was a close

competition. But our legal decision does not say anything

about the merits of the Boeing's or Northrop's proposed

tankers.

Point 2: When it comes to capability, the Northrop Grumman plane is still the superior choice for our warfighters, I would submit, based on the analysis, and I would make these points--ultimately, that would have to be decided by the professionals, not this Senator.

I would just make these points as a push-back to some of the comments my colleagues have raised. First, I would note that the A330, the Northrop aircraft frame, is a more modern airframe than the Boeing 767. The first 767 flew in 1982. The A330 was first built in 1998, some 16 years later. It is a much more modern airframe.

No. 2: I would note that no one disputes that the A330 can carry and offload more fuel, the primary job of a refueling tanker. The Air Force judged that one Northrop plane could do more refueling more efficiently than one Boeing plane, and the GAO upheld that finding.

The GAO did criticize the Air Force for giving Northrop ``extra credit'' for their superior refueling capability. However, they noted that this extra credit was not in keeping with--in a legal sense--the language of the original request for proposal. They did not say the Air Force shouldn't place a premium on refueling capability. Mr. Gordon of GAO said yesterday:

There was an objective. Northrop exceeded it by quite a bit

and Northrop got all the extra credit. We have no opinion, we

have no view on whether it was a good idea.

Well, I would suggest that giving a refueling tanker credit for its refueling capability would seem like a good idea to me, if the Air Force wants the best aircraft for their men and women in uniform.

Further, I would note that in addition to carrying more fuel, the GAO also agreed with the Air Force and their finding that the larger boom envelope of the Northrop KC-45 would make it easier and safer for pilots to refuel.

In addition, because the A330 is a more capable refueler than the 767, the Air Force predicts they will ultimately have to buy 22 fewer aircraft if they go with the Northrop team. At today's prices, the sticker price of 22 aircraft is $4.3 billion. That is without factoring in manning those aircraft and maintaining them over the years.

The GAO acknowledged in their report and in their testimony yesterday that the A330 can carry more cargo, more personnel, and conduct more aeromedical evaluations. They said:

We see no basis to conclude that the Air Force's evaluation

that Northrop Grumman's aircraft was more advantageous in the

airlift area is unreasonable.

The GAO further found no fault with the Air Force's conclusion that the Boeing proposal was more risky in certain areas and that their past performance on--by the Boeing team--on similar contracts was ``marginal.''

So what did the GAO ultimately say about the Air Force's decision? They certainly said the decision was flawed from a procedural perspective, but they also said the Air Force picked a plane that could carry and offload more fuel more efficiently and in a more desirable way for pilots.

The main fuselage compartment of the aircraft is not where the fuel is stored. It is in the wings. So these aircraft have a tremendous capability of helping airlift personnel and equipment to a distant battlefield. They found that the plane's secondary mission--airlift-- could be accomplished more effectively by the Northrop aircraft.

Finally, the GAO agreed that the Northrop plane was lower risk and that Boeing had marginal past performance.

Point 3: We need to maintain a fair and competitive process. The fact that we chose to compete this contract--that Congress ordered a competition for this aircraft--directed it rather than sole-sourcing it to Boeing or any other company, as some would have preferred, has been hugely beneficial to our military and to our taxpayer. Boeing's preferred sole-source leasing plan or scheme that got through this Congress, or this Senate, would have had us leasing 100 767s for $23.5 billion. So we would lease them for $23.5 billion, or $235 million a copy.

Now, thanks to this very competitive and aggressively conducted bid competition, thanks to fair and transparent procedures, the military is going to own 179 superior aircraft for $35 billion, or $195 million a copy. That is a win for the taxpayers and a win for the military.

As Secretary Young said yesterday in his testimony before the House Armed Services Committee:

I see no benefit, in my experience across the acquisition

enterprise, setting this aside. Sole sources limit our

flexibility in negotiating prices. We achieve the best value

through a competitive source selection of a single source who

has bid in a competitive environment and offered us hopefully

an excellent deal.

So these words should induce caution in those of my colleagues and some of our Senators who have introduced legislation that would, in effect, sole-source this contract to Boeing. The result would be inferior planes for our military and clearly inflated costs for the taxpayers.

As important as the principle that we should have a competitive process for defense contracts is the principle that the military ultimately--and not the

Congress--should be in charge of making meritorious, objective, and fair decisions on who should be the winner of a contract.

As Secretary Young said yesterday in his testimony:

Grounded in the warfighter's requirements and the pursuit

of the best value for the taxpayer, the Defense Department is

the only organization that can fairly and knowledgeably

conduct this competition . . .

Isn't that true?

. . . The Defense Department does not care which tanker

wins the competition. The Defense Department's sole objective

is to get the required capability for the men and women who

serve this Nation at the best price for the taxpayer.

I certainly think that is correct. I certainly think that is correct.

I will conclude by saying, after the collapse and quite a bit of embarrassment and actual criminal prosecutions of the sole-source lease plan that occurred--and we are all aware of how that occurred--Congress required a competition. By definition, a competition assumes that there will be bidders, and there are only two potential bidders in the world for this kind of aircraft. And if you are going to have a competition, it needs to be fair. Both bids should be objectively evaluated on the merits of the product they have offered. If that is so, I think the American taxpayer will be the winner in the end. I will just say to my colleagues, I have advice. I believe the Northrop team presented the best aircraft, but I don't know. I am not an expert. So I would urge my colleagues to resist any political pressures that might be brought to bear or interests that they may have in infecting this process with politics. Let's let them make the best decision. That is what I have said from the beginning, and that is what I have said throughout this process. That is what I believe is the only right position we can take.

I thank the Chair and yield the floor.

Job Training

Mr. President, later this afternoon the Senate will be voting on two measures. One is the housing bill. We have been working on it for months. The object behind this bill is to find some relief for the thousands of people who will lose their homes today and every day.

About 7,500 Americans will have their homes foreclosed on today, and that has been repeated over and over. We are reaching a housing crisis in this country. It not only affects those who are losing their homes; it affects those of us who live nearby who make our mortgage payments and watch the value of our homes go down because somebody in the neighborhood lost their home, had to put it up for auction, sold it at less than what they wanted to just to get out of the deal. So we need to do something about this housing crisis, not just for the good of those families affected by foreclosure and those living nearby but for the housing industry, which is an important part of our economy.

This housing bill has been around for several weeks. This week alone we had two Republican filibusters slowing down this bill. If there has ever been a time when we shouldn't slow down, when we should move forward with dispatch, it is now. With the state of our economy, with the number of people unemployed, with the costs that a lot of families are facing, this Senate ought to put politics behind, stop these filibusters, move these bills forward, and give our best efforts to try to solve some of the problems facing our country.

The second bill we are going to be voting on is called the PEPFAR bill. This is a bill which relates to a program announced by President Bush.

Now I am on the Democratic side of the aisle. I have sure had my differences with President Bush. However, I can remember his State of the Union Address when he stood up and said: I think the United States should lead the world in fighting the global HIV/AIDS epidemic. I jumped out of my seat to applaud because he was right. I supported the President every year when he came in asking for more money so we could work around the world to deal with the scourge of HIV/AIDS, tuberculosis, and malaria. After the first 5 years, the President came back and said: We need a new program, one that takes into account what we are doing around the world and what we need to do in the future. I think he was right.

We basically had two programs going at once, and we were participating more in one--the PEPFAR Program--which was the President's emergency program to deal with this problem. It was the direct aid of the United States to countries around the world--some 15 different countries--where we provide assistance in dealing with HIV/ AIDS, tuberculosis, and malaria. There is a separate endeavor called the Global Fund, and that really engages the whole world and the rest of the world. We participate in that too. We are part of it.

A lot of people may say: Well, with all of the problems in the United States, why are we spending all of this money overseas? It turns out to be a small fraction of our budget but a very important investment. First, that money spent defines who we are. America is a caring nation. When we read about tragedies around the world, whether it is a hurricane or an earthquake or some other disaster, our people rally to help.

We always have. I am proud of that. I think it says a lot about who we are. There are a lot of people trying to paint an image of America around the world that is very negative, an image most of us here don't even recognize. For a lot of people in the world, all they ever hear is bad news about the United States.

This is part of the good news about the United States. President Bush's initiative to deal with the global AIDS crisis is the right thing to do. It explains who we are and what American values are. It brings the expertise we have in our country to other countries around the world who are, frankly, struggling with a very slow economy or backward economy, and a lot of people are in trouble.

When I first went to Africa a number of years ago, I wasn't looking for a global AIDS epidemic, but I could not avoid it. In every country there I visited, I would see more and more people who were doomed to die because they had been infected--young people, mothers and fathers with children by their side, who knew death was the ultimate result of this disease. There was no place for them to turn. At that point, there weren't any drugs--at least not available to these poor countries. All they were doing was trying to keep people as strong as they could for as long as they could to avoid the fatal onset of these diseases.

Things have changed. They have changed because of the PEPFAR program of President Bush, the global fund program. We are taking therapies now and medications that have kept Americans infected with HIV alive for so many years and sharing them with countries around the world. President Bush comes before us now with this proposal, S. 2731, which wants to reauthorize the global AIDS program. I think it is a good idea. I am a cosponsor. It is a bipartisan bill, led by Senator Biden, a Democrat from Delaware, and Senator Lugar, a Republican from Indiana. It is a bipartisan bill. This bill has been stopped on the floor of the Senate for months. A handful of Senators don't want this bill to move forward for a variety of reasons. If they disagree with this bill, if there is something they wish to change, let them offer an amendment about the bill.

But it turns out, yesterday, when we confronted these Senators and said: What is your problem? What is the amendment you want to offer, they want to offer amendments that have nothing to do with the global AIDS crisis, nothing to do with this bill. That, to me, is unnecessary and unfortunate. We are delaying the passage of this important lifesaving legislation so some Senators can offer amendments that have nothing to do with the subject matter.

I hope they will reconsider. In fact, the Senate being in session this late on a Friday is unusual. We are usually back home by now. But we are here, having spent the whole day waiting for a vote at about 5:20 because one particular Senator--Senator DeMint of South Carolina-- objected to moving forward with the vote on this bill either this morning or on Monday. So 100 Senators--at least those of us who are still here--wait patiently for this vote and hope to get home to our families this evening or maybe even tomorrow. I hope we pass the bill. We need 60 votes to do it. If all Senators are present, there are 51 Democrats and 49 Republicans. Even with all the Democrats supporting the President, we need nine Republicans to make this a bipartisan bill, and we should.

The Presiding Officer, Senator Brown of Ohio, has focused a large part of his congressional career in the House and in the Senate on the issue of tuberculosis. He has traveled all around the world and has seen the scourge of the disease and what it has meant to these different nations. We can treat it effectively. If we fail to treat it effectively, it can get complicated and very challenging--this multidrug-resistant tuberculosis, which we read about in the newspapers once in a while and is extremely difficult to treat.

If a person in a developing country is developing tuberculosis, and we can spot it and treat them with very low-cost medicine immediately, we can cure it. If we fail, their condition can worsen and the disease can worsen and more people can be subject to it.

We don't live in a world where public health problems are isolated. The public health problem in Africa today could be the same public health problem in America 2 weeks from now. All it takes is an airplane ride. We have seen that happen before. So when we treat these diseases overseas, we are not only speaking of our values and who we are, we are doing something that is right when it comes to the area of public health.

Critics of the bill have said it goes too far. Let me give you one illustration. They argue, for example, we should not be including in this bill--directed at HIV/AIDS, tuberculosis, and malaria--nutrition programs. They are wrong. I went to an area of Nairobi, Kenya. It is a slum area, where about 600,000 people are living in very abject circumstances. It is called Canberra. If you saw the movie ``The Constant Gardener,'' I believe it was broadcast--or at least filmed in this slum. They have all the problems you can imagine--public diseases and health problems. Of course, HIV/AIDS and tuberculosis are found in this slum area. They took me to a section on the outskirts where there were mothers with small children, families. The kids were playing in this courtyard-like area and the

mothers were sitting on benches. Most of the mothers looked like they were about to die. I said: Why didn't these mothers, who are suffering from HIV/AIDS, get the drugs they need? They said: Well, they did. Unfortunately, these mothers were suffering from malnutrition. They don't have enough food. They give the food to the kids. Because they don't have enough food to eat, the drugs cannot work. Their systems are so compromised because of their weakness and malnutrition that the drugs don't work.

So to say we are going to send drugs to that slum in Nairobi, Kenya, to cure HIV/AIDS but not food to feed the patients is self-defeating. We would not achieve our goal of saving lives and giving those kids the parents they need for the rest of their lives. A nutrition program is an important part of this effort.

I hope this bill will pass this afternoon, or at least move forward, but we need 60 votes for that to happen. We have to come together and put politics aside. I hope those who wish to offer a variety of amendments relating to other things, and not directly to global AIDS and HIV, will save those battles for another day. I want them to save those battles because that mother in Nairobi is fighting a battle right now; she needs our help. President Bush understands that. Senator Lugar, a Republican leader, understands that, Senator Biden understands that, and the Senate should too.

It is, to me, a bit embarrassing that we have waited this long to bring up this bill of such critical importance to so many millions of people around the world. It is our chance this afternoon to do what is right and move it forward. The sacrifice we have made to stick around and not be with our families this evening, as we hoped to be, is worth it if, at the end of the day, we can pass this important motion, move the legislation forward for a vote early next week.

I salute the occupant of the chair for his leadership on the issues of tuberculosis and many other areas of public health. I know you feel this is the right thing to do. A small investment now can make a big difference in lives around the world. I hope our colleagues will share that view this afternoon when we vote on the motion to proceed to this bill, which is President Bush's plan to deal with the global AIDS crisis.

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

I announce that the Senator from California (Mrs. Boxer), the Senator from Massachusetts (Mr. Kennedy), the Senator from Louisiana (Ms. Landrieu), the Senator from Vermont (Mr. Leahy), the Senator from Missouri (Mrs. McCaskill), the Senator from Washington (Mrs. Murray), the Senator from Nebraska (Mr. Nelson), the Senator from Illinois (Mr. Obama), the Senator from Michigan (Ms. Stabenow), and the Senator from Montana (Mr. Tester) are necessarily absent.

I further announce that if present and voting, the Senator from Vermont (Mr. Leahy) would vote ``yea.''

Mr. President, today I am introducing, along with Senator Feinstein, the Over-the-Counter Speculation Act. This legislation will provide the Commodity Futures Trading Commission, CFTC, with the ability to detect and prevent price manipulation and excessive speculation. In the currently unregulated over-the-counter commodity markets, this legislation will close a major loophole in our commodities laws that prevents the CFTC from conducting oversight in certain enforcement activities and obtaining information about trading in the unregulated over-the-counter market. It will ensure that large energy and other commodity traders cannot use the over-the-counter market to hide from the CFTC, escape reporting requirements, or avoid CFTC enforcement authorities to require traders to reduce their holdings of futures contracts in order to prevent manipulation or excessive speculation.

This legislation is based on the work of the Permanent Subcommittee on Investigations, which I chair, regarding effect of speculation on rising energy prices. In 2006, the PSI study, called ``The Role of Market Speculation in Rising Oil and Gas Prices: A Need to Put the Cop Back on the Beat,'' found the following:

First, over the past few years, speculators have dramatically increased their activities in U.S. energy commodity markets. Second, speculation has contributed to rising U.S. energy prices.

The 2006 report estimated that this increased speculation, particularly through commodity index funds, had contributed about $20 to the price of a barrel of oil which was then about $70, or roughly 25 to 30 percent of the price. The 2006 PSI report also found that CFTC access to daily reports of large trades of energy commodities is essential to its ability to detect and deter price manipulation. It recommended that Congress require reports of large trades on over-the- counter electronic exchanges. The 2006 report also recommended that Congress eliminate the Enron loophole to put the cop back on the beat in the over-the-counter electronic markets. Since the 2006 PSI report, the amount of speculation has increased significantly and so have energy prices. In 2006, there was about $60 billion invested in commodity index funds. Today there is over $200 billion. Since 2000, there has been nearly a 1200-percent increase in the amount of speculative trading compared to only a 200-percent increase in the commercial trading world. Even this understates the increase in speculation, since the CFTC data classifies futures trading involving index funds as commercial trading rather than speculation. A large amount of speculative trading is taking place in the unregulated over- the-counter market. Many market experts believe this huge increase in speculation in recent years has boosted oil prices.

Last fall, as oil prices were nearing $100 a barrel--$40 a barrel lower than they are today--the president and CEO of Marathon Oil said:

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

market. It has to be speculation on the futures market that

is fueling this.

Mr. Fadel Gheit, an oil analyst for Oppenheimer and Company, describes the oil market as ``a farce.''

The speculators have seized control and it's basically a

free-for-all, a global gambling hall, and it won't shut down

unless and until responsible governments step in.

In January of this year, as oil hit $100 a barrel, Tim Evans, oil analyst for Citigroup, wrote:

The larger supply and demand fundamentals do not support a

further rise and are, in fact, more consistent with lower

price levels.

That is when oil was at $100 a barrel.

At the joint hearing of my PSI Subcommittee and Senator Dorgan's Energy Subcommittee last December, Dr. Edward Krapels, a financial market analyst, testified:

Of course financial trading, speculation affects the price

of oil because it affects the price of everything we trade .

. . It would be amazing if oil somehow escaped this effect.

He said that as a result of this speculation:

There is a bubble in oil prices.

There is some concern that some large traders may be avoiding the limits on holdings and accountability levels that apply to trading on the futures exchanges by trading in the unregulated over-the-counter market. In the absence of data or reporting on the activity in the over-the-counter market, it is difficult to estimate specifically the specific impact of this large amount of unregulated trading on commodity prices. Moreover, even if we were to get better information about unregulated over-the-counter trades, the CFTC has no authority to take action to prevent price manipulation or excessive speculation resulting from this unregulated trading.

The need to control this speculation is urgent. Only yesterday the presidents and CEOs of major U.S. airlines warned about the disastrous effects of rampant speculation on the airline industry. The CEOs stated:

Normal market forces are being dangerously amplified by

poorly regulated market speculation.

They further stated:

Twenty years ago, 21 percent of oil contracts were

purchased by speculators who trade oil on paper with no

intention of ever taking delivery. Today, oil speculators

purchase 66 percent of all oil futures contracts, and that

reflects just the transactions that are known.

So it has gone up from 21 percent purchased by speculators on these oil contracts, these futures, to 66 percent during this period, and that, again, excludes some of the transactions.

The CEOs wrote that:

For airlines, ultra-expensive fuel means thousands of lost

jobs and severe reductions in air service to both large and

small communities.

Earlier this year, Congress included legislation on the farm bill that closed the Enron loophole. This legislation closed one of the major regulatory gaps identified in the 2006 PSI report and then again in the 2007 PSI report on how a single hedge fund named Amaranth distorted natural gas prices through, in part, using the over-the- counter electronic exchanges that were not regulated under the Enron loophole.

The legislation to close the Enron loophole placed over-the- counter electronic exchanges under CFTC regulation. However, that legislation did not address the separate issue of trading in the rest of the over- the-counter market, which includes bilateral trades through voice brokers, swap dealers, and direct party-to-party negotiations. The legislation we are introducing today builds on that previous legislation and addresses the rest of the over-the-counter market.

Additionally, I have already introduced legislation with Senators Feinstein, Durbin, Dorgan, and Bingaman, S. 3129, to close the ``London loophole.'' This loophole has allowed crude oil dealers in the United States to avoid the position limits--limits on their holdings--that apply to trading on U.S. futures exchanges by simply directing their trades onto the ICE Futures Exchange in London. The legislation we have introduced has been incorporated into legislation introduced by Senator Durbin, S. 3130, which also would give the CFTC more resources and enable them to better obtain information about index trading and the swaps market.

After these two bills were introduced, the CFTC imposed more stringent requirements upon the ICE Future Exchange's operations in the United

States, and for the first time the London exchange imposed comparable position limits in order to be allowed to keep its trading terminals in the United States. This is the very action our legislation called for.

However, although the CFTC took those important steps that will go a long way toward closing the London loophole, Congress still needs to pass the legislation to make sure the London loophole is closed. The legislation would put the conditions the CFTC has imposed upon the London exchange into statute, and ensure that the CFTC has clear authority to take action against any U.S. trader who is manipulating the price of a commodity or excessively speculating through the London exchange, including requiring traders to reduce positions.

There are additional steps that need to be taken to address the issue of ensuring that increasing speculation in our commodity markets is not driving up commodity prices.

The legislation we are introducing today is a practical, workable approach that will enable the CFTC to obtain key information about the over-the-counter market to enable it to prevent manipulation and excessive speculation. It will provide the CFTC with the authority to take action in the over-the-counter market to prevent excessive speculation and price manipulation, such as by requiring large traders to reduce their holdings of futures contracts. It enables the CFTC to obtain information on large trades in the over-the-counter market so it can determine whether any trader or class of traders has excessive holdings that may affect market prices, and whether such positions should be reduced.

This legislation will ensure that large traders cannot avoid the CFTC reporting requirements by using the unregulated over-the-counter market instead of the regulated exchanges. It will ensure that the CFTC can take appropriate action, such as by requiring reductions in holdings of futures contracts against traders with large positions in order to prevent price manipulation or excessive speculation, regardless of whether the trader's position is on an exchange or in the over-the- counter market.

The approach in this bill is practical and workable. I thank Senator Feinstein for her important support of this legislation.

Mr. President, I ask unanimous consent, that a summary of the bill be printed in the Record.