After the Commodity Futures Trading Commission voted to impose position limits on commodity speculators, the emails started whizzing into my inbox. Since the vote fell strictly along party lines, you’d think the left-leaning emailers would be full of praise for the plan, while the right chagrined. But you would be wrong.

There are basically two Senators who have followed this rule the most: Bernie Sanders and Maria Cantwell. Here’s what Sanders said: “Under this rule, a single Wall Street speculator will still be allowed to hold positions equal to 25 percent of the physically deliverable supply of crude oil, gasoline, and heating oil. That’s not enough.” If anything, Cantwell was more bracing:

“Last year, Congress told the CFTC to get serious about reining in Wall Street’s excessive speculation,” Cantwell said. “The CFTC was supposed to provide speed limits for Wall Street gambling on commodities. Today’s overly broad rule is like setting the speed limit at 125 miles per hour.”

“The CFTC should do its job and provide transparency and oversight of Wall Street. I’m pleased the CFTC followed our suggestion in dropping the conditional spot month position limit, which would have made it easier for speculators to manipulate prices. But I’m disappointed that this rule is simply too weak to meaningfully protect consumers.”

The position limits rules were mandated by Dodd-Frank, so the CFTC couldn’t do nothing. According to Sanders and Cantwell, they did the next best thing. First of all, the rule was supposed to be promulgated in January, so that’s a 10-month reprieve for commodity speculators. Second, it’s unclear when this rule will even take effect. Third, even when they do take effect, the rules are a light touch.

Any oil trader, as Sanders said, can control 25% of deliverable supply in any given month, and natural gas traders can hold contracts worth FIVE TIMES the deliverable supply. Tyson Slocum of Public Citizen says in a statement that “these limits are simply too permissive to the big banks and allow them to hold positions that are too large. And with the rules’ implementation delayed until the commission defines the term ‘swap’ (no timeframe on that), the banks’ status quo reigns supreme.”

The Public Citizen recommendation is at 5% for the spot month. Sanders notes that CFTC can tighten the limits in the future. Until then, speculators will be able to run up energy prices and damage consumers. “I will continue to urge the CFTC to use this provision to impose stricter speculation limits,” Sanders said in his statement. Of course, he and his colleagues will have to come up against the massive finance lobby to pull it off.

This has been the trajectory of Dodd-Frank; Congress passed the rule-writing power to the regulators, and the regulators bow to lobbyist pressure to turn the rules into mush.

David Dayen

David Dayen