Randy Shannon – 6/11/08

This page was last updated on June 12, 2008.

Plug speculators’ loophole; Randy Shannon; Beaver County Times; June 11, 2008.

In 2006 Mr. Shannon penned a letter to the editor entitled “The [Beaver County] Times is a tool of the GOP,” and he was serious.

For background info about Mr. Shannon, see my notes on his speech of October 16, 2004, in front of the Beaver County Courthouse.

Mr. Shannon also posted the following on the Times website.

“Randy Shannon wrote on Jun 12, 2008 11:05 AM:

“The U.S. Commodity Exchange Act (CEA) states: ‘Excessive speculation in any commodity under contracts of sale of such commodity for future delivery...causing sudden or unreasonable fluctuations or unwarranted changes in the price of such commodity, is an undue and unnecessary burden on interstate commerce.’ The law directs the Commodity Futures Trading Commission to establish trading limits ‘as the Commission finds are necessary to diminish, eliminate, or prevent such burden.’ The CFTC is ignoring its mandate and Congress is watching while we are being raped. Remember Mary Joe [sic] Kopechne?”

I have two comments. First, “we are being raped?” I suspect actual rape victims would disagree. Second, what on Earth does Ms. Kopechne have to do with this topic?

Below is a detailed critique of the subject letter.

“Can the driving public do anything about high oil and gas prices? The answer is yes.

“But it may be difficult for some people to do. They would have to call U.S. Rep. Jason Altmire and demand that he do something he doesn’t want to do. Let me explain.

“The cause of the present spike in the long-term uptrend of energy prices is the illegal speculation in the energy futures market by Wall Street banks. These speculators are legally barred from trading commodities.”

[RWC] If you’ve followed Mr. Shannon’s letters for at least the last four years, you know he believes Wall Street financial firms are one of the roots of evil.

“However, they bypass the law by depositing funds in banks that are authorized to buy futures. This loophole can be plugged in one day if Congress had the will to confront these powerful banks.”

[RWC] Note how Mr. Shannon shifted from “illegal speculation” in the previous paragraph to exploiting a “loophole.” Translation: What Mr. Shannon alleges is happening is perfectly legal but he doesn’t like it. People tend to refer to aspects of the law they don’t like as loopholes.

“Only one half percent of oil futures contracts take delivery. The other 99.5 percent are speculative purchases of future oil contracts. The speculators are required to put up $7 to control a $130 barrel of oil. Meanwhile, the driving public is paying full price.

“Congress can change this by raising the margin requirement, currently only 5 percent, to 25 percent or even 50 percent.

“The result of these two acts would result in an immediate and substantial drop in energy prices. This will take an informed public uproar that forces Altmire to go to the floor and speak and act to make this happen.

“Congress would rather haul oil executives before a panel to be excoriated for their profits than to actually confront the powerful banking interests that are stealing billions from the public by illegally manipulating prices.”

[RWC] My experience with Mr. Shannon’s letters tells me it’s a waste of time trying to verify his stated “facts.” For the sake of argument, however, let’s say all the “facts” cited by Mr. Shannon are true. There’s a load of futures markets outside the U.S. and the reach of Congress. How would Mr. Shannon’s law be enforced for foreign traders in foreign futures markets? Even if the bulk of oil futures trading were currently taking place in U.S. futures markets by evil Wall Street banks, and I don’t know if that’s the case, wouldn’t the trading simply shift to other futures markets and traders? It never ceases to amaze me that so many folks don’t think beyond the first move.

Given his history, don’t ask me why Mr. Shannon didn’t also bash the oil companies.