Yes we can protect the citizen from the Big Oil Scam!

Recently, I've written a couple of posts about energy speculation and why it's part of the reason for the current energy crisis. This occurs when speculators buy oil on paper with credit, the oil is never delivered and then we are told that supply and demand is driving the prices up.

Then all of a sudden, I read a story that Barack Obama is calling for an end to the speculation many believe is the cause of the out-of-control prices. Some think these high prices are being enabled by a law known as the "Enron Loophole." One would think that after studying all the fraud and financial misdeeds in the Enron scandal -- anything they pushed through Congress would have had action taken on it a long time ago?

Perhaps, I'm a bit of a conspiracy theorist, but having lived in California at the time of the Enron scandal -- I can see clear similarities between that time and now. Two of them are how it is hitting the pocketbook of the average person and that that the economic law of supply and demand is being used as an excuse.

From an article in the Washington Post by Anne E. Kornblut:

Sen. Barack Obama on Sunday rolled out a proposal to curb speculation in energy markets, a plan his advisers said would help stabilize soaring gas prices.

Obama proposed a four-step program that would, among other things, close a so-called "Enron loophole" that protects some energy futures trading from oversight by the Commodity Futures Trading Commission, his advisers said.

The Washington Post article quoted the McCain camp as saying:

"The truth is Barack Obama is following John McCain's lead to close a Wall Street loophole that was signed into law by President Bill Clinton," McCain campaign spokesman Tucker Bounds said in a statement. "John McCain has supported bipartisan efforts to close this loophole and will work to address abuses in oil speculation. Barack Obama has voted the party line for Democrats who claim the loophole is fixed. The fact that Barack Obama is attacking John McCain, despite McCain's leadership on the issue, shows that Barack Obama is driven by the partisan attacks that Americans are tired of."

Do we have a reversal going on? Prior to this all we've seen are statements on conservation and allowing the oil companies to drill in places they weren't allowed to before.

Please note -- the quote from the McCain camp is partially true -- Mr. McCain has in the past supported legislation to close the Enron Loophole. The problem is that it's been awhile since he has brought up doing anything about it. Perhaps, Mr. Obama will make him remember his original concerns with the problem?

MSNBC's Keith Olbermann did an interesting story on this, which I first saw on my daughter's blog (RaleighRD.blogspot.com), which can be seen, here.

This investigative report points out that Ken Lay starting laying the ground work for the Enron Loophole under the first Bush administration with the blessing of then "new" U.S. Commodity Futures Trading Commission. The Enron Loophole was actually signed into law under the Clinton Administration.

Fast forward to the present and the U.S. Commodity Futures Trading Commission is now going to host a International energy market manipulation conference to look into the speculation issue. Is this a sign that the Enron Loophole has gotten out-of-control?

It also points out that it is probable the speculators will do the same thing with alternative energy sources once they come into vogue.

Of course in all fairness to John McCain, he did vote with the minority in 2002-2003 to close this loophole.

Bill O'Reilly also did an interesting talking point on this subject last Wednesday called "Who Is Hurting You at the Gas Pump." Mr. O'Reilly made a great argument that a large percentage of the prices at the pump are being caused by greedy speculators and that the oil industry and OPEC are along for the ride.

Hopefully, Mr. Obama's statement will inspire the rest of the leadership in Washington to do the right thing and take a serious look at this problem.

In closing, those of us who remember the 70's need to remember we should have been taking a holistic approach to the energy problem long ago. We need to develop alternative sources and find ways to produce energy that aren't going to ruin the planet.

If we ignore the recent lessons on how volatile the energy market is -- there is little doubt we will see the problem in the future again -- and wonder why we didn't do anything about it NOW.

I hope this doesn't turn into a flurry of attacks between Mr. Obama and Mr. McCain. Wouldn't it be nice to see them join hands and do what is in the interest of the general public? I'd also like to see support in Washington to foster what should be a bi-partisan effort.

I'm pretty sure the voting public would appreciate this and should they fail to do so might express their frustrations when they exercise their right to vote!

Mortgage crooks arrested nationwide in FBI sweep!

Recently, the FBI hinted that a lot of criminals might be getting arrested for contributing to the mortgage meltdown.

It appears that they are now backing up their words with some action.

From the FBI press release:

From March 1 to June 18, 2008, Operation Malicious Mortgage resulted in 144 mortgage fraud cases in which 406 defendants were charged. Yesterday, 60 arrests were made in mortgage fraud-related cases in 15 districts. Charges in Operation Malicious Mortgage cases were brought in every region of the United States and in more than 50 judicial districts by U.S. Attorneys’ Offices based upon the law enforcement and investigative efforts of participating law enforcement agencies. The FBI estimates that approximately $1 billion in losses were inflicted by the mortgage fraud schemes employed in these cases.

Most notably two Bears and Sterns executives were taken off the job in handcuffs:

Today, the U.S. Attorney’s Office for the Eastern District of New York announced an indictment against two senior managers of failed Bear Stearns hedge funds, charging Ralph Cioffi and Mathew Tannin with conspiracy, securities fraud and wire fraud. Cioffi was also charged with insider trading. The indictment alleges that the managers marketed the two funds as a low risk strategy, backed by a pool of debt securities such as mortgages. The indictment alleges that by March 2007, the managers believed the funds were in grave condition and at risk of collapse, but made misrepresentations to stave off investor withdrawal. The funds subsequently collapsed in the summer of 2007 resulting in approximately $1.4 billion in losses to investors.

There is no doubt that a lot of dishonest and very greedy people took advantage of the public at large.

Some people are comparing the mortgage crisis with another economic crisis, where only a rumor of fraud has been suggested thus far.

One of the reasons housing costs skyrocketed and them plummeted was a lot of property flipping. "Many experts blame the US real estate bubble in 2004 and 2005 on investor speculation and "irrational" flipping. Very low interest rates were a root cause, but speculation and flipping compounded the bubble," according to Wikipedia.

Most of this was based on speculation that the price would keep going up.

Now it is rumored that a key reason energy prices are skyrocketing is speculation in the oil market. Huge chunks of oil are bought on paper and paid for with credit. In a lot of instances, the oil is never even actually delivered. The result is that we hear that the price is being driven up because of demand.

Bill O'Reilly (Fox News) did a pretty interesting talking point on this subject, where he said:

Bottom line: Oil is being artificially marketed, and because we all need oil to live, we must pay what the industry dictates because there is no competition.

Add to this the oil speculators. These are people who buy oil contracts for delivery in the future. Only they don't really want the oil. They want the paper.

Speculators bet that oil prices will go higher, and if they do, they sell the paper to concerns that will actually take the oil. If prices go lower, the speculators lose their money.

But get this. The speculators don't have to pay cash to buy the paper contracts. They use credit, so it is easy to play this Las Vegas-type game.

Being just an average person, this leads me to believe that we might see (my opinion) some scandals come out in the future in the energy market, just as we are seeing them now come out in the mortgage meltdown now.

At the end of his talking point, Bill lamented that any help might be a long way off because of all the special interests the oil industry has in Washington.

Interestingly enough, a scandal is now brewing about two prominent Washington types getting sweetheart deals from a mortgage company, while all the real estate speculation was ongoing. The latest is that this money will be given to charity, but it illustrates Bill's last thought on why relief for the average person in the oil crisis might be a long way off.

Granted this is a speculation on my part, but it doesn't appear that it's illegal to speculate, does it? Well I suppose, as long as the person doing the speculating isn't ripping the general public, it isn't.

A short while ago, I did another post on this matter:

Does our current economic situation make sense?

Given that the U.S. Commodity Futures Trading Commission is hosting a International energy market manipulation conference to look into this, perhaps we will hear a rumor that the authorities are hot on the trail of this issue, also.

Maybe some wishful thinking on my part, but remember I'm only speculating!

FBI press release on the recent arrests, here.