Washington, DC – U.S. Senator Dianne Feinstein (D-Calif.) today released three letters signed by then-Chairman of the Federal Reserve Alan Greenspan which proved crucial in defeating her efforts to establish regulations in the energy swaps markets in 2002 and 2003.
Greenspan, along with former Treasury Secretary John W. Snow, strongly opposed Senator Feinstein’s efforts to establish oversight for energy swaps and derivatives markets in the wake the Enron scandal, which cost Californians $30 billion. In letters of opposition to Senator Feinstein’s legislation, Chairman Greenspan repeatedly affirms his belief that government regulation represents an unnecessary intrusion on markets that can better regulate themselves.
In a letter dated November 5, 2003, Mr. Greenspan stated that Senator Feinstein’s legislation to increase transparency in the energy swaps market “would undermine market discipline to the extent that market participants come to rely on the Commodity Futures Trading Commission (CFTC) to protect their interests and therefore fail to do more to protect themselves. Reliance on market discipline rather than government regulation has allowed derivatives markets to allocate risks very flexibly and effectively, which has contributed importantly to the resiliency of our financial system and our economy.”
In light of Mr. Greenspan’s testimony today in front of the House Oversight and Government Reform Committee, these letters are being released to demonstrate Mr. Greenspan’s longstanding opposition to increased regulation in the swaps market. A Wall Street Journal story published November 19, 2004, chronicled Greenspan’s repeated efforts to defeat Senator Feinstein’s bill. The story labeled Greenspan as “The Deregulator.”
The letters are attached in PDF format.
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CFTC Letter -