Obama Signs Financial Reform Legislation that Aims to Curb Speculation in Oil, Fuel

This story appears in the July 26 print edition of Transport Topics.

President Obama signed into law a financial reform bill that includes provisions aimed at reducing speculative trading in commodities such as crude oil and diesel fuel and limiting the fees that credit-card companies can charge merchants for their services.

During a July 21 ceremony in Washington, Obama said the legislation provides for “the strongest consumer protections in history.”

“Because of this law, the American people will never again be asked to foot the bill for Wall Street’s mistakes,” Obama said.

“ATA applauds Congress’s decision to curb excessive commodity speculation while protecting the ability of the trucking industry to hedge its exposure to increased fuel prices,” said Rich Moskowitz, American Trucking Associations’ regulatory counsel. “The legislation will help ensure that fuel prices are linked to the market forces of supply and demand.”

As part of the law, commodities traders would be required to report in real time the derivative trades they make, but end-users such as truckers who use these trades to hedge against cost increases still would be allowed to do so.

ATA and other groups have pushed for this type of transparency, arguing that speculative trading has led to spikes in the price of crude oil and diesel fuel.

In addition to the derivatives language, the bill also was praised by retail groups — including Natso Inc., formerly the National Association of Truck Stop Operators — for putting limits on the so-called interchange fees charged by banks for the use of credit cards.

Banks currently collect about 2% of purchases from retailers who accept credit cards, compared with about 0.2% in Europe (click here for previous story).

Under the new legislation, banks would have limits on the these fees imposed on them.

“Passage of the swipe fee provision marks a major victory for retailers in their multi-year campaign to restore competitive balance between retailers and financial institutions, which impose these fees without any negotiation,” said Holly Alfano, Natso’s vice president of government affairs. “This victory is a major step forward for retailers of all industries.”

The interchange provision was “an all-around win for consumers,” Mallory Duncan, senior vice president and general counsel of the National Retail Federation, said in a statement. The fees are “a prime example of banks charging fees that are incredibly out of proportion with the costs involved,” he added.

However, other major business groups condemned the new law, arguing it will harm the economy.

“Congress had a historic opportunity to fix a broken system, and it failed,” U.S. Chamber of Commerce Thomas Donohue said. “For years — long before the markets collapsed — the Chamber has called for modernizing our capital markets. Instead of fixing the system, Washington just piled bureaucracies and massive new regulations onto a broken system. This will only exacerbate uncertainty and jeopardize job creation.”

John Engler, president of the National Association of Manufacturers and a three-term governor of Michigan, said that while the group supported “Congress’ efforts to improve transparency, accountability and stability in our nation’s financial system, we are concerned about the overall impact of a new and complex regulatory system on the U.S. economy and more specifically, U.S. capital markets.”

The Senate passed the legislation July 15, nearly two weeks after the House passed it, by a 60-39, largely party-line vote.

“Never again, ever again should we have to go through what we did in the fall of 2008 to ask the American taxpayer to write a check for $700 billion to bail out a handful of financial institutions that, frankly in many cases, helped create the mess we were in,” Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and a lead architect of the bill, said at a news conference after the vote.

Sen. Richard Shelby (R-Ala.), the ranking member of the committee, opposed the legislation and called the bill a “2,300-page legislative monster.”

“It creates vast new bureaucracies with little accountability and seriously, I believe, undermines the competitiveness of the American economy,” Shelby said.

Bloomberg News contributed to this report.