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S. HRG. 110–580 

NOMINATIONS HEARING FOR 

COMMODITY FUTURES TRADING COMMISSION 

HEARING 

BEFORE THE

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

JUNE 4, 2008 

Printed for the use of the 

Committee on Agriculture, Nutrition, and Forestry 

( 

Available via the World Wide Web: http://www.agriculture.senate.gov 

COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY 

TOM HARKIN, Iowa, Chairman 

PATRICK J. LEAHY, Vermont 

KENT CONRAD, North Dakota 

MAX BAUCUS, Montana 

BLANCHE L. LINCOLN, Arkansas 

DEBBIE A. STABENOW, Michigan 

E. BENJAMIN NELSON, Nebraska 

KEN SALAZAR, Colorado 

SHERROD BROWN, Ohio 

ROBERT P. CASEY, Jr., Pennsylvania 

AMY KLOBUCHAR, Minnesota 

SAXBY CHAMBLISS, Georgia 

RICHARD G. LUGAR, Indiana 

THAD COCHRAN, Mississippi 

MITCH MCCONNELL, Kentucky 

PAT ROBERTS, Kansas 

LINDSEY GRAHAM, South Carolina 

NORM COLEMAN, Minnesota 

MICHEAL D. CRAPO, Idaho 

JOHN THUNE, South Dakota 

CHARLES E. GRASSLEY, Iowa 

MARK HALVERSON, Majority Staff Director 

JESSICA L. WILLIAMS, Chief Clerk 

MARTHA SCOTT POINDEXTER, Minority Staff Director 

VERNIE HUBERT, Minority Chief Counsel 

(II) 

(III) 

C O N T E N T S 

Page 

HEARING(S): 

Nominations Hearing for Commodity Futures Trading Commission .................. 1 

Wednesday, June 4, 2008 

STATEMENTS PRESENTED BY SENATORS 

Harkin, Hon. Tom, a U.S. Senator from the State of Iowa .................................. 1 

Chambliss, Hon. Saxby, a U.S. Senator from the State of Georgia ..................... 2 

Domenici, Hon. Pete, a U.S. Senator from the State of New Mexico .................. 3 

Lugar, Hon. Richard G., a U.S. Senator from the State of Indiana .................... 2 

Stabenow, Hon. Debbie, a U.S. Senator from the State of Michigan .................. 5 

Panel I 

Lukken, Walter, of Indiana, Nominee to be Chairman of the Commodity 

Futures Trading Commission .............................................................................. 6 

Chilton, Bartholomew H., of Delaware, Nominee to be a Commissioner of 

the Commodity Futures Trading Commission for a term expiring April 

13, 2013 ................................................................................................................. 8 

O’Malia, Scott, of Michigan, Nominee to be a Commissioner of the Commodity 

Futures Trading Commission for a term expiring April 13, 2012 ................... 10 

APPENDIX 

PREPARED STATEMENTS: 

Harkin, Hon. Tom ............................................................................................ 22 

Chambliss, Hon. Saxby .................................................................................... 25 

Cochran, Hon. Thad ......................................................................................... 27 

Grassley, Hon. Charles E. ................................................................................ 30 

McConnell, Hon. Mitch .................................................................................... 32 

Thune, Hon. John ............................................................................................. 37 

Chilton, Bartholomew H. ................................................................................. 40 

Lukken, Walter ................................................................................................. 42 

O’Malia, Scott ................................................................................................... 45 

DOCUMENT(S) SUBMITTED FOR THE RECORD: 

Chilton, Bartholomew H.: 

Committee questionnaire and Office of Government Ethics Executive 

Branch Personnel Public Financial Disclosure Report .............................. 48 

Lukken, Walter: 

Committee questionnaire and Office of Government Ethics Executive 

Branch Personnel Public Financial Disclosure Report .............................. 66 

O’Malia, Scott: 

Committee questionnaire and Office of Government Ethics Executive 

Branch Personnel Public Financial Disclosure Report .............................. 81 

QUESTION AND ANSWER: 

Harkin, Hon. Tom: 

Written questions for Walter Lukken, Bartholomew H. Chilton and Scott 

O’Malia ........................................................................................................... 114 

Page

IV 

Crapo, Hon. Mike: 

Written questions for Walter Lukken, Bartholomew H. Chilton and Scott 

O’Malia ........................................................................................................... 115 

Grassley, Hon. Charles E.: 

Written questions for Walter Lukken, Bartholomew H. Chilton and Scott 

O’Malia ........................................................................................................... 116 

Roberts, Hon. Pat: 

Written questions for Walter Lukken, Bartholomew H. Chilton and Scott 

O’Malia ........................................................................................................... 118 

Thune, Hon. John: 

Written questions for Walter Lukken, Bartholomew H. Chilton and Scott 

O’Malia ........................................................................................................... 120 

Chilton, Bartholomew H.: 

Written response to questions from Hon. Tom Harkin ................................. 121 

Written response to questions from Hon. Pat Roberts .................................. 121 

Written response to questions from Hon. Mike Crapo .................................. 122 

Written response to questions from Hon. John Thune .................................. 123 

Written response to questions from Hon. Charles E. Grassley .................... 124 

Lukken, Walter: 

Written response to questions from Hon. Tom Harkin ................................. 126 

Written response to questions from Hon. Pat Roberts .................................. 127 

Written response to questions from Hon. Mike Crapo .................................. 128 

Written response to questions from Hon. John Thune .................................. 129 

Written response to questions from Hon. Charles E. Grassley .................... 130 

O’Malia, Scott: 

Written response to questions from Hon. Tom Harkin ................................. 138 

Written response to questions from Hon. Pat Roberts .................................. 138 

Written response to questions from Hon. Mike Crapo .................................. 139 

Written response to questions from Hon. John Thune .................................. 139 

Written response to questions from Hon. Charles E. Grassley .................... 140 

(1) 

NOMINATIONS HEARING FOR 

COMMODITY FUTURES TRADING COMMISSION 

Wednesday, June 4, 2008 

U.S. SENATE, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY, Washington, DC 

The committee met, pursuant to notice, at 11:03 a.m., in room 

SR–328A, Russell Senate Office Building, Hon. Tom Harkin, Chairman of the committee, presiding. 

Present or submitting a statement: Senators Harkin, Lincoln, 

Stabenow, Chambliss, Lugar, Roberts, Thune, and Grassley. 

STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM 

THE STATE OF IOWA, CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY 

Chairman HARKIN. The Senate Committee on Agriculture, Nutrition and Forestry will come to order. 

Today, the committee is meeting to consider three nominations 

to the Commodity Futures Trading Commission. I will just have a 

brief opening statement and I would yield to two Senators for purposes of introduction. 

The Commodity Futures Trading Commission has critical regulatory responsibility to protect and ensure the integrity, fairness, 

and transparency of our nation’s futures, options, and derivatives 

markets. These markets are vital price discovery and risk management functions. These markets that originated with the agricultural commodities have grown and expanded to cover a broad array 

of both physical and financial commodities. They now serve vital 

price discovery and risk management functions that affect the 

prices that consumers pay for everything from a loaf of bread to 

gasoline to copper plumbing. They are vital to the functioning of 

our economy. It is essential that they are properly regulated. 

The CFTC has a critical responsibility to protect customers, market integrity, and the public while also promoting efficient and 

internationally competitive futures and derivatives markets. With 

good reason, there has been a great deal of interest in restoring 

fuller CFTC authority to monitor and take appropriate regulatory 

action in energy derivatives markets. 

The farm bill that was enacted last month includes important additional authority regarding the exempt commercial markets. The 

new authority requires the CFTC to monitor ECM trading of oil, 

natural gas, and other commodities for contracts that perform significant price discovery functions. Last week, the CFTC announced 

2 

energy market initiatives to expand international surveillance of 

crude oil trading and to increase transparency of trading in the 

U.S. markets. These are important initiatives that this committee 

will follow closely over the coming weeks and months. Faced with 

record high gasoline and diesel prices, every American has a direct 

interest in the integrity of those markets. 

Just yesterday, the CFTC announced agricultural market initiatives to review the role of indexed trading and speculators in agricultural commodities, to improve market transparency, and to take 

steps to ensure that farmers had the tools they need to manage the 

price risk in times of these volatile markets. 

Over the last year, crop prices have risen dramatically, but producers have not always been able to take advantage of the higher 

prices because their local grain elevators have not been able to 

offer forward contracts. The CFTC intends to coordinate with the 

agricultural lending community to better understand the role of financing in managing price risk. 

I look forward to hearing the nominees’ statements and answers 

to our questions. I will now yield to our Ranking Member, Senator 

Chambliss, for any statement that he may have. 

STATEMENT OF HON. SAXBY CHAMBLISS, A U.S. SENATOR 

FROM THE STATE OF GEORGIA 

Senator CHAMBLISS. Well, thank you very much, Mr. Chairman. 

Because I know we are in a rush to move through this, hopefully 

before the vote, I am going to submit my opening statement to the 

record and just say that I am very pleased that these three gentlemen are before us today to fill out the contingent of the Commodity 

Futures Trading Commission. 

Commissioners Lukken and Chilton are very familiar to this 

committee, having testified before us as well as been a part of this 

committee, so we are glad to have you two gentlemen where you 

are. We thank you for your public service. 

Mr. O’Malia is also very familiar to many of us on the Hill, as 

we will hear from Senator Domenici, and I think will be a great 

asset to the Commission, so I look forward to his testimony today 

and to completing this and, as I say, moving this to the floor and 

filling out the Commission. 

Thank you, Mr. Chairman. 

[The prepared statement of Hon. Saxby Chambliss can be found 

on page 25 in the appendix.] 

Chairman HARKIN. Thank you, Senator Chambliss. 

Now what I would like to do is yield first to Senator Lugar for 

the purpose of an introduction, then I will yield and turn to Senator Domenici, also for the purpose of an introduction, because I 

know he has to leave, and then we will hear from our nominees. 

Senator Lugar. 

STATEMENT OF HON. RICHARD G. LUGAR, A U.S. SENATOR 

FROM THE STATE OF INDIANA 

Senator LUGAR. Thank you, Mr. Chairman. I thank you for holding this important hearing to hear three well-qualified persons, 

Walt Lukken, the Chairman, Bart Chilton and Scott O’Malia as 

Commissioners of the CFTC. 

3 

I am especially pleased to welcome back Walt, as he is a former 

member of my staff and I believe he is remarkably qualified to 

serve as the CFTC’s Chairman. During the summer of 1990, only 

18 years ago, Walt was an intern in my office and later spent nearly a decade working on our personal staff and as a staff member 

of this committee. In that capacity, he played an instrumental role 

in moving a number of important legislative measures through the 

committee process, including the Commodity Futures Modernization Act of 2000. Perhaps most memorable to me, Walt’s talents as 

an active runner greatly enhanced our office team in the three mile 

ACLI Challenge, as well as interoffice running competitions. 

He has served as a Commissioner of the CFTC since 2002, being 

twice confirmed by this committee and passed unanimously by the 

Senate. In this role, he has been an active and engaged member 

and continually sought ways to improve government oversight. He 

has been acting Chairman since June 2007 and is well positioned 

to provide critical leadership to our economic markets today. 

As we are all aware, commodity prices across the board, including corn and oil, have seen large and in some cases rapid increases. 

The current crisis has developed from a complex web of factors. Expanding affluence in the emerging economy, such as China and 

India, has improved diets for hundreds of millions of people and led 

to increased global demand for food. Simultaneously, the highest oil 

prices on record have driven up food costs all along the line in the 

farm-to-market chain. The surge in oil prices has increased transportation, packaging, and fertilizer costs, provided the impetus for 

developing alternative fuels, such as ethanol. We have experienced 

droughts in some food exporting countries, expanded trade barriers, 

a weakening of the U.S. dollar and market destroying subsidies. 

And others have pointed to excessive market speculation or even 

active market manipulation to explain high wheat prices or crude 

oil trading above $120 a barrel. 

The CFTC has undertaken a number of actions to investigate the 

core factors fueling these increases, including the recent announcement of greater energy market oversight and transparency measures. I believe it is critically important that these efforts be continued and we look forward to the testimony in today’s hearing. I am 

also interested in hearing from today’s nominees about the adequacy of authority given to the CFTC by Congress and the level of 

funding needed to maintain appropriate oversight of these markets. 

I thank you, Mr. Chairman. 

Chairman HARKIN. Thank you, Senator Lugar. 

Now I turn to our colleague, though not a member of this committee immediately, I know Senator Domenici has always worked 

very closely with us on a lot of agricultural matters and we welcome him here today, my good friend, Senator Domenici. 

STATEMENT OF HON. PETE DOMENICI, A U.S. SENATOR FROM 

THE STATE OF NEW MEXICO 

Senator DOMENICI. Thank you very much, Mr. Chairman and 

Senator Chambliss and fellow Senators. It is a pleasure to be with 

you. I am pleased to be here to introduce and recommend Scott 

O’Malia for appointment as Commissioner of the Commodity Futures Trading Commission. 

4 

Let me take a moment to recognize Scott’s family for being here 

with us today, including his parents, who drove all the way from 

Scott’s home State of Michigan, if they would please stand, and his 

wife and their children. Thank you. 

[Applause.] 

Senator DOMENICI. I always feel when they think that much of 

their son, it is probably a pretty important son, so I recognize him 

on that count alone. 

But seriously, he has had a very diverse experience in both public and private portions of the energy sector that will enable him, 

in my opinion, to bring new and innovative ideas to the market 

oversight work of the CFTC. I think we all are confounded and perplexed by what is going on in the energy field in terms of prices 

and wondering whether speculation, inordinate, improper speculation is contributing to it. I think his experience will help him help 

fellow Commissioners do a better job in the area that we are being 

asked about as Senators all the time. 

I have worked with Scott over the past several years on a variety 

of national energy-related issues, including energy and water appropriations, national energy policy, funding and support for the 

nation’s nuclear weapons stockpile, and nuclear nonproliferation 

activities. I have always been impressed with his ability to bring 

a fresh perspective and superior problem solving. He brings those 

skills to whatever issues are at hand. His outstanding public service combined with his private energy market experience make him 

an exceptional candidate to head to CFTC and I hope you will approve him readily for this important post. 

I might say that I think you are aware that this is my last year 

serving with you. My term expires in January, and I think you 

might expect that if I were still going to be here another term, who 

knows. Scott O’Malia might not be here. I don’t know that, but I 

am just speculating. 

[Laughter.] 

Senator DOMENICI. But in any event, he is going to do a formidable job for you all and it is my pleasure to be with you. Thank 

you, Mr. Chairman. 

Chairman HARKIN. Thank you very much, Senator Domenici, and 

again, I will have more to say on the floor about your service to 

our country, but I wouldn’t let the moment pass without thanking 

you for all you have done for New Mexico, but also for America, for 

all of your time here. Of course, your wife does a lot of good too, 

in the health care field and I have worked with her on a wide variety of health care matters for so many years. Thanks for being 

here. 

Senator DOMENICI. Thank you very much. 

Chairman HARKIN. Thanks, Pete. 

I know that Senator Stabenow also wanted to be recognized for 

purposes of introduction. 

Senator STABENOW. I do. 

Chairman HARKIN. I just might say, we have an 11:45 vote. I 

would like to get our candidates through so we can get them 

through in a hurry, and so I am going to ask people to dispense 

with a lot of opening statements, but for purposes of introduction, 

I would recognize the Senator. 

5 

STATEMENT OF HON. DEBBIE STABENOW, A U.S. SENATOR 

FROM THE STATE OF MICHIGAN 

Senator STABENOW. Thank you, Mr. Chairman. I just want to 

add words to what Senator Domenici already indicated and welcome all of our nominees, but particularly Scott O’Malia, who hails 

from a great family in Michigan, Williamston, Michigan. I have 

known his mom and dad, John and Beverly, longer than I have 

known Scott, I think, actually, and we have worked together for 

many, many years. It is great to have you here, John and Bev and 

the whole family. 

I have to say that what is most momentous about my support for 

Scott today is that he went to the University of Michigan and I 

went to rival Michigan State University and I am still supporting 

Scott for this. 

[Laughter.] 

Senator STABENOW. But we are very proud of you and welcome. 

Chairman HARKIN. Does anyone else have a statement for purposes of introduction? 

[No response.] 

Chairman HARKIN. Thank you all very much. We have all of your 

statements, I say to all of our nominees this morning. A couple of 

things that I have to dispense with here that are required. Would 

you all please stand and raise your right hand, please. 

Do you swear or affirm that the testimony you are about to provide is the truth, the whole truth, and nothing but the truth, so 

help you, God? 

Mr. LUKKEN. I do. 

Mr. CHILTON. I do. 

Mr. O’MALIA. I do. 

Chairman HARKIN. Thank you. Please be seated. Another mandatory question. Do each of you agree that if confirmed, you will appear before any duly constituted committee of Congress if asked to 

appear? Mr. Lukken. 

Mr. LUKKEN. Yes. 

Chairman HARKIN. Mr. Chilton. 

Mr. CHILTON. I do. 

Chairman HARKIN. Mr. O’Malia. 

Mr. O’MALIA. I do. 

Chairman HARKIN. Thank you very much. The last housekeeping 

thing that I have here is that would each of you make sure that 

we have the proper spellings and the names of your family members who are here that were introduced? 

We will start first with Mr. Lukken, who is nominated to fill the 

position of the Chairman of CFTC. A lot of us know Walt from his 

service up here for a long time. Again, if I could ask each of you 

maybe just 5 minutes or so, maybe, and then we will have some 

time for questions and interchange. If that would be all right, I 

would sure appreciate that. We will go with Mr. Lukken, then Mr. 

Chilton, then Mr. O’Malia. 

Mr. Lukken, welcome back to the committee. 

6 

STATEMENT OF WALTER LUKKEN, OF INDIANA, NOMINEE TO 

BE CHAIRMAN OF THE COMMODITY FUTURES TRADING 

COMMISSION 

Mr. LUKKEN. Thank you, Chairman Harkin, Senator Chambliss, 

and other members. I appreciate the kind remarks of my former 

boss and mentor, Richard Lugar. I am always thinking about him 

whenever making informed decisions in the government. He is 

somebody that I admire every day, so I appreciate your thoughtful 

remarks. 

I do also want to introduce my wife, Dana, and my sister-in-law, 

Diana, and my mother-in-law, Denise, who are here. They are from 

Louisiana, so there is no Senator here from Louisiana, but—— 

[Applause.] 

Mr. LUKKEN. I also want to make sure to recognize my fellow colleagues from the CFTC, Commissioners Mike Dunn and Jill 

Sommers, who are here in attendance, so thank you very much. 

Since I first appeared before you as a nominee in 2002, the futures markets have changed dramatically, both in size and complexity, experiencing fivefold growth in both volume and products 

traded. Once member-owned and dominated by open-outcry trading, today exchanges are technology-driven corporations that primarily trade electronically 24 hours a day, all around the globe. 

Add to these significant changes the subprime crisis, record commodity prices across the board, and the large influx of financial 

funds into futures, and it is clear that these are extraordinary 

times in our markets. 

Needless to say, the past year has presented challenges for regulators but also opportunities for advancements in oversight. In the 

time since I became Chairman nearly 1 year ago, the agency has 

amassed a solid record of accomplishment, tackling some of these 

difficult issues. 

In my second month in this role, the Commission announced its 

intention to address the mounting regulatory concerns surrounding 

exempt markets that trade over-the-counter energy products. The 

Commission held a public hearing and worked with your committee 

to develop legislation providing our agency with additional abilities 

to oversee exempt commercial markets. These authorities were part 

of the Farm Bill enacted last month and the CFTC has begun implementing these important measures into law. 

Critically important, the Farm Bill also contained the rest of the 

CFTC’s reauthorization, which had lapsed in 2005. Beyond the energy measures, the bill authorized the agency through 2013, clarified the agency’s fraud authority over retail foreign currency transactions, and doubled the agency’s penalty authorities for manipulation. I applaud the leadership of this committee for moving this important piece of legislation. 

Another major breakthrough this year was the CFTC’s agreement with the Securities and Exchange Commission that established a regulatory framework for coordinating our respective public missions. In March, Chairman Cox and I signed a Memorandum 

of Understanding that will help the agencies share information as 

well as coordinate a review of novel derivative products. Yesterday, 

our agency announced the first products to be approved using this 

new regulatory framework with the listing of gold ETF products on 

7 

both OneChicago, a CFTC-regulated exchange, and CBOE, an SECregulated exchange. This shows that when regulators work together, markets can benefit without compromising the public interest. 

During my service, the Commission has been busy on the enforcement front, as well. Aggressive enforcement must accompany 

strong regulatory policies to effectively police the futures markets 

for manipulation and fraud. The CFTC’s Division of Enforcement 

had another productive year, highlighted by the record settlement 

with British Petroleum for manipulating the propane market, the 

announced action against Amaranth hedge fund for attempting to 

manipulate the natural gas market, and the Marathon Oil case for 

attempted manipulation of the crude oil market. The CFTC may be 

a relatively small Federal agency, but we maintain a zero tolerance 

policy toward anyone who attempts to disrupt these important 

markets. 

Recent concerns with the functioning of the agricultural futures 

markets led the Commission to convene a public hearing on April 

22 at our Washington, D.C. headquarters. Yesterday, the Commission announced several initiatives derived from its Agricultural 

Roundtable, including the public disclosure of an ongoing cotton investigation surrounding the March price run-up in this commodity, 

the review of whether index traders are being properly classified 

for regulatory and reporting purposes, the official withdrawal of 

two proposals regarding increasing speculative participation in our 

markets, the development of additional risk management products 

for producers, including ag trade options and cleared agricultural 

swaps. 

This comes on the heels of last week’s announcement of our national crude oil investigation and several other energy initiatives, 

including a new agreement with the U.K. Financial Services Authority to expand the data received from institutions trading crude 

oil products across borders. 

The CFTC also announced that it will use its authorities to receive more detailed data from the energy markets from participants that are in indexed trading coming from these markets and 

to make sure that this indexed trading is properly classified. 

If it sounds busy, it is, especially given that the agency’s staffing 

levels are near record low numbers. Since the CFTC opened its 

doors 33 years ago, the volume on futures exchanges has grown 

8,000 percent while the CFTC staffing numbers have decreased 12 

percent. Mr. Chairman, this is a small agency doing an extraordinary job under difficult circumstances. I am fortunate to work 

every day with a group of dedicated and skilled individuals at the 

CFTC. Without a doubt, these are some of the hardest-working 

people and most productive individuals that I know. 

Should this committee and the Senate vote to confirm me as 

Chairman, I pledge to serve to the best of my abilities as this agency’s steward and to work with my Commission colleagues as we 

strive to ensure that these markets are meeting their price discovery and risk management roles free from manipulation and 

market abuse. Thank you very much. 

[The prepared statement of Mr. Lukken can be found on page 42 

in the appendix.] 

8 

Chairman HARKIN. Thank you very much, Mr. Lukken. We will 

go through all the candidates and then we will open it up for questions. 

I will introduce Mr. Chilton myself, since I have known Bart 

Chilton for a long time. Mr. Chilton has a long record here on the 

Hill, 10 years in the House for various members of the House Agriculture Committee with whom we have worked closely: Congressman Pomeroy and Congresswoman Long and Congressman Jim 

Jobs, Congressman Terry Bruce. For 5 years, Mr. Chilton worked 

at the Department of Agriculture under the Clinton administration, 

and, of course, worked for Majority Leader and Minority Leader, 

both Tom Daschle, for a long time here. A lot of us know him also 

as the Vice President for Government Affairs for the National 

Farmers Union. 

Mr. Chilton, I know, has been very much involved with family 

farmers, hands-on people, farmers throughout the country for as 

long as I have known him, and that has been 20–some years. So 

it is again a privilege to welcome you back, Mr. Chilton, to the committee, and please—as I said for all of you, your statement will be 

made a part of the record and please proceed. 

STATEMENT OF BARTHOLOMEW H. CHILTON, OF DELAWARE, 

NOMINEE TO BE A COMMISSIONER OF THE COMMODITY FUTURES TRADING COMMISSION FOR A TERM EXPIRING APRIL 

13, 2013 

Mr. CHILTON. Thank you, Mr. Chairman. That is really nice of 

you to introduce me like that and I appreciate it, and thank you, 

Senator Chambliss and all the members of the committee. It is a 

pleasure to be with you. 

I won’t read my statement and I will try to be as brief as possible 

and keep us on schedule. I thought maybe since I was here like 9 

months ago, I might just give you a quick react to what I am seeing 

at the CFTC, and I will try not to repeat anything that Walt has 

said. 

The staff is great. They have this super institutional memory. 

They have issue area expertise that I think is probably not found 

in many places. They really are a good group of folks. We have 

even got a fellow, Charlie Rickey, who used to work in the basement of USDA before we were the CFTC. But on surveillance and 

oversight and litigation and enforcement, they work hard every 

day, as Mr. Lukken said. 

On enforcement, for example, at any one time, we are investigating between 750 and 1,000 individuals or companies for violations of the Commodity Exchange Act as the Acting Chairman said, 

the industry that we regulate today is dramatically different than 

it was at its inception or even five years ago. I won’t go into all 

the details, but the Act that you all passed, the last reauthorization, it is really different than anything else in government. It is 

not the old sort of stovepipe government that is bureaucratic. We 

are able to move things and approve things quickly, and that has 

allowed the industry to be nimble and quick and to take competitive advantage of really good ideas, and helped foster the economic 

engine of our democracy. 

9 

So I congratulate you for that Act and thank you, as the Acting 

Chairman did, for what you have done on the Enron loophole and 

fixing FOREX. 

I do believe there are new challenges and that we must look at 

things in a completely different way, for many of the reason the 

Acting Chairman addressed—increased volume, increased number 

of traders, and two other areas. One, technology. People are moving 

to electronic trading and it is critcal that the CFTC keeps up. That 

is why our appropriations are so important, not just from the 

human capital side, but on the technology front, because software 

and the tools we use to stay a step ahead are not things we can 

just run down to Circuit City and buy. It takes a long time to implement these new technologies and requires considerable foresight 

on behalf of appropriators in Congress. 

The final thing is globalization. These are markets that are operating twenty-four-seven-three-sixty-five. Somebody is trading all 

the time. For us not to realize that we must work with our fellow 

regulators around the world would be a big mistake, and we are 

doing that and trying to get better information for them. 

With regard to what is going on in the markets now, we are seeing an entirely new paradigm and we must look at our regulatory 

approach in a fresh way. The standard operating procedure no 

longer should apply and transparency is probably the first antidote 

for ill markets. Whether or not you take that a step further, whether you deal with margins, whether you reclassify people, those are 

all things that I would urge caution and encourage us to gather the 

requisite information and make sure that our cure isn’t worse than 

the disease. 

But the absolute first thing, is to get information, from our foreign counterparts, that we drill down on that data and these markets, and then do our best to ensure that we are ensuring price discovery, guarding against fraud, abuse, and manipulation, and we 

are ensuring that these markets are viable, efficient and effective 

risk markets for hedgers, farmers and ranchers and grain elevators 

and the other hedgers, the commercials. It also needs to be fair for 

speculators, because, look, they are the other side of a vast amount 

of trades. You don’t have a hedge if you don’t have somebody on 

the other side of it and speculators are critical to making markets 

work. We need to make sure it is working for everybody. 

Most importantly, Senators, it is critical that we ensure that 

these markets operate because it affects the price that people pay 

for about everything they buy. It is important for the American 

consumers. And if you continue to entrust me with that responsibility, I will work hard to be the type of regulator that tax-payers 

deserve. Thank you. 

[The prepared statement of Mr. Chilton can be found on page 40 

in the appendix.] 

Chairman HARKIN. Thank you very much, Mr. Chilton. 

Now we turn to Mr. O’Malia, welcome to the committee. Please 

proceed. 

10 

STATEMENT OF SCOTT O’MALIA, OF MICHIGAN, NOMINEE TO 

BE A COMMISSIONER OF THE COMMODITY FUTURES TRADING COMMISSION FOR A TERM EXPIRING APRIL 13, 2012 

Mr. O’MALIA. Thank you, Chairman Harkin, Ranking Member 

Chambliss, and members of the committee. I am grateful for the 

opportunity to appear before you as the President’s nominee to 

serve as Commissioner on the Commodity Futures Trading Commission. I appreciate the committee holding this nominating hearing and I would like to thank Senator Domenici for his support, as 

well as the support of Senator Stabenow, being a Michigan resident. 

Before I begin, I want to introduce my family, which Senator 

Domenici did. I am honored to have my wife, Marissa. Mr. Chairman, she attended Palmer College of Chiropractic in Davenport, 

Iowa, practices here today. She is the best chiropractor in town. I 

also am joined by my three daughters, Kelsey, Claire, and Macey. 

I would also like to thank my parents, John and Bev O’Malia, for 

driving down from Michigan to join me today. Growing up on a 

small farm in Michigan, my parents taught me the value of hard 

work and persistence. I would not have the opportunity today if it 

were not for the support of my wonderful family. 

After graduating from the University of Michigan in 1990, I came 

to Washington and found my first job with the Public Securities 

Association, a trade association serving Wall Street and Main 

Street banks with interest in bonds and municipal finance. I was 

then offered a position with Senator McConnell’s office, where I 

worked for 9 years on a wide variety of energy issues, including 

legislation fighting for lower and more transparent electricity rates 

for Kentucky residents. 

My experience continued when I went to work for the private 

sector for 2 years with Mirant, an Atlanta-based independent energy company. It was during this period that I learned first-hand 

the devastating impacts a flawed market design can have on consumers and markets. The Enron debacle opened my eyes to very 

serious consequences of poorly designed markets and inadequate 

oversight. 

As investors in the credit rating agencies lost confidence in the 

sector, it forced the industry to reevaluate its own risk management controls. During this time, I worked to help establish the 

Committee of Chief Risk Officers. This is an organization developed 

by the industry to support best practices and put an end to the manipulative trading deployed by Enron and others. 

While these developments of new standards were a necessary exercise to restore discipline in the trading sector, I strongly believe 

that regulators are critical to ensuring that markets operate in a 

fair and transparent manner. To achieve this, regulators must be 

provided with the appropriate authority and tools to respond to the 

constant evolution in market behavior and products. To this end, 

I compliment the committee for its work in passing new authorities 

in the Farm Bill for the CFTC to expand its authority over certain 

contracts trading on exempt commercial markets. 

In 2003, Senator Domenici offered me a job as a professional 

staffer on the Energy and Natural Resources Committee handling 

oil, natural gas, and coal markets as well as the futures market. 

11 

In developing the 2000 energy bill, I worked extensively with the 

Senate Agriculture staff to ensure this committee’s jurisdiction over 

the futures markets were maintained. In 2004, I became the Clerk 

of the Energy and Water Development Subcommittee on Appropriations, with funding responsibilities for the Department of Energy 

and Federal Energy Regulatory Commission, among others. For the 

past 4 years, I have worked in a bipartisan fashion to facilitate the 

deployment of advanced energy technology to reduce our reliance 

on foreign energy sources. 

Drawing on my extensive energy background, I believe I can 

make a significant contribution to the market oversight responsibilities of the Commission. If confirmed, I will work to ensure the 

CFTC uses all of its legal authorities to guarantee markets operate 

in a fair and completely transparent manner. These markets must 

continue to serve as a price discovery and risk management tool for 

all participants. It is also imperative that the Commission continues to stand firm against abusive trading practices, including 

fraud and manipulation. 

I will work with the other Commissioners and the experienced 

staff to implement new legal authorities Congress has provided the 

Commission as part of the 2008 farm bill. I will also support the 

cooperative enforcement agreements with other Federal agencies to 

guarantee that these agencies treat companies fairly and consistently protect consumers. 

In closing, I would like to thank the committee for holding this 

hearing and considering my nomination. It would be an honor and 

a privilege for me to serve the American people in this capacity. 

That concludes my statement. 

[The prepared statement of Mr. O’Malia can be found on page 45 

in the appendix.] 

Chairman HARKIN. Thank you very much, Mr. O’Malia. We will 

just start a round of questions. I just have a couple that I wanted 

to proffer here and then we will take questions from other. We 

have that vote at 11:45. 

Mr. Lukken, I was in the House when the CFTC was created, in 

1974, and so I followed it very closely during all my tenure on the 

Agriculture Committee in the House and then here in the Senate 

as a member, and now Chairman of the Agriculture Committee. 

And, you are right—the amount of work you have to do has increased substantially. You have five members of the Commission. 

That number was established in law when the CFTC was established in 1974, however I am not certain how many staff you have 

there. Perhaps you could enlighten me on that. 

Let me ask you this. With this tremendous new responsibility 

you have and with worldwide markets, it is so different than what 

it was in 1975. Do we need more members of this Commission to 

parcel out the workload, and how about staff? I know you said the 

staff was down 12 percent. Twelve percent from where, I don’t 

know. But could you tell me, do we need more staff? How many 

staff do you have and do we need more? 

Mr. LUKKEN. We have roughly 450 staff members today. That is 

an historic low number for us. 

Chairman HARKIN. How much was it, say, 20 years ago? 

12 

Mr. LUKKEN. We were at our high in the mid–500’s. I think when 

we opened the doors, we were around 500 as an agency over 30 

years ago. So yes, we certainly need more bodies at the agency. We 

have been able to get more productive as a result of technology. 

This is an information-driven industry, and so we are able to collect the data efficiently with new technology, but still we need 

skilled personnel in order to sift through this data and make informed, qualitative decisions. So we have a $112 million budget this year. We have asked and the President has provided a $130 million appropriation request to 

Congress this year. We hope to get that. But that is the minimum. 

We could use more. And so as Congress considers resources, we 

certainly will be willing to talk about additional funds for the 

CFTC. 

Chairman HARKIN. How about Commissioners? Do you need 

more than five? 

Mr. LUKKEN. Five, I think, has worked well for us. I mean, it 

gives a good diversity of views. You want to make sure that you 

have different thoughts coming at a process, but not too large that 

you end up—it makes it difficult to make decisions. As Bart said, 

we get to be a nimble organization. So you want to try to find that 

balance. I think five has worked well, but it is something worth 

considering. 

Chairman HARKIN. OK. I am just wondering because of this tremendous caseload, workload that you have. 

Mr. LUKKEN. Yes, absolutely. 

Chairman HARKIN. Let me ask maybe both of you—Mr. Chilton, 

you touched on the idea of speculation and what is happening 

there. Market prices for energy and agricultural commodities have 

reached record levels. We keep hearing about speculation. Someone 

said the other day, I don’t know whether it is true or not, that 

about 30 percent of the price of a barrel of oil can be allocated to 

just speculation. I don’t know if that is true or not, but I have 

heard this number bandied about. 

And I am concerned about a parallel with Enron, not perfect, but 

some might say that there is a bubble of some degree in commodities, energy, even some financial derivatives. I asked you, Mr. 

Chilton, about this. How do we know that the positions taken in 

the markets could not unwind very, very rapidly with big consequences? How much assurance can you give us and the American 

people that we are not facing another Enron surprise in either commodities, energy, derivatives? Can you give us any assurance on 

that? I address these questions to ask both Mr. Lukken and Mr. 

Chilton. 

Mr. CHILTON. I can’t, Mr. Chairman. I can’t tell you exactly what 

the reason for the large price move is. As you know, the concern 

is there are speculators moving into the market and the quick answer is, from a lot of folks, is that they are long in the market and 

staying long. Whether or not that has an impact, we simply don’t 

know. They are not in the spot month, but that doesn’t mean that 

they couldn’t be having some important impact on the market 

when they exit the spot month and immediately re-enter the market. A lot of times, these are passive investors that they are not 

trading on inside information, which this industry uses. They are 

13 

sort of followers more than anything else and have made commodities markets an asset class to diversify their portfolio. They are 

about 30 percent of some of these markets and it may be a contradiction in terms to say that anybody who is 30 percent of any 

market is passive. 

I firmly believe it deserves a closer look, as I said in my statement and a careful examination. It is something—we have to look 

at it differently than we have before, Mr. Chairman. We need to 

beat up this data and slice and dice it and figure out what it means 

and maybe categorize commercials differently, maybe figure out if 

there is any undue influence so that we are avoiding any fraud, 

abuse, and manipulation. With gas near $4, it just is a crime for 

us not to be doing everything we can, and I think we are headed 

down that road now, sir. 

Chairman HARKIN. Mr. Lukken, any thoughts on this, could 

some of these things unwind; could we be in for another Enron surprise in some of these other areas? 

Mr. LUKKEN. I think this is the basis of our announcement last 

week. We understand there is a large influx of financial money 

coming into the commodity markets. We want to get a better understanding of it. So the first step is to ask for the data, to ask for 

better, clearer, more detailed data on what is coming in. So that 

is what we did last week and we are going to review how those financial traders are being treated from a regulatory point of view 

as an agency. 

Traditionally, our systems are in place to prevent manipulation, 

somebody who is intentionally going in to move the markets. It is 

an illegal act. I think what is being talked about more is the 

amount of money coming into the commodity markets may be overwhelming the structure of the markets. So that is something we 

are trying to get our arms around and something that we announced last week. 

Right now, there is not a clear smoking gun as far as index traders. As Bart said, they are never in the spot month where delivery 

occurs so it is not affecting the physical commodity. There are some 

commodities, such as live cattle and lean hogs, that have a very 

large percentage of index trading. They are down negatively for the 

year. And so we are looking to find a clearer picture of what is 

going on in this area and we will continue to look at it. 

Chairman HARKIN. Mr. O’Malia, I didn’t mean to exclude you, 

but since you have just come on, any thoughts on this subject of 

speculation and whether or not we could be facing a bubble that 

might unwind? 

Mr. O’MALIA. Well, one of the things my father taught me in 

doing my math homework was go with what you know. We do 

know that billions of dollars have come into the commodity markets as outperforming equities and we have seen this activity. The 

CFTC is obviously taking steps to increase the disclosure and 

transparency, looking at index traders, swap dealers in both agriculture and energy markets. I think what Commissioner Chilton 

said was right. We need to look at this data, turn it inside out, and 

make sure we know exactly who is doing what in the markets, 

what the nature of their investments are, and where they are going 

with them. 

14 

Chairman HARKIN. Do you all have the ability to do that, and 

would you make that information available publicly and to this 

committee? 

Mr. CHILTON. We do. I should let the Acting Chairman respond, 

but I will take this opportunity to tell you that we have got 448 

people right now. At the height in 1992, we had 592. So we are 

down 150 folks. Now, the ordinary budget process that we go 

through—ordinary, I say, you know, you submit something to 

OMB—we asked for $150 million. I am totally off-script now, but 

we got what was a $130 request. I think we could use that $150 

million plus the good work that you did on closing the Enron loophole, that is going to be another $6 million. So we could use upwards of $155, $156, $157 million to ensure that we can do this 

stuff. As I said earlier, these are extraordinary times and I think 

it requires an extraordinary budget, sir. 

Mr. LUKKEN. We will absolutely share that information. We have 

confidentiality issues at the agency, to make sure we are not disclosing trader positions, but that is something we want to, in an 

aggregate form, inform the public and this committee. 

Chairman HARKIN. I am going to turn to our Ranking Member 

now, but I just want you to know that I hear it a lot. There is a 

lot of unease about some of these markets, the derivatives and 

some of the energy positions out there. There is just a lot of anxiety 

about it right now. Thank you very much. 

Senator Chambliss. 

Senator CHAMBLISS. Thank you, Mr. Chairman. 

Gentlemen, I want to turn for just a minute to a hearing that 

was held in the Commerce Committee yesterday. I think there has 

been some press that has been out today giving attention to some 

statements that were made in there, particularly statements by a 

Professor Greenberger relative to the markets of today and the 

oversight by CFTC. Now, I don’t know this Professor Greenberger, 

but I hope he does a better job of preparing himself to teach his 

law class than he did for appearing before the Commerce Committee yesterday because he misstated the facts as I know the facts 

to be, because I was involved, as was Senator Harkin, in the negotiations relative to the provisions that we added in the Farm Bill 

concerning additional oversight responsibilities and authorities 

granted to the CFTC, and I know that Commissioner Chilton, you 

as well as Commissioner Lukken were very much involved in these. 

These negotiations on this issue started, in fact, 3 years ago when 

I was the Chairman and we were looking to reauthorize the CEA 

and they have been ongoing since that time. 

So for this guy to walk into the Commerce Committee yesterday 

and to say that this committee as well as Senators Feinstein and 

Levin and Snowe, as well as PWG were shills for ICE is totally outrageous and it is appalling to me that somebody would make a 

statement like that in a public hearing when they simply know not 

from which they speak. 

Mr. Lukken, let me just direct it to you. You were integrally involved in these negotiations. ICE, as I recall, was not—as a matter 

of fact, I know they weren’t happy. ICE happens to be a constituent 

of mine. When the PWG made their recommendations, they were 

very upset about the recommendation and it took an extensive 

15 

amount of negotiating between the CFTC, between PWG, and all 

of the members of the industry—this was not solely discussions 

with ICE—before appropriate language was achieved, and I would 

like to give you the opportunity to respond to the comments that 

were made by this gentleman yesterday. 

Mr. LUKKEN. Well, this did go through a full transparent airing 

of the public when we came to this issue. It started last summer. 

Several committees in Congress held hearings on these issues. Obviously, there was concern about the amount of oversight happening on these types of exempt commercial markets. We worked 

closely with this committee as well as Senators Feinstein and 

Levin to develop a proposal. Our agency, in fact, held a public hearing, as public as you get. All comers could have come and talked 

and given us their views, and we heard from a variety of people 

from all sides talking about exempt commercial markets. 

From that, we developed legislative recommendations for Congress. They were brought to this committee. This committee passed 

this as part of the Farm Bill after debate and amendment on the 

floor. The House marked this up in their committee, as well, the 

House Agriculture Committee. And so there was a lot of work, bipartisan work, in getting this done. As the Senator mentioned, the 

PWG as well as the Commission, Democrats and Republicans on 

the Commission, approved these recommendations coming up to 

Congress. 

So no, there was plenty of transparency in the process and I hope 

that there is an ability of the CFTC to implement these provisions 

before they are thrown out. We are in the process of trying to implement these to ensure that we have closed these loopholes that 

they are talking about for exempt commercial markets. So I hope 

there is some patience with the public. 

Senator CHAMBLISS. Well, I have no doubt, but what with the additional tools that you are going to be able to do an even better job 

than what you have been doing relative to that oversight and I 

have such great respect for Senators Levin and Feinstein and 

Snowe. They did a terrific job of helping negotiate a very fair position. And again, I would just say that anybody who thinks otherwise or makes a public statement ought to apologize to those individuals. 

One other statement that this gentleman made yesterday, Bart, 

was relative to the Acting Chairman. I happen to think that Acting 

Chairman Lukken is doing a terrific job on a very difficult situation 

of volatile markets, rising prices, and we sought to give you more 

tools because that is what the Acting Chairman and the members 

of the Commission, including you, said we needed. I would just 

simply like to throw out to you, when he was asked the question 

of whether or not Acting Chairman Lukken was part of the problem or part of the solution, he said he is part of the problem. He 

was considered a Republican nominee. You are considered a Democratic nominee. Give me your thoughts on that for the record, 

please. 

Mr. CHILTON. Well, this man is not part of the problem, I can assure you, Senator. He is a dedicated public servant who has worked 

hard on Capitol Hill and in government. 

16 

I do just want to take maybe 15 seconds and say I think there 

is an important issue that was raised in the hearing, though, and 

that deals with what I talked about in my statement and that is 

transparency, and particularly when we look at overseas contracts. 

If you look at the WTI contract on ICE in London, it is a look-alike 

contract for the NYMEX market, and there is only a certain 

amount of oil, and so we should look at what the positions are 

there, and as I have talked about, beat up this data and more 

transparency is important. 

We have entered into an agreement with the Acting Chairman’s 

leadership with the Financial Service Authority in the U.K. to get 

this information on a daily basis, particularly in the back months. 

We were getting it on a daily basis in the spot month. But now we 

will be able to look back and see if there is anything going on over 

there. They don’t have position limits there in the U.K. on this 

look-alike contract. 

So the question, Senator, would be whether or not, if you had 

large positions on both contracts, whether or not that could potentially manipulate the market, even for a temporary amount of time, 

and that is one of the things that we are going to be looking into 

very intricately. 

Senator CHAMBLISS. Is there any information that you have requested from the FSA in the United Kingdom relative to these contracts that they have not given you? 

Mr. CHILTON. Maybe Chairman Lukken would like to—— 

Mr. LUKKEN. Absolutely not. We talk to them frequently, our 

surveillance staff and their surveillance staff. And again, these are 

not physically delivered contracts. These are cash settled off of the 

NYMEX, so they are not moving around physical crude oil, so I 

think that is important. They are giving us, as Bart said, daily information now and they are now committed to putting it in a format that will seamlessly come into our surveillance systems. They 

have agreed to notify us when they exceed accountability limits on 

the NYMEX, notify us using a red flag system that when something goes over an accountability limit on one of our exchanges, 

they are willing to let us know about that. And we are seeing it 

all. It is all transparent to us. 

Rather than sort of turning off these markets with the fear that 

they could go underground or to less-regulated areas, it would be 

better, I think, to engage these regulators. These are global markets and we are world leaders here. We should engage these regulators overseas and make sure that we are seeing the entirety of 

the marketplace. 

Senator CHAMBLISS. Thank you, Mr. Chairman. 

Chairman HARKIN. Thank you, Senator Chambliss. 

The list I have here is Senators Lugar, Stabenow, Roberts, Lincoln, Thune, and Grassley. Senator Lugar. 

Senator LUGAR. Thank you very much, Mr. Chairman. I just 

want to follow up the questioning of Senator Chambliss. 

As all of you will recall, in the 2000 negotiations of the reauthorization of CFTC, there was very strong opposition from the energy 

interests to a regulation by CFTC. As a matter of fact, I can remember the difficulties with the Banking Committee, for one, and 

others who felt that they had a say in all of this, and so as a result, 

17 

we came out of that particular period with a degree of openness 

and with the markets that some felt led to the Enron problem or 

at least it became possible because of lack of regulation. 

Now, I compliment the Chairman and Senator Chambliss in the 

recent years, and it hasn’t all happened in this particular year, for 

attempting to close the gap, to give the CFTC authority. But as you 

pointed out today, there needs to be authority with regard to other 

markets, whether it is the U.K. or so forth, and this degree of cooperation. 

What I suppose I really want to know, and you have answered 

this in a way but maybe not to my satisfaction, if you had the 

transparency that you are talking about, and hopefully you do, and 

let us say the U.K. people or others agree that transparency is required in terms of world economy, even at that point, are there the 

analytical skills or the regulatory skills or the information given 

this 24/7 situation that Mr. Chilton is talking about to spot what 

is going on? 

The reason I suggest this is a very small number of people, and 

you are 400–and-some, plus this small budget is taking a look at 

a problem that could have worldwide implications in terms of catastrophe in our economy. Many pessimists would say that the oil 

bubble, just to take that one, leaving aside corn or beans or what 

have you, but just the oil bubble, if it burst and you have a drop 

of tens of dollars suddenly, is going to knock the socks off of whatever recovery our economy has right now, quite apart from the 

Western European situation, which is equally weak. 

So this has huge implications, what we are talking about today. 

People may not understand what the CFTC does, but people should 

because this is perhaps the way in which the world can be alerted 

and policymakers, whether it be the Federal Reserve Board or the 

President or the Treasury in our country, make some policy judgments. So what is the state-of-the-art in spotting a bubble if you 

have full transparency and cooperation at this point. 

Mr. LUKKEN. This is something that we think about. As I said, 

our systems have traditionally been in place to spot and to take action on intentional manipulation. This is the Hunt silver crisis back 

in the late 1970’s type of environment, where somebody tries to corner or squeeze a market, and we could see through their positions 

on a futures market the fact that they are holding—they are trying 

to hold the position as well as hold the commodity in the cash market. 

I think what is being discussed now is not that type of intentional manipulation but just the fact that a lot of money is flowing 

into these markets, potentially creating a bubble. We don’t have 

regulatory tools to spot that sort of a situation. We look at supply 

and demand data. There are obviously strong fundamentals in this 

area. 

We are asking for better information. That is what last week’s 

and yesterday’s announcements were intended to get, is this better 

information on the amount of funds flowing into these markets, 

and it is certainly worthy of discussion with the President’s Working Group about what all this means. Are there ways that we can 

control and manage the types of monies that are coming into these 

markets, develop practices for those that are entering the marketVerDate Aug 31 2005 15:15 Jan 29, 2009 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 C:\DOCS\44765.TXT SAG2 PsN: SAG2
18 

place? So there is not an easy answer here, but it is something we 

are trying to get our arms around. 

Senator LUGAR. Just a sub-question of this. Do you have as a 

part of your staffs or others you work with people involved in foreign policy or security policy? Taking the oil business, frequently 

it is suggested maybe 90 percent-plus of oil now is governed by governments, by state agencies who may have political agendas, not 

economic agendas. What if a Hugo Chavez decides to give oil to 

people in the United States or the Caribbean or so forth while less 

is being produced in his own country? We would say, well, this is 

ridiculous. Here you have less production and you are giving it 

away. Well, not ridiculous from his standpoint with a political 

agenda rather than an economic one. 

I wonder to what extent this influences the way that you look at 

this situation. You are trained economists and people and it is 

transparent, but the motives of some of these other countries are 

sometimes not really very hidden and I just wonder whether this 

is a factor that you are looking at. 

Mr. CHILTON. If I might, you know, that one of the things that 

I have expressed a real concern about and this is a concern in general in the financial services areas, and that is sovereign wealth 

funds. And I am not casting any aspersions on any individual nation, but Saudi Arabia has a $900 billion sovereign wealth fund. 

Now, these things are not very transparent and they are not supposed to be operated on geopolitical bases. They are supposed to be 

just sort of an investment tool. But this is something that people 

are looking at, and whether or not those are having any sort of impact on our markets, we don’t know, but that is an area, Senator, 

that I think we need to be looking at in addition to the other areas 

that you mentioned earlier. 

Senator LUGAR. Thank you. 

Mr. LUKKEN. Well, it is definitely something, if I might chime in, 

too, that the President’s Working Group and the Treasury Department are looking into developing best practices for sovereign 

wealth funds, that when they enter the commercial markets, that 

they should act like commercials with full transparency and abiding by the rules of the free market society. So that is something, 

I think, the Treasury Department is looking into, and we are also 

following, from a surveillance point of view, how many sovereign 

wealth funds are in our markets. They are very low numbers. They 

are not heavily involved in futures trading at the moment, but it 

is something we are keeping a close eye on. 

Senator LUGAR. Thanks. 

Chairman HARKIN. Thank you, Senator Lugar. 

Do you have any follow-up questions at all? We have a roll call 

vote on right now and I am sorry that other Senators didn’t get a 

chance to ask questions. I will keep the record open for a while for 

questions to be submitted to you in writing, if you could respond. 

Well, that was quick. Senator Lincoln, before we all go to vote 

here. 

Senator LINCOLN. Thank you, Mr. Chairman, and thanks to Senator Chambliss, as well, and we want to thank all of you all for 

being here today. I think you all certainly know, and I think many 

of us are learning more and more, the CFTC’s role in regulating 

19 

the commodities futures market, and it has come under such increased scrutiny as so many of our commodity prices have surged 

to record levels, whether it is oil, corn, wheat, or cotton, which you 

all brought the case before. 

Your average American consumer is paying more. Having just 

done a tour throughout my State covering the majority of my State, 

I was amazed. Without a doubt, gas prices were the very top issue, 

the war in Iraq, but food prices were incredibly important to working families, and seeing that and feeling helpless in terms of what 

they can do about that. So looking at our food pantries, knowing 

that they are at record highs. I just got a letter, a solicitation in 

the mail commenting that they were serving 30 to 35 percent more 

this month this year than they did the same month last year. 

So it is a critical issue for our families and our working families 

out there. For our producers, the cost of inputs from diesel to fertilizers have soared. We are in an unusual time and it is going to 

be critical for us to maintain our competitiveness. 

Globally, higher food prices have threatened to certainly cause 

severe food shortages in countries. They have sparked riots. We 

have seen that happen and we don’t want it to happen here. 

Ultimately, you all are the cop on the beat and we appreciate 

that. You are a cop on the beat for us as well as these global markets and it is a role there to prevent fraud, the manipulation, the 

excessive speculation in futures markets, and we want to make 

sure that you have the tools to do that, so we applaud you for the 

steps that you have recently announced to deal with that greater 

transparency which Bart mentioned and the oversight to our agriculture and energy futures markets. 

As Chair of the subcommittee that has oversight over CFTC, I 

really do look forward to working with all three of you in the future. I think there is much to be done, and as you mentioned, you 

probably do need more bodies to be able to do that, but also to ensure that what we are doing is going to meet the needs of the 21st 

century and that we are looking forward as opposed to backwards 

in the needs that we have. 

Mr. Chairman, just two quick questions. One is to what extent 

do you think that the low dollar has an effect on crude oil, and the 

other is what do you think your biggest challenge is, and I think 

you have pretty much covered that second one, many of you have, 

but if there is anything else you would like to add to it, I would 

like to hear it. 

Mr. LUKKEN. I will just quickly mention that the dollar is obviously a factor on crude oil prices and other commodities across the 

board. Our staff, just plotting the dollar’s rise against crude oil and 

the Euro, there is as much as a 25 percent difference. So we think 

somewhere in that range. That is a back-of-the-envelope-type calculation, but certainly the dollar is having a big impact on commodities across the board. 

And obviously the big challenge is just the size, enormity, and 

speed of these markets that are happening before our eyes. These 

are global markets. We have to be engaged with global regulators. 

They are technology-driven markets. We have to get better technology so we are able to see this. And it is going to require more 

resources, as you mentioned. So these are all things that we will 

20 

be working with your committee to try to implement over the coming year. 

Mr. CHILTON. What he said. 

[Laughter.] 

Mr. O’MALIA. I will agree. 

[Laughter.] 

Senator LINCOLN. Well, that was easy and it gets us to our vote. 

Thanks to all of you and we look forward to working with you. 

Chairman HARKIN. Thank you very much, Senator Lincoln. 

I will just announce that Senators will have until 6 p.m. today, 

for the staff who are here, to submit questions for the nominees, 

and for the benefit of other Senators, it is my intention to ask for 

unanimous consent on the floor to discharge the committee of these 

nominees, to bring our nominees to the floor as quickly as we can. 

I thank all of you for all of your service, the Commissioners who 

are here, Mr. Dunn, Ms. Sommers, Mr. Lukken and Mr. Chilton, 

and welcome our new member, Mr. O’Malia, to the Commission. I 

look forward to working with you in the future. 

Thank you very much, and the committee will stand adjourned 

subject to the call of the Chair. 

[Whereupon, at 12:02 p.m., the committee was adjourned.] 

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A P P E N D I X 

JUNE 4, 2008 

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44765.003
25 


44765.004
26 


44765.005
27 


44765.006
28 


44765.007
29 


44765.008
30 


44765.009
31 


44765.010
32 


44765.011
33 


44765.012
34 


44765.013
35 


44765.014
36 


44765.015
37 


44765.016
38 


44765.017
39 


44765.018
40 


44765.019
41 


44765.020
42 


44765.021
43 


44765.022
44 


44765.023
45 


44765.024
46 


44765.025
(47) 

DOCUMENTS SUBMITTED FOR THE RECORD 

JUNE 4, 2008 

48 


44765.026
49 


44765.027
50 


44765.028
51 


44765.029
52 


44765.030
53 


44765.031
54 


44765.032
55 


44765.033
56 


44765.034
57 


44765.035
58 


44765.036
59 


44765.037
60 


44765.038
61 


44765.039
62 


44765.040
63 


44765.041
64 


44765.042
65 


44765.043
66 


44765.044
67 


44765.045
68 


44765.046
69 


44765.047
70 


44765.048
71 


44765.049
72 


44765.050
73 


44765.051
74 


44765.052
75 


44765.053
76 


44765.054
77 


44765.055
78 


44765.056
79 


44765.057
80 


44765.058
81 


44765.059
82 


44765.060
83 


44765.061
84 


44765.062
85 


44765.063
86 


44765.064
87 


44765.065
88 


44765.066
89 


44765.067
90 


44765.068
91 


44765.069
92 


44765.070
93 


44765.071
94 


44765.072
95 


44765.073
96 


44765.074
97 


44765.075
98 


44765.076
99 


44765.077
100 


44765.078
101 


44765.079
102 


44765.080
103 


44765.081
104 


44765.082
105 


44765.083
106 


44765.084
107 


44765.085
108 


44765.086
109 


44765.087
110 


44765.088
111 


44765.089
(113) 

QUESTIONS AND ANSWERS 

JUNE 4, 2008 

114 


44765.090
115 


44765.091
116 


44765.092
117 


44765.093
118 


44765.094
119 


44765.095
120 


44765.096
121 


44765.097
122 


44765.098
123 


44765.099
124 


44765.100
125 


44765.101
126 


44765.102
127 


44765.103
128 


44765.104
129 


44765.105
130 


44765.106
131 


44765.107
132 


44765.108
133 


44765.109
134 


44765.110
135 


44765.111
136 


44765.112
137 


44765.113
138 


44765.114
139 


44765.115
140 


44765.116
141 


44765.117