Commodity Futures Modernization Act of 2000

The CFMA has received criticism for the so-called “Enron Loophole,” 7 U.S.C. §2(h)(3) and (g), which exempts most over-the-counter energy trades and trading on electronic energy commodity markets. The “loophole” was drafted by Enron Lobbyists working with senator Phil Gramm [1] seeking a deregulated atmosphere for their new experiment, “Enron On-line“

An attempt to repeal the policy was vetoed by President Bush in 2008. Several Democratic Legislators introduced legislation to close the loophole from 2000-2006, but were unsuccessful due to Republican control of the House and Senate.

The Commodity Futures Modernization Act of 2000 or CFMA ([H.R. 5660] [S.3283]) repealed the Shad-Johnson jurisdictional accord, which had banned single stock futures in 1982. The legislation also provided certainty that products offered by banking institutions would not be regulated as futures contracts. This act was incorporated by reference into H.R. 4577 (see below). The legislation thus became law as a part of H.R. 4577 – Public Law 106–554, §1(a)(5) signed by Bill Clinton December 21, 2000.

Legislative History

The “Commodity Futures Modernization Act of 2000″ [H.R. 5660 was introduced in the House on Dec. 14, 2000 by Rep. Thomas Ewing [R-IL] and cosponsered by Rep. Tom Bliley [R-VA] Rep. Larry Combest [R-TX] Rep. John LaFalce [D-NY] Rep. James Leach [R-IA] ^[1] and never debated in the House.

The companion bill [S.3283] was introduced in the Senate on Dec. 15th, 2000 by Sen. Richard Lugar [R-IN] and cosponsored by Sen. Peter Fitzgerald [R-IL] Sen. Phil Gramm [R-TX] Sen. Charles Hagel [R-NE] Sen. Thomas Harkin [D-IA] Sen. Tim Johnson [D-SD] ^[2] and never debated in the Senate.

The “Enron Loophole”

Commodity Futures Modernization Act of 2000

The CFMA has received criticism for the so-called “Enron Loophole,” 7 U.S.C. §2(h)(3) and (g), which exempts most over-the-counter energy trades and trading on electronic energy commodity markets. The “loophole” was drafted by Enron Lobbyists working with Senator Phil Gramm [1] seeking a deregulated atmosphere for their new experiment, “Enron On-line“

An attempt to repeal the policy was vetoed by President Bush in 2008. Several Democratic Legislators introduced legislation to close the loophole from 2000-2006, but were unsuccessful due to Republican control of the House and Senate.

The prohibition on single-stock futures and narrow-based indices that had been in effect until the passage of this act was known as the Shad-Johnson Accord because it was first announced in 1982, as part of a jurisdictional pact between John S.R. Shad, then chairman of the U.S. Securities and Exchange Commission and Phil Johnson, then chairman of the Commodity Futures Trading Commission.

H.R. 4577

H.R. 4577 was an appropriations/budget bill encompassing the funding for the Departments of Labor, Health and Human Services, and Education for fiscal year 2001 which had already begun in Sept., 2000^[3].This budget bill included:

1. H.R. 5656 – Labor HHS Education Appropriations;

2. H.R. 5657 – Legislative Branch Appropriations;

3. H.R. 5658 – Treasury Appropriations;

4. H.R. 5666 – Miscellaneous Appropriations – except section 123 relating to the enactment of H.R. 4904;

5. H.R. 5660 – Commodity Futures Modernization;

6. H.R. 5661 – Medicare, Medicaid and SCHIP Benefits Improvement and Protection;

7. H.R. 5662 – Community Renewal Tax Relief and Medical Savings Accounts;

8. H.R. 5663 – New Markets Venture Capital Program; and

9. H.R. 5667 – Small Business Reauthorization.

References:

1. “Referred to House Judiciary”

2. [http://www.govtrack.us/congress/bill.xpd?bill=s106-3283 "Read once"

3. [http://thomas.loc.gov/cgi-bin/bdquery/z?d106:H.R.4577: Included Bills

See:

Securities regulation in the United States

The CFMA has received criticism for the so-called "Enron Loophole," 7 U.S.C. §2(h)(3) and (g), which exempts most over-the-counter energy trades and trading on electronic energy commodity markets.

The "loophole" was drafted by Enron Lobbyists working with Senator Phil Gramm [1] seeking a deregulated atmosphere for their new experiment, “Enron On-line“