Commodity Exchanges and the Privatization of the Agricultural Sector in the Commonwealth of Independent States—Needed Steps in Creating a Market Economy

Pre-revolutionary commodities exchanges in Russia and their extinguishment by the Bolsheviks are examined, and the role thereafter by Soviet central planners in the distribution, import and export of agricultural commodities is described. It is argued that the privatization process in the CIS must include incentives for the development of an exchange system for agricultural goods

The Commodity Exchange Monopoly – Reform is Needed

In theory, the commodity futures markets are the essence of competition. All orders are required to be exposed to trading pits where traders vie competitively and aggressively to assure the best possible execution price. On the surface, as observed from the exchange galleries or on television, the exchanges do appear to be highly competitive, particularly when one views hundreds of traders screaming and gesticulating wildly for orders. The now famous sting operations on the Chicago exchanges in 1989, however, have provided dramatic evidence that a dangerous symbiotic relationship has developed among traders on the floor that is undermining competition and threatening the integrity of the system. When these non-competitive arrangements are coupled with the fact that floor traders enjoy a decided time and place advantage over all persons off the floor, and since by law all orders must come to the floor for execution, the market loses its surface aura of maximum competition. Instead, the exchanges may rightly be viewed as having a statutory monopoly that is undermining competition in the futures industry at the expense of the public. That statutory monopoly should be broken and effective floor trading practices and procedures should be established in order to prevent the type of conduct that was exposed by the Chicago sting operation. This article will describe the background of futures regulation and the role now being played by futures trading in the financial markets. The article will then discuss and propose reforms that are needed to assure effective regulation. Specifically, Part I of the article will discuss the present regulatory scheme under the Commodity Exchange Act. This part includes a discussion of the regulatory background of futures trading, and it describes statutory provisions that are designed to prevent fraud and trading abuses. Part I of the article also discusses some of the numerous regulatory problems and concerns that the government has faced in the futures markets, and it reviews some of the more abusive trading practices that have been uncovered by the Chicago sting operation. Part II of the article focuses on a core provision in the Commodity Exchange Act that requires futures instruments to be traded on licensed “contract markets.” Part II suggests that the solution to many of the present regulatory shortcomings is to loosen this statutory monopoly so that competition may operate more fully. This approach will assure that the marketplace, and not artificial regulatory barriers, determines whether particular commodity interests are traded on the exchanges. Part II also proposes that public representation be required on the boards of the exchanges as well as their committees so that the power of the exchanges, which has long been used to block regulatory reforms, is diluted.Part III discusses some other shortcomings in the present regulatory system that have fostered and encouraged the abuses exposed by the Chicago sting operation. This part also addresses some gaps in the Commodity Exchange Act that prevent effective regulation and it proposes reforms in the manner in which futures trading is conducted on the floors of the exchanges so as to assure maximum competition and efficiency

From the Great Recession to the COVID-19 Pandemic: A Financial History of the United States 2010–2020: Introduction

This article is an Introduction to a symposium on the Author\u27s latest volume in his seven volume series on the Financial History of the United States. The Introduction summarizes the articles published in the symposium and reviews how each contributes to the ongoing analysis and debate over the causes of financial panics and government policies to deal with such events

Banking Regulation: Its History and Future

This article traces the history of the growth and regulation of banking services in the United States. That history will show how the existing regulatory structure was developed in response to demands of the Civil War and a populist crusade against the “money trust.” That effort reached its zenith with the New Deal legislation of the 1930s, but began to fall apart as financial services consolidated. The article will then show how the financial services industries (banking, insurance, securities and derivatives) began to merge in their product base while at the same time separating on a fault line between institutional and retail customers. After reviewing this history, the article will discuss the future of banking regulation under the functional regulatory structure adopted by the recently adopted Gramm-Leach-Bliley Act for financial services holding companies

Privatizing Social Security

The 2000 presidential election focused attention on an idea that has been surfacing for some time--the privatization of Social Security. Although opposition remains fierce, proposals for privatization have been gradually gaining acceptance as the inadequacy of benefits from the present system become more apparent, and bankruptcy becomes certain in the absence of additional onerous funding. Resistance to privatization largely centers on concerns that existing participants will lose their contributions and that private accounts may result in investment losses, which would leave future pensioners penniless. The disability and survivor benefits of the present Social Security system also raise concerns for the plight of the disadvantaged, should those features of Social Security be eliminated. However, proponents of private accounts argue that such accounts would provide far more social security and retirement benefits than available under the present government system, which offers little more than a poverty line existence to individuals dependent on Social Security for retirement. Proponents further contend that the system can be privatized without undue hardship and that survivor and disability benefits can be privately insured more effectively than through existing governmental programs. This Article will address the debate and discuss regulatory concerns that would arise with the creation of private social security accounts. As will be shown, the present system fails to provide real social security, and deprives those most in need of a retirement program of an opportunity to increase their wealth or to have a comfortable retirement. Shifting to a private system would be expensive, but could be accomplished through recognition of the benefits of private investments and through a program of tax credits and deductions. Existing regulatory requirements protect private social security account holders from fraud, as well as overreaching and unsuitable investments. The question remains whether the government should be the custodian and provider of investment choices in a “privatized” Social Security system. As explained in this Article, government control would ignite a never-ending war over the role of the government in selecting “socially responsible” investments