Wall Street’s Oil Speculation Clobbers Main Street’s Consumers
The oil price spike of the past year, which saw gasoline prices increase by over a dollar from the summer of 2010 to the summer of 2011, will drive household expenditures on gasoline to a record average of $2900 this year, according to a new analysis released by CFA last week. Crude oil is about $30 higher than costs or historic trends justify, according to the report, generating needlessly high prices for petroleum products that will drain about $200 billion out of the economy.
This $200 billion drain is over one percent of gross domestic product and almost two percent of consumer spending, which translates into the loss of hundreds of thousands of jobs. “Since consumer spending is the main driver of the U.S. economy, when speculators, oil companies and OPEC rob consumers of that much spending power, the inevitable result is a dramatic reduction of economic activity and employment,” said CFA Research Director Mark Cooper, author of the report.
“We have been hearing a lot of over-heated rhetoric recently about job-killing regulations,” said CFA Director of Investor Protection Barbara Roper. “This report provides a timely reminder that it was weak regulation that landed us in our current economic mess, and it will take a strong policy response to restore the economy to health. Restraints on excessive speculation are just one component of that policy response, but they are a necessary component.”
A copy of the full report is available here.
Consumer Agency Nominee Advances on Party-line Vote
The Senate Banking Committee voted on party lines earlier this month to approve the nomination of Richard Cordray to head the Consumer Financial Protection Bureau (CFPB). In advance of the committee vote, CFA issued a release on mounting financial abuses that cry out for strong leadership at the new agency. “The list of financial tricks and traps that consumers are forced to deal with keeps growing,” said CFA Legislative Director Travis Plunkett. “Fourteen months after Congress created the CFPB, the agency needs a permanent leader so it can move forcefully and use all of its powers to address mounting problems in the financial services marketplace.”
Despite this progress, the nomination remains in limbo. It requires approval by the full Senate, and all 44 Republican senators have pledged to oppose any nominee to head the CFPB unless changes are made to the agency that would that would significantly weaken its authority to act quickly to address serious marketplace problems.
Jobs Council Recommends Weakening Accounting Fraud Protections
When the President’s Council on Jobs and Competitiveness released its Interim Report last week, it included a recommendation to roll back protections against accounting fraud at all but the nation’s largest public companies. CFA Director of Investor Protection Barbara Roper criticized the recommendation as a special interest pet issue that has no place in the Administration’s jobs agenda. She noted that the Council offered no evidence to support its proposal to promote job growth at the smallest companies by weakening protections against accounting fraud at all but the very largest public companies.
“The Jobs Council looks at job losses that are the direct result of a financial crisis brought on by weak financial regulation and proposes as a solution further weakening regulations – in this case the regulations adopted in response to an unprecedented wave of accounting fraud a decade ago at companies large and small,” said CFA Director of Investor Protection Barbara Roper. “Those accounting scandals, and the costly restatements that followed, were the job killers. If this proposal is adopted, we can expect a repeat of that painful lesson, with even worse consequences for our fragile economy. If Congress and the Administration care about jobs, they will reject this irresponsible recommendation.”
Expert Panel Concludes Hair Product is Unsafe
The Cosmetic Ingredient Review expert panel has concluded that, when formaldehyde and methylene glycol are used as chemical ingredients in hair smoothing products, they are unsafe as currently used. Based on its extensive review, the panel concluded that “formaldehyde and methylene glycol are unsafe in the present practices of use and concentration in hair smoothing products.” CFA Senior Counsel Rachel Weintraub, who serves as consumer liaison to the panel, applauded the decision, which she said would “protect consumers and stylists from unsafe formaldehyde exposure.”
Food Policy Leaders Address Conference
Many of the nation’s food policy leaders addressed the 34th Annual National Food Policy Conference, which was coordinated by CFA and held in Washington, D.C. earlier this month. Conference speakers included U.S. Department of Agriculture Secretary Tom Vilsack, Food and Drug Administration Commissioner Margaret Hamburg, Centers for Disease Control & Prevention Director Tom Frieden, Rep. Chellie Pingree (D-ME), award-winning chef Jose Andres, and former Secretary of Agriculture Dan Glickman.