Enron has raised many concerns regarding the state of our energy markets. However, as investigations into the collapse of the company are showing, the failure of Enron was likely due to unethical and possibly illegal accounting techniques used by executives at the company. We need to make one thing clear - the trading of energy derivatives had nothing to do with the collapse of Enron. In fact, Enron's trading platform was one of the most lucrative parts of the company. Enron is not an accounting problem, it is not a business problem - it is a fraud problem.

During debate of the Commodities Futures and Modernization Act we examined the oversight and regulation of energy derivatives extensively. What we concluded was the proper amount of oversight for a new and emerging new business. If we start to regulate an industry that is in its infancy, we run the risk of stifling competition and reducing the possibility of it reaching its full potential.

Federal Reserve Chairman Alan Greenspan testified before the Senate Banking Committee last week. I would just like to echo a few of his comments regarding the regulation of energy derivatives. Chairman Greenspan said that,

"It was crucially important that we allow those types of markets to evolve amongst professionals who are most capable of protecting themselves far better than either we, the Fed, CFTC, or the OCC could conceivably do. The important issue is that there is a significant downside if we regulate where we do not have to in this area. Because one of the major - and indeed the primary - area for regulation and protection of the system is counter-party surveillance - that the individual private parties, looking at the economic events of the status of the people with whom they are doing business....We've got to allow that system to work, because if we step in as government regulators, we will remove a considerable amount of the caution that is necessary to allow those markets to evolve. And while it may appear sensible to go in and regulate, all of our experience is that there is a significant downside when you do not allow counter-party surveillance to function in an appropriate manner."

Mr. President, there are no indications that the trading of energy derivatives contributed in any way to the collapse of Enron. However, if in fact members feel we need to look at legislation in this area, we should examine it in a reasonable process - not by offering amendments to a newly enacted piece of legislation on the floor.

I certainly appreciate and respect members attention to examining the energy markets, but we should take this through the committee process, so members have a chance to hear testimony and pose questions to experts in this area.

Supporters of this amendment claim that Enron had such a large market share of this business that they were able to provide undo influence over the energy trading. To the contrary, during and after the collapse of Enron, there were no interruptions to trading. Other market participants stepped in and assumed volume. There were no price swings or collapse of the energy markets. This is a perfect example of market forces working the way they are intended.

The CFMA provided legal certainty for commercial parties not executed on futures exchanges. This amendment could be interpreted to cover all transactions between commercial parties conducted either by e-mail or over the telephone. The effect of this amendment would likely be decreased market liquidity because of increased legal and transactional uncertainties. Additionally, energy companies may be discouraged from using derivatives to hedge price risks. This could result in more price volatility in energy markets which will hurt the very consumers this legislation seeks to help.

Mr. President, this amendment would also require electronic trading exchanges to set aside capital, even if they do not participate in trading. For instance, the Intercontinental Exchange allows buyers and sellers of energy derivatives to exchange offers through an electronic program. This exchange is already regulated by the CFTC and gives the CFTC access to its trading screens. This amendment would require the Intercontinental Exchange to set aside capital even though it only facilitates transactions and does not trade. This requirement could force ICE to cease operations - forcing buyers and sellers of energy derivatives into the over-the-counter market. This is why CFTC Chairman Newsome has said that the CFTC does not require this new authority.

Because of my concern for this issue, I recently wrote to the Chairman of the Securities and Exchange Commission to get his views regarding this amendment. Mr. Pitt responded that "the Securities and Exchange Commission believes this legislative change is premature at this time."