February 12, 2020
by Katherine Cooper

With the country seemingly having survived its most recent Presidential impeachment, what is not commonly appreciated is the outsized role that Presidents involved directly or indirectly in impeachment proceedings have had on commodities regulation.  Take for instance Gerald Ford.  After Vincent Kosuga and Samuel Siegel pulled off “the Great Onion Corner” in 1955 and 1956 by wresting control over the vast majority of onions in the United States,[1] Gerald Ford, then a Republican Congressman from Michigan, introduced the Onion Futures Act of 1958[2] which, once adopted by Congress and signed into law by President Eisenhower, banned outright the trading of onion futures in the United States.[3]

Just days after becoming President and shortly after pardoning President Nixon declaring “the long national nightmare” to be over,[4] President Ford signed legislation into law allowing U.S. citizens to own gold,[5] reversing President Roosevelt’s forty year-old Executive Order 6102 issued on April 5, 1933 prohibiting U.S. citizens from owning more than a de minimis amount of the yellow metal.[6]  President Ford had another major impact on commodity laws and regulations in the United States, when on October 23, 1974, he signed into law the Commodity Futures Trading Commission Act of 1974[7] creating the CFTC and placing all futures trading in the country under federal jurisdiction. 

President Nixon had his own indirect impact on commodities regulation by supporting the secret sale of a billion dollars-worth of wheat to the Soviet Union in 1972, which when announced publicly caused massive price increases in wheat.[8]  This led Congressman Neil Smith, a Democrat from Iowa, to charge the Nixon administration had been duped by the Russians.[9]   A year later, Congressman Smith, outraged over the debacle of the Chicago Board of Trade’s July 1973 corn contract delivery, held Congressional hearings that eventually led to the Commodity Futures Trading Commission Act of 1974.[10]

Moving forward to President Clinton, after his tribulations of being impeached by the House of Representatives and trial acquittal  in the Senate, President Clinton went on to sign into law the Commodity Futures Modernization Act of 2000.[11]  The CFMA codified the complete deregulation of the swaps market and shifted the CFTC to being a principles-based oversight agency.  In eight years, the wisdom (or lack thereof) of the CFMA’s hands-off approach to swaps trading was brought under withering scrutiny by the financial crisis of 2008 and the ensuing Great Recession.[12] 

President Clinton’s waning days of his second term also included his grant of a presidential pardon to fugitive commodity trader Marc Rich.  Rich fled to Switzerland shortly after he was indicted on more than 50 counts involving fraud, racketeering and tax evasion for his role in rigging oil prices during the 1973 energy crisis and selling oil to Iran in violation of sanctions while Iran held American hostages.[13]

Only the future will tell what impact the current, impeached occupant of the White House will have on commodities regulation.  With his trade wars with adversaries and allies alike,[14] he does seem to be following in the footsteps of other Presidents involved in past impeachments to make an outsized impact on the commodities industry.  

 

[1] K. Romer, The Great Onion Corner and Futures Markets (NPR Oct. 15, 2015)

https://www.npr.org/2015/10/22/450769853/the-great-onion-corner-and-the-futures-market#

 

[2] Onion Futures Act, Pub. L. 85–839, § 1, Aug. 28, 1958, 72 Stat. 1013.  Available at: https://www.govinfo.gov/content/pkg/STATUTE-72/pdf/STATUTE-72-Pg1013-2.pdf#page=1

 

[3] Of course, Ford’s legislation could have proposed strengthening the then Commodity Exchange Commission’s authority to prosecute and punish manipulators rather than banning onion futures altogether.  But, then again, the notes taken by the Yale alumnus who interviewed Ford for admission to Yale law school read: “he probably won’t embarrass us.”  Ford Presidential Library, Grand Rapids, Michigan.

 

[5] Pub. L. 93-373.

 

[6] Technically, the Executive Order prohibited “the hoarding of gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations . . . .”  Executive Order 6102.  Available at: https://www.presidency.ucsb.edu/documents/executive-order-6102-requiring-gold-coin-gold-bullion-and-gold-certificates-be-delivered

 

[7] Pub. L. 93-463, 88 Stat. 1389.

 

[8] M. Jensen, Soviet Grain Deal is Called a Coup (N.Y. Times Sept. 29, 1972).  Available at: https://www.nytimes.com/1972/09/29/archives/soviet-grain-deal-is-called-a-coup-capitalistic-skill-surprised.html

 

[9] Id.

 

[10] Hearings before the Subcommittee on Special Small Business Problems of the House Permanent Select Committee on Small Business on Problems Involved in the Marketing of Grain and Other Commodities 93rd Cong. 1st Sess. July 25, 26: Sept 18, 25, 26; Oct 2, 3 and 4, 1973 at 144.

 

[11] Pub. L. 106-554, 114 Stat. 2763.

 

[12] See M. Block, 2000 Commodities Act Paved Way For Problems (N.P.R Mar. 20, 2009). Available at: https://www.npr.org/templates/story/story.php?storyId=102185942 

 

[13] K. Holman, Clinton’s Pardon of Marc Rich (P.B.S. Jan. 26, 2001).  Available at: https://www.pbs.org/newshour/show/clintons-pardon-of-marc-rich

 

[14] K. Rogers, J. Tankersley & A. Rappeport, Trump Inflames the Trade Wars, Again (N.Y. Times Dec. 3, 2019).  Available at: https://www.nytimes.com/2019/12/03/business/trump-trade-wars.html

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