Last week in this column I told you about a couple of dozen airline executives that were calling on Congress to restrict oil speculators. The airlines blame speculators for running up the price of oil.
But when testifying before the Senate Banking Committee Tuesday, Fed Chairman Ben Bernanke played down the blame on speculators, saying:
"There is speculation, but speculation under most circumstances is a positive thing. It provides liquidity and allows people to hedge their risks. It (speculation) provides price discovery. It can help allocate oil availability over time, depending on the pattern of futures prices and so on."
Some have suggested that Congress should change the regulations on commodities speculation, requiring investors to put up more of the capital needed to speculate. Bernanke was much more cautious about changing the rules. Regarding speculators, he said:
"They can affect the cost of credit, but they are also a very important part of the counterparty risk management process for exchanges. And so we need to be careful in changing margin requirements that we don't interfere with these other important functions or that we don't unnecessarily reduce the liquidity in these markets, looking specifically at the whole range of issues regarding transparency."
