Eugene Scalia, Justice Antonin Scalia’s Son, Hired By Wall Street To Fight Dodd-Frank Rule
Posted: 02/28/12 05:21 PM ET | Updated: 03/02/12 01:02 PM ET
It’s got all the ingredients of a high-stakes courtroom thriller: billions of dollars on the line, intense Wall Street deal-making, and highly profitable oil speculation. But the big banks aren’t taking any chances in this drama. They’ve hired the son of Supreme Court justice Antonin Scalia to help them fight regulations which might crimp their profits.
In one of the highest-profile challenges to the sweeping Dodd-Frank financial industry overhaul, two financial industry groups sued the Commodity Futures Trading Commission in federal court to toss a rule that limits speculation by banks.
On Monday, a federal judge turned down Eugene Scalia’s request to immediately stop the CFTC’s enforcement of the rule, which would scale back excessive speculation in the trading of oil contracts. But U.S. District Court Judge Robert Wilkins seemed inclined to side with Wall Street and Scalia, going so far as to express his doubts about the CFTC’s need for such a rule. “I’m kind of skeptical about their position of Congress mandating position limits,” Wilkins said.
Scalia argued that the agency never determined whether the rule was “necessary and appropriate,” claiming that it would end up costing big Wall Street firms, such as Barclays and JPMorgan. CFTC deputy general counsel Jonathan Marcus countered by stating that the banks’ costs will be “miniscule.”
The debate took place against a backdrop of rapidly climbing gas prices, which is partly due to the role of oil speculators, according to industry analysts. Those speculators outnumber by more than 2-to-1 the “traders who actually produce or consume oil,” according to McClatchy.
The CFTC was ordered by Congress in 2010 to apply the rule to oil trading before expanding its application to speculation in other commodities. Last year, the financial industry barraged the regulator with thousands of comment letters that complained about this one rule’s “immediate, irreversible costs,” but it was eventually finalized in October.
“This is one of the most important rules: to limit wild speculation in the commodity markets, which hurts every American family,” says Dennis Kelleher, the president and CEO of Better Markets, an advocacy group. “It doesn’t only run up a family’s bill but also every town struggling under shrinking budgets. Their gas bills for the cops and firefighters are going through the roof.”
Kelleher said he expects a decision later this week on whether or not Wilkins will hear the case.
Eugene Scalia has proven himself as an effective warrior against Dodd-Frank. One aspect of the law aimed to give shareholders more power in choosing candidates for corporate boards but Scalia convinced a court to trash that idea last year, reports McClatchy.