WASHINGTON — Rep. Walt Minnick, D-Idaho, will be at the center of the discussion Friday when two House committees take a look at a White House proposal to regulate the complex financial instruments that contributed to the financial meltdown.
Minnick is one of only a handful of Democrats on both the House Financial Services Committee and the Agriculture Committee — and he'll be the only rank-and-file member to give an opening statement Friday.
The committees — numbering 117 people, or nearly one-quarter of the House — will hear from Treasury Secretary Timothy Geithner. He will outline a White House proposal to further regulate unchecked commodities training that is blamed in part for last summer's high gasoline prices.
The hearing will be a rare moment in the spotlight for a freshman Democrat. Minnick got the assignment by parlaying a close working relationship with the chairmen of the two committees.
The two represent the wide spectrum of Democratic House leadership: Rep. Barney Frank, D-Mass., is one of its most liberal members, and Rep. Collin Peterson, D-Minn., is a member of the fiscally conservative Blue Dog Democrats, as is Minnick.
Peterson, the Agriculture chairman, played in a band with Minnick's predecessor, Republican Bill Sali. But he apparently has not taken the defeat of his drummer personally: Minnick will use some of Peterson's time to make remarks at the start of the hearing.
A spokesman for the Financial Services committee said it helped that Minnick supported Frank's legislation earlier this year cracking down on mortgage fraud and predatory lending.
"I know Mr. Frank has been impressed by Mr. Minnick's ability to understand mortgage reform," spokesman Steve Adamske said. "He took a real lead on that. He comes from a total business background, and that's been helpful. More so than some of the other freshmen, he's gotten to know Mr. Frank and has worked with him."
The White House hopes to give the Commodity Futures Trading Commission expanded regulatory powers. It also hopes to curb the ability of big Wall Street banks to sidestep regulations limiting how much they can invest in commodities such as oil. Their investments now outnumber those of big fuel consumers, such as airlines and trucking companies, which invest in oil futures to protect against price swings and actually take delivery of the commodities they're trading.
The White House also hopes to shed some light on the vast unregulated markets that allow private parties to enter into complex contracts about the prices of future deliveries of oil or other commodities. Those bets, known as over-the-counter swaps or derivatives, amount to trillions of dollars of activity. They have no limits and limited regulation.
Minnick said he will offer a proposal that goes beyond that of the White House: combining the Securities and Exchange Commission and the CFTC.
"That is not in the president's proposal," Minnick told the Idaho Statesman, "but I think it's important for the Congress to take a look at what the president has proposed, carefully and analytically. And to the extent that we think that they haven't gotten it quite right, it's important we improve on that proposal."
Derivatives aren't just obscure financial instruments important only to Wall Street, Minnick said. They have a tremendous effect on Main Street: Lack of regulatory oversight is blamed for the rampant speculation that drove oil prices to an all-time high of $147 a barrel last summer.
The resulting economic chaos led many Americans to lose jobs, retirement savings and jobs, Minnick said, all because the U.S. continues to operate under a regulatory scheme that dates to the reforms put in place after the Great Depression began.
"It was clear people were playing poker when they didn't have the bank accounts to be at the table," he said. "Trillion-dollar bets, and without disclosure to the public, and without any regulator looking over their shoulder to make sure that what they were doing was prudent, and if they were capable of handling it if their bet went wrong."