The chairman of the Commodity Futures Trading Commission, James Stone, last October blocked a proposal to have the agency's staff study possible restrictions on gold and silver speculation.
Stone said at the time he saw no need for a formal staff investigation because the nation's two big silver markets were taking steps to curtail speculation.
Silver was selling for less than $20 an ounce then but the price exploded to $50 in January and then fell back to $10 last month when the silver speculative bubble burst.
Lately Stone has told a congressional committee investigating the silver scare that the agency he heads should have done more to stop silver's roller coaster ride. He has complained that the other three members of the commission haven't backed his efforts to curb speculation.
All four CFTC members have been called to testify today before a subcommittee chaired by Rep. Ben Rosenthal (D-N.Y.).
Harold Williams, the chairman of the Securities and Exchange Commission told the committee yesterday the SEC is prepared to take over part of the job of regulating commodity futures trading, if the CFTC can't handle it.
The subcommittee has invited Texas silver speculator Nelson Bunker Hunt to testify, and if he has not accepted the invitation by today will vote on whether to subpoena him.
Among the new federal regulations being discussed is one to limit the amount of silver -- or any other commodity -- that a single speculator can buy in the futures markets.
A CFTC study of that question was called for nearly six months ago, but Stone did not permit the study to start, transcripts of the agency's public meetings show.
Commission member David Gartner brought up the issue on Oct. 16, saying, "I have been quite concerned recently about actions in precious metals."
At Garner's request, a discussion of the impact of position limits on commodity speculation was put on the agenda for the CFTC's meeting on Oct. 30.
Between Oct. 16 and Oct. 30, both the Chicago Board of Trade and the New York Commodity exchange began taking steps to curtail silver speculation.
When the silver item came up on the Oct. 30 agenda, Stone commented, "Since that topic was scheduled for discussion, there have been some changes in the marketplace . . . I, for one, would be willing to stand by now and . . . see whether those developments are as promising as we hope they will be, and not take action at this time."
Stone said he favored limiting the holdings of big speculators, but recommended the commission "drop the discussion of position limits in precious metals at this time."
Despite the chairman's opposition, Gartner persisted, saying "I would personally like approval of the commission to ask staff to explore alternatives and to come to us with recommendations."
The commission deadlocked 2-2 on the question, with Gartner and Read Dunn for it and Stone and Robert Martin opposed. When it became apparent he could not get Stone to cast the vote needed to start the study, Gartner withdrew his request.
Stone said yesterday he saw no need for studying limits on silver speculating in October because by that time the Hunt brothers of Texas had already bought large numbers of contracts for future delivery of silver.
He said the agency did not have the power to put on limits retroactively, but that could be done by the two silver exchanges in New York and Chicago.
"My emphasis was on getting the exchanges to impose retroactive position limits," he said. "That is something we could not do." Stone said it would have required weeks of studies and hearings before the CFTC could have imposed its own limit.