Fed Chief Rejects Rules for Energy Derivatives

Federal Reserve Chairman Ben S. Bernanke said new government rules for energy derivative securities such as futures contracts and for hedge funds were unnecessary, reiterating stances taken by his predecessor, Alan Greenspan.

“Additional regulation of energy derivatives is not warranted,” Bernanke said in a letter to Sen. Michael D. Crapo (R-Idaho), responding to questions from Crapo. The letter was released Thursday.

Bernanke said he shared Greenspan’s view that derivatives have led to a “more flexible, efficient, and resilient financial system,” and he didn’t know of evidence that new rules would lower energy price volatility.

Some experts have raised the question of whether speculation in oil futures has inflated prices.

Bernanke also said that it was “a reasonable presumption that market discipline can effectively constrain hedge funds’ leverage,” meaning the debt the private partnerships take on in their sometimes risky investment strategies.

But Securities and Exchange Commission Chairman Christopher Cox this week told Congress that he believed hedge funds needed some federal oversight in the name of protecting investors and markets.