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Dan Rather Reports 614

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Dan Rather ReportsEpisode Number: 614 Episode Title: Gas Pains Description: What's behind the sudden jump in gas prices may have nothing to do with supply or politics in the Middle East. Also, the electric car - building the infrastructure to keep cars going. And rhino poaching in S. Africa is booming. TEASE: DAN RATHER (VOICE OVER) TONIGHT GAS PAINS...THE PRICE AT THE PUMP IS BEING PUSHED TO RECORD HIGHS -- SOME SAY WITH A LOT OF HELP FROM WALL STREET. MICHAEL MASTERS, HEDGE FUND MANAGER, FOUNDER AND CHAIRMAN OF THE BOARD, BETTER MARKETS INC. There's enormous amount of money going into these markets from investment pools, large institutional investors that has transformed these markets to a sort of full-fledged casino. RATHER (VOICE OVER) ALSO READY OR NOT, HERE THEY COME THE ERA OF THE ELECTRIC CAR IS HERE WITH A JUMP START FROM UNCLE SAM. RICHARD LOWENTHAL, COULOMB TECHNOLOGIES The federal government in programs like this are accomplishing two goals -- a strategic goal of getting off of oil and also accomplishing a secondary goal which is to get people to work. RATHER (VOICE OVER) ANDTHE MOST VALUABLE HORN OF AFRICARHINOSSLAUGHTERED BECAUSE OF A MEDICAL MYTH. LORINDA HERN, RHINO OWNER Poaching has become such a slick operation that can literally be in and out of a property in under 10 or 15 minutes. RATHER (VOICE OVER)

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WELL BRING YOU THE NEWS, TONIGHT ON DAN RATHER REPORTS. GAS PAINS: RATHER (ON CAMERA) GOOD EVENING. TONIGHT AN INVESTIGATION INTO THE SOARING PRICE AT THE PUMP...ACCORDING TO THE LATEST GOVERNMENT ESTIMATES, AN AVERAGE FAMILY WILL PAY $337 MORE THIS SUMMER THAN LAST FOR GASOLINE. SO WHY THE BIG JUMP? DONT BLAME SUPPLY AND DEMAND...THERES PLENTY OF OIL. AND YOU CANT BLAME TENSIONS IN NORTH AFRICA OR THE MIDDLE EAST. THE OIL IS STILL FLOWING. BUT SOME ANALYSTS BELIEVE YOU CAN BLAME IT, AT LEAST IN PART, ON ONE OF THE HOTTEST WAYS TO MAKE BIG MONEY ON WALL STREET....COMMODITIES TRADING... DESPITE CONGRESSIONAL ATTEMPTS TO REGULATE THIS MARKET, INVESTORS CONTINUE TO RAKE IN HUGE PROFITS WHILE THE AVERAGE DRIVER CAN ONLY WINCE AT PRICES THAT WERE, NOT SO LONG AGO, UNTHINKABLE. RATHER (VOICE OVER) THERES NOTHING SUBTLE ABOUT THE PRICE OF GASOLINE. THE SIGNS ARE EVERYWHEREYOU CANT MISS THEM AND LATELY WHEN YOU FILL UP, THE SPIN OF THE PRICE GAUGE IS ENOUGH TO MAKE YOU DIZZYAND LIGHT IN THE WALLET. FEMALE CONSUMER 1 Im noting everything I spend because I know now I have to budget a lot more for gas. MALE CONSUMER 1 I use to fill this up for five bucks now its fifteen. MALE CONSUMER 2 I watch my gas tank more when I drive and I dread coming to the gas station more now that prices are soaring. RATHER (VOICE OVER)

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PRICES ARE NEARING AN ALL-TIME HIGH. A GALLON COSTS A DOLLAR MORE THAN IT DID LAST YEAR AND A FULL TANK CAN COST YOU MORE THAN A CNOTE. FEMALE CONSUMER 2 You know listen to different things on news in the newspapers its not intended to go down anytime soon. So thats concerning more than anything, its just how far are they going to go? I guess is the bigger question. MICHAEL MASTER, HEDGE FUND MANAGER, FOUNDER AND CHAIRMAN OF THE BOARD, BETTER MARKETS INC. Commodities exist to be consumed, to be used. RATHER (VOICE OVER) MICHAEL MASTERS IS A HEDGE FUND MANAGER WHOS MADE A NAME FOR HIMSELF CRITICIZING WHAT HE INSISTS IS EXCESSIVE OIL SPECULATION ON THE COMMODITIES MARKETS, WHICH HE SAYS IS A FACTOR BEHIND TODAYS GASOLINE SPIKE. RATHER I'm no economist. But I thought, and I think a lot of people think, that the market is driven by supply and demand. MASTERS Well, the reality is is the markets are driven in part by supply and demand. But they are also driven by the supply and demand of speculators. And there's been an enormous influx of new kinds of speculators into these markets-- with a lots-- lot of dollars. RATHER (VOICE OVER) OIL IS BOUGHT AND SOLD ON TRADING FLOORS ALL OVER THE WORLD, SUCH AS THIS ONE AT THE NEW YORK MERCANTILE EXCHANGE. AND ITS NOT JUST OIL; ITS ALL KINDS OF COMMODITIES, FROM METALS TO LIVESTOCK TO CROPS. IT USED TO BE THAT MOST OF THE PEOPLE MAKING TRADES EITHER OWNED OR NEEDED THE PRODUCTS. BUT NOW, MOST ARE SPECULATORS WHO DONT REALLY WANT TO OWN THE COTTON, WHEAT OR OIL. THEYRE BETTING ON THE PRICE TO MAKE MONEY. AND MASTERS SAYS RECENTLY THEIR NUMBERS HAVE GROWN SIGNIFICANTLY. MASTERS

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Speculators today have about 70 percent of the open interest in the commodity markets. Ten years agothey controlled roughly 30 percent of the market. RATHER I think your argument; correct me if I'm wrong, its contributing-- contributing quite a bit to the rising price of oil. MASTERS Well, that's right. I mean, money ultimately moves markets. One could make the analogy that it's just like having a house where-- one person shows up to buy your house, there's one price. But if six people show up to buy your house, there's another price. And so the more participants you have in a market, you can definitely change the market. RATHER (VOICE OVER) MOST ECONOMISTS AGREE THAT SOME SPECULATION BRINGS STABILITY TO COMMODITY MARKETS. FOR EXAMPLE, SPECULATORS HELP FARMERS AND CONSUMERS LOCK IN A PRICE FOR SOMETHING LIKE CORN, PROTECTING AGAINST EXTREME PRICE SWINGS FROM A POOR HARVEST OR OVERSUPPLY. BUT MASTERS SAYS THAT A RECENT SURGE IN SPECULATION HAS THROWN THE OIL MARKET OUT OF BALANCE MAKING PRICES AT THE PUMP RISE AND FALL AT THE WHIM OF WALL STREET. MASTERS There's enormous amount of money going into these markets from investment pools, large institutional investors that has changed these markets from-- sort of a backwater to a sort of full-fledged casino. RATHER Now are the big Wall Street players, Goldman Sachs-- go down the line, are they in this? MASTERS Of course. They're-- they're-- central to the story. Because they are the financial intermediaries behind the scenes and the more they can promote commodities to institutional investors-- the-- the-- the higher they can effectively drive the price. RATHER (VOICE OVER)

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OVER THE PAST DECADE, GOLDMAN SACHS AND OTHER WALL STREET FIRMS HAVE PROMOTED COMMODITIES FUTURES LIKE OIL TO INVESTORS AS AN ALTERNATIVE TO STOCKS AND BONDS. AND MASTERS SAYS IF THERES ANY QUESTION THAT WALL STREET CAN DRIVE THE PRICE OF OIL, YOU DONT HAVE TO LOOK ANY FURTHER THAN WHAT HAPPENED LAST WEEK. MASTERS Goldman Sachs made a recommendation to sell crude to their clients. And-- crude fell the most its f-- fell in several months. It fell about eight dollars a barrel. And what's more interesting is the price fell without any supply and demand changes. There was no changes in-RATHER Blame it all on the speculators. MASTERS There was no change in Libya. There was no change anywhere else in those two days. But Goldman Sachs sells recommendation had a significant amount-- caused a significant amount of selling. REP. BARNEY FRANK, (D-MA) Did we discover more oil? Did people stop driving? I mean-- a-- major financial entity speculates that it's gonna go down, and-- and the price drops. RATHER (VOICE OVER) CONGRESSMAN BARNEY FRANK IS THE CO-AUTHOR OF LAST YEARS LANDMARK FINANCIAL REFORM BILL THAT BEARS HIS NAME. AMONG THE HUNDREDS OF NEW REGULATIONS IN THE DODD-FRANK LAW, IS A PROVISION THAT REQUIRES FEDERAL REGULATORS TO RESTRICT HOW MUCH MONEY SPECULATORS CAN POUR INTO THE OIL MARKET. FRANK We did this because it was clear to us that speculation in commodities, particularly oil at this point, is a factor, not the major factor, but a factor, in driving up prices. RATHER (VOICE OVER) NEW GOVERNMENT NUMBERS RELEASED JUST LAST WEEK ESTIMATE EXCESSIVE SPECULATION COST AMERICANS AN ADDITIONAL 8 TO 16 DOLLARS EVERY TIME THEY FILL UP.

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BUT LESS THAN A YEAR AFTER THE DODD-FRANK LAW PASSED, THE NEW REGULATIONS TO POLICE THE SPECULATORS HAVE STALLED. JOHN DAMGARD, PRESIDENT, FUTURES INDUSTRY ASSOCIATION I for one don't want the government telling me what I can buy and what I can't buy. RATHER (VOICE OVER) JOHN DAMGARD IS A LOBBYIST AND THE PRESIDENT OF THE FUTURES INDUSTRY ASSOCIATION. HE REPRESENTS MANY OF THE BIG PLAYERS IN THE COMMODITIES MARKET AND HE SAYS EVERYTHING IS WORKING AS IT SHOULD. DAMGARD You talk to any of these people that are knowledgeable about the markets, and they will say, "These markets are working to our benefit. And we simply don't want the government in there trying to determine what we should do and what we shouldn't do." RATHER (VOICE OVER) DAMGARD TOLD US THAT ANY EFFECT SPECULATORS COULD HAVE ON THE PRICE OF OIL, PALES IN COMPARISON TO OTHER FACTORS LIKE INCREASED GLOBAL DEMAND... DAMGARD Ten years ago, the Chinese were all riding bicycles and today they all own cars. And-there are a lot more Chinese drivers than there are drivers in the United States. And-- and let's talk about India. You know, India's got two billion people, and they've got some of the largest car manufacturing plants in the world. RATHER (VOICE OVER) LAST YEAR, THE FINANCIAL INDUSTRY SPENT MORE THAN $100 MILLION LOBBYING CONGRESS. ALMOST HALF A MILLION DOLLARS OF THAT CAME FROM DAMGARDS GROUP. HE SAYS THE PROBLEM IS CONGRESS JUST DOESNT GET IT. DAMGARD Quite honestly, you will not find market experts running for office. The people that really understand the way these markets work, frankly, are not Congressmen and Senators and yes, the Congressmen and Senators are constantly hearing from the people who believe that they're being disadvantaged by high prices. They are reacting to the pressures that

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they're hearing, but I think we need to resist those pressures. Speculators are incredibly important to the market. FRANK They are the ones whose irresponsibility, lack of understanding, arrogance, overconfidence, and in some cases excessive greed, gave us the worst economic crisis in 70 years. How could he say we don't understand it? His problem is that we do. RATHER (VOICE OVER) DESPITE ALL THE LOBBYING -- AND RESISTANCE FROM NEWLY ELECTED REPUBLICANS, FRANK IS STILL HOPEFUL THAT T

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