When Kosuga and Siegel’s activities began to be known by the wider public and the media, Kosuga’s attitude was unrepentant, and he was quoted as saying, “If it’s against the law to make money…then I’m guilty”. When the House and Senate subcommittee meetings took place, and Kosuga was called to testify, his attitude was the same as he defended himself and his practices.
During these hearings, one of the main arguments made on why onions were particularly at the mercy of being manipulated as commodities was that they are highly perishable. As a result, they are more at risk of being affected by price swings.
Farmers and Growers Were Badly Affected
Kosuga and Siegel made millions from this scheme while leaving many farmers in a precarious position of financial loss: many were left with large amounts of high-priced onions that were impossible to sell, and in several cases, these growers had to pay out of pocket to get rid of all that inventory. Needless to say, this led a good number of farmers to be forced to declare bankruptcy.
What had begun as a deal between Kosuga and the growers would supposedly help everyone involved. The farmers would buy the inventory from the merchants, who would then hold on to the inventory until demand surged. This ended up negatively affecting the growers when the merchants decided to make their profits by lowering onion prices instead of increasing them.
The Federal Government Was on Alert
A maneuver this big from Kosuga and Siegel affected many people negatively and did not go unnoticed. By the late spring of 1956, the Commodity Exchange Authority (the regulatory arm of the government which oversaw commodities trading) caught wind of the plan put into action by Kosuga and his partner and declared the duo was involved in a conspiracy designed to depress the prices to cover their short position.
But this was not the only government body to get involved: the Senate and the House Agriculture Subcommittee also began to hold hearings on the situation, all of which led to the eventual ban on trading futures contracts on onions.
President Ford Sponsored the Onion Act
The congressional hearings involving Kosuga and his partner drew the attention of Gerald Ford, then a congressman from Michigan. If the name sounds familiar it's because two decades later, Ford would rise to fame as Richard Nixon’s vice president in 1973, ultimately becoming president after Nixon resigned the following year.
Ford would keep the position until losing reelection to Jimmy Carter in 1977. Ford sponsored the bill that became known as the Onion Futures Act, which would forever enshrine Kosuga into the history books and make onions the only trading commodity to be banned in the United States to this day.
President Eisenhower Turned the Onion Act Into a Law
On August 28th, 1958, President Dwight D. Eisenhower signed the Onions Futures Act, and it officially became law. What had begun as an idea to play the commodities market in Chicago by Vincent Kosuga had spiraled in such a way that it prompted Congress to officially make a law to prevent what he and Sam Siegel had done and gotten away with. After all, their market manipulations were not illegal when they committed them.
In 1961, after the Chicago Mercantile Exchange failed to successfully challenge the law in federal court, it drew its attention to coming up with a new commodity to trade in the futures market: pork-belly futures. That’s right — Vincent Kosuga inadvertently set the course for the trading of frozen pork bellies.