Friday, December 11, 2009

Dodging a regulatory bullet...

I think this is good news at my level.
The measure requires the Commodity Futures Trading Commission to curb excessive speculation by restricting trading volumes on oil and currency futures. It also requires broker- dealers including Goldman Sachs Group Inc. and “major swaps participants” like Fannie Mae to use regulated clearinghouses to process standard derivatives contracts that are normally accepted for clearing and deemed mandatory by regulators.
Some derivatives transactions would also be forced onto so- called swap execution facilities. Hedge funds, airlines and other corporate end-users that don’t pose a risk to the broader financial system won exclusions from the bill’s clearing, trading and collateral requirements.
Delta, Cargill
End users are mainly corporations that rely on derivatives to mange their so-called operational risks, such as protecting against swings in interest rates or fuel prices. Delta Air Lines Inc., agriculture company Cargill Inc. and farm equipment maker Deere & Co. successfully lobbied against some amendments that would have scaled back exclusions.
“Manufacturers of all sizes use customized OTC derivatives to manage the cost of borrowing or other risks operating their businesses,” Dorothy Coleman, vice president of tax and economic policy at the National Association of Manufacturers, said in a statement. “These important risk management tools help keep manufacturers operations going, invest in new technologies, build new plants and retain and expand workforces.” [More]

It's hardly surprising that punitive legislative and regulatory measures are pouring out of Washington after the recent shabby performance of too much of our financial industry.  This measure could have been a lot more burdensome without those exclusions.

And the result would have been obvious in our grain bids and input prices.

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