A Committee Vote That Preserves a Risk Management Tool

By April 22, 2010Regulations

Marketwatch, “Senate committee approves controversial derivatives bill“:

WASHINGTON (MarketWatch) — Big commercial banks would be forced to shed lucrative derivatives trading operations under provisions of controversial, sweeping legislation to regulate the $450 trillion derivatives market that was approved Wednesday by the Senate Agriculture Committee.

The vote was 13-8 with all Republicans opposed except for Sen. Charles Grassley, R-Iowa. The committee has 12 Democrats and nine Republicans.

The bill establishes a clearinghouse and collateral requirements for trading in derivatives, and has important exemptions for many businesses, such as manufacturers, airlines, and other commercial “end users.” Marketwatch quotes Dorothy Coleman, the NAM’s top tax policy person: “We are encouraged that the bill approved this morning by the Senate Agriculture Committee recognizes the importance of these risk management tools to end-users like manufacturers.”

Marketplace also talked to the NAM in this story, “Some industries cheer derivatives vote.”

Committee Chairman Blanche Lincoln’s news release, “Bipartisan Bill Passage will Pave Way to Ending Backroom Wall Street Deals.”

UPDATE (8 a.m.): Wall Street Journal’s piece is good, “Grassley Bucks GOP, Backs Derivatives Curb.” There is, of course, much, much more in the financial reg legislation than just derivatives regulation. The consumer finance protection agency could have huge implications.

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