To many, the term “derivative” sounds confusing and complex – a tool for high finance that has little value to the majority of Americans. However, for many manufacturers and other businesses, the reality is that derivatives provide stability and certainty for our economy. Unfortunately, as regulators implement the new financial reform law, businesses that use derivatives to plan for the future are facing significantly harmful margin-requirements.
Clear oversight of the derivatives market is a good thing but, as is often the case, overregulation can cause a stranglehold on investment and threaten jobs. NAM President and CEO Jay Timmons said as much today in an op-ed he co-wrote with Chamber President and CEO Tom Donohue and Gov. John Engler, president of the Business Roundtable.
“Bringing more transparency and accountability to the derivatives market should be a victory for the American people, but if regulators overreach and fail to distinguish between end- users and speculators, we will simply be taking one step forward and two costly steps back.”
They voiced their support for swift Congressional action to fix this flaw in the financial reform law.
“We are thrilled that the House Financial Services Committee recognized the potential consequences and voted unanimously this week in favor of a bill that would exempt end-users from government-mandated margin requirements. With strong bipartisan support, we hope Congress will move quickly on the legislation to provide much needed certainty for end-users.”
When businesses can better plan for the future, the positive impact is felt across our economy. Customers feel it in stabilized prices no longer dependent on consistently fluctuating markets. And derivatives allow businesses to develop strategy for future investment, plan for employment growth, and quite simply, better know how much it will cost to run their business in the coming years.
There is too little certainty in the world – why take away more of it with the unintended consequences of regulation?
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