Sen. Chambliss blasts derivatives reform proposals as politically motivated

By Jon H. Harsch

© Copyright Agri-Pulse Communications, Inc.

Washington, April 29 – The controversial derivatives market got top billing during the first day of Senate debate on the Wall Street reform bill.

Senate Agriculture Committee Ranking Member Saxby Chambliss (R-GA) said that “appropriate regulation of derivatives and specifically the swaps market is a critical component of this legislation.” But he charged that the Ag Committee reported out a derivatives bill that was deliberately “crafted without input from Republicans.” He said the result is a bill which “will have many unfortunate consequences for

Main Street
businesses that had nothing to do with creating this financial meltdown. I fear what I believe to be unintended consequences resulting from applying complicated regulations too broadly will subject our American businesses to more risk and not less.”

As an example, Chambliss said “this legislation would force the Farm Credit System institutions to run their interest rate swaps through a clearing house which will result in additional costs in the form of higher interest rates to their customers without getting anything to lessen systemic risk. Let me be clear as to who this will ultimately affect – our farmers and ranchers, our electric cooperatives, and our ethanol facilities who seek financing from these institutions. Institutions like CoBank will be forced to clear their swaps and execute them on a trading facility which will impose significant new costs and result in higher interest rates for their customer or worse, discourage them from managing their risk which will again result in higher cost for their borrowers. . . CoBank and Goldman Sachs are not the same and should not be regulated in the same manner. CoBank should have the option to clear their swaps and not be mandated to do so.”

Offering a second farm-state example, Chambliss predicted that the bill “also would prevent John Deere Credit from hedging its interest rate risk except through a clearing house. Again, this will result in less effective credit arrangements for farmers who need financing to buy tractors and combines.”

Chambliss concluded by charging that “When the Obama administration realized that the Committee on Agriculture was on the verge of producing a derivatives regulation package that could have appealed to both Republicans and Democrats, they scrambled to kill the deal. You see, to the extent that any aspect of the financial regulatory reform package has Republican support, they can no longer play politics with this issue. If we produce a bill that has the support of several Republicans, then they can no longer blame us for holding up this process which would cause the administration to lose the message they are pushing in hopes that voters will forget about healthcare and their message is simple. They want to be able to tell the public that Republicans are opposed to regulating Wall Street. Well, that is disingenuous at best and totally false at worst. Republicans are just an anxious as Democrats to address what went wrong on Wall Street.”

Promising to offer corrective amendments to the Wall Street bill, Chambliss said he will urge his Senate colleagues to oppose the current derivatives portion of the bill “because I think it will have undesirable consequences for

Main Street
businesses and consumers who are already struggling in this weakened economy.”

To read more about the opening Senate debate on financial regulatory reform, go to:

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