Senate Ag Chair Blanche Lincoln’s bill to rein in speculative trading in risky derivatives that can affect commodity prices is directly tied to the fate of a separate reform bill.
Lincoln’s bill imposes mandatory clearing and trading requirements and real-time reporting of derivatives trades. It aims to lower risk and boost safety in what’s been an unregulated 600-trillion dollar market blamed for the economic meltdown and commodity price volatility. But it’s directly tied to the fate of a more sweeping and partisan Banking Committee reform bill - attacked by Republicans for a 50-billion dollar bank rescue trust fund.
Lincoln said the two bills will be merged... “I think that I’ve been given the assurances from the majority leader that… and one of the reasons that I’ve worked tirelessly my staff and the whole ag committee, to make sure we could have a mark up tomorrow, so that we would be prepared when we go to the floor.”
Lincoln’s bill bans any Wall Street bail-outs to those firms that engage in risky derivative deals - forcing these banks to spin-off their swap dealer desks. And it tries to deal with commodity price volatility on exchanges like the Chicago Board of Trade and the MERC... “I think that really, being able to eliminate some of the risky businesses out there we’ll be able to deal with some of the volatility that exists.”
But agriculture and other commercial interests will still be allowed to use derivatives or customized contracts to manage risk without added margin costs... “We have very painstakingly tried to make that a narrow section. All of the bills obviously have an exemption for some end-users. We’ve tried very narrowly to focus on those end-users and figure out who of those really do need that commercial risk…the ability to hedge that commercial risk.”
Lincoln claims the exemption for end users - similar to one in a House-passed regulatory reform bill - is drawn narrowly to avoid speculators from using it as a loophole. But she calls the provision important to help those who are creating jobs and helping to grow the economy.