Oversight of financial markets affecting agriculture in the news

As recently as yesterday, the United States Senate Agriculture Committee has been working hard in developing oversight legislation for the over-the-counter-derivatives market (OTC), which is under the committee’s jurisdiction as part of the nation’s futures markets. The futures markets are used to determine what a commodity’s price should be and the markets are used to manage business risks.

Senate Chairman Blanche Lincoln, stated before the committee’s hearing on financial market regulation that “the Committee will produce a bipartisan over-the-counter derivatives bill that will provide greater oversight and transparency to the nation’s financial markets [,]” according to the Senate Agriculture Committee’s press release. Lincoln also stated that reform is a top priority for the Committee and there is “an urgency to act” on behalf of the American people.

The committee expects the bill will be part of greater regulatory reform legislation.

Meanwhile, Charles Abbott and Kevin Drawbaugh are reporting for Reuters that House Financial Service Chairman Barney Frank and House Agriculture Committee Chairman Collin Peterson have reached an agreement on their bill to provide “regulation for the first time over the over-the-counter derivatives market.” Like the Senate bill, this legislation will be folded into a broader financial reform package.

As Reuters reports, the OTC derivatives market is worth $450 trillion, and “has been widely blamed for amplifying last year’s financial crisis.” Lawmakers are caught in a balancing act of trying to maintain the markets role “in helping corporations hedge against operational risks [,]” while also curbing excessive speculation.

Both Frank and Peterson have developed bills to deal with this market as part of their respective committees’ jurisdictions. Aides claim 90 percent of the two bills have been “reconciled” but end user and clearinghouse ownership “issues must still be ironed out.”

The compromise is likely to happen and the House will probably pass a bill this year as major financial market reform is major objective of the administration. Though, as with several other bills, the pace of the Senate will dictate when a bill gets to the president’s desk and how much bi-partisan support will it enjoy.

To read the Senate Agriculture Committee press release click here.
To read the Reuters article on the markets and House action, click here.

Posted: 12/03/09