Klobuchar: Transparency, Accountability Needed In Over-The-Counter Derivatives Market, Responsible End-Users Must Be Protected

Press Release

At a Senate Agriculture Committee hearing, U.S. Senator Amy Klobuchar continued her push to ensure that new rules created under Wall Street reform are implemented as Congress intended. In her questions to Securities and Exchange Commission Chairman Mary Schapiro and Commodity Futures Trading Commission Chairman Gary Gensler, Klobuchar highlighted the importance of bringing transparency and accountability to the market while protecting responsible end-users who use derivatives to hedge their risks. Klobuchar also said it is important to make sure that farmer cooperatives that help farmers manage risk are not swept up in additional regulations aimed at swap dealers.

"The misuse of derivatives contributed to a recession that left millions without jobs, businesses shuttered, and trillions in household savings lost," Klobuchar said. "But farmers, cooperatives, manufacturers, and a host of other businesses use derivatives responsibly to reduce risk, and it's important that regulators ensure that these good-faith actors are not unintentionally impacted by new rules."

The reckless trading in the unregulated, over-the-counter derivatives market played a significant role in triggering the financial crisis of 2008. When derivatives are used properly and backed by sufficient collateral, they can provide efficient ways for commercial and financial users -- including farms, cooperatives, and small businesses -- to hedge against risk.

The Wall Street reform law enacted in 2010 sought to make financial markets safer through transparency measures, mandatory clearing, and more robust capital requirements. Agencies tasked with rulemaking were given new regulatory authorities, and today's Agriculture Committee hearing focused on ways to implement regulation of the derivatives market.

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