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Derivatives for Farmers

In the continuing congressional saga in which each and every committee tries to grab a piece of the financial crisis, the Senate Committee on Agriculture, Nutrition, and Forestry is holding a hearing on derivatives.

And this, actually, makes some sense (certainly more sense than "the Science of Insolvency" hearing). Farmers have been using derivatives since long before AIG got into credit default swaps. Pork futures, for instance, are a derivative. Which is a useful reminder that derivatives can be very complicated, or they can be pretty simple. A world in which the more exotic strains of derivatives are penned up is not a world in which basic derivatives will cease to perform their basic functions.

By Ezra Klein  |  June 4, 2009; 2:36 PM ET
Categories:  Financial Crisis  
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There's a real story here - those guys were getting hammered in early 2008 due to all the vol in the market, having to put up margins that were bankrupting small farmers to lock in otherwise ordinary derivatives. Plus an argument that the hedge funds were having their way with them.

They really need to overhaul this, if only for that whole "stability of the global production of food" thing.

Posted by: rortybomb | June 4, 2009 4:13 PM | Report abuse

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