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Curious why the Senate Agricultural Committee handles derivatives?

Here ya go:

Because traders used to gamble with corn. A derivative contract, very briefly, is a bet on what's going to happen in the future. These instruments are now associated with interest rates, or with a company's creditworthiness, but in the 19th century they were more often attached to the future prices of agricultural commodities, like rice, wheat, cotton, or corn. Farmers were suspicious: They worried that speculators were depressing the value of their goods and lobbied their representatives to step in. State governments responded first; Illinois, for example, made futures contracts illegal in 1867. Then, starting in the 1880s, Congress wrote one bill after another aimed at regulating "to arrive" contracts (as derivatives were then called).

Over a span of about 40 years, federal lawmakers introduced 164 such measures, but the more robust attempts to control derivatives did not become law. The 1890 Butterworth Anti-Option Bill, which tried to ban futures trading, never came to a vote. And the 1892 Hatch Anti-Option Bill, which tried to do the same, passed both houses but failed on technicalities during reconciliation. Since crops were at issue, Senate bills tended to go through the agriculture committee. The committee on banking wasn't created until 1913.

By Ezra Klein  |  April 23, 2010; 12:08 PM ET
 
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Comments

I didn't realize Orrin Hatch had been in the Senate for that long...

Posted by: stjohnsmikeblogspotcom | April 23, 2010 1:23 PM | Report abuse

What did you think the Chicago Board of Trade did?

Posted by: endaround | April 23, 2010 1:48 PM | Report abuse

It's interesting, and possibly even instructive, to see that every new financial instrument gets demonized when it's introduced.

Posted by: tomtildrum | April 23, 2010 4:03 PM | Report abuse

The comments to this entry are closed.

 
 
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