It's About Derivatives, Twice
You might wonder how the Senate Committee on Agriculture, Nutrition, and Forestry could hold a hearing on issues that are central to the financial crisis and cleaning up the aftermath. That’s easy: derivatives – options to buy and sell crops – matter a great deal for agricultural producers. If these markets work well, that helps farmers. If the markets malfunction (a euphemism for someone doing bad things), farmers get angry – with good reason.
Today, the committee is convening two panels on derivatives. The first has just one witness, Gary Gensler, incoming chairman of the Commodity Futures Trading Commission. It’s the CFTC that you hear so much about from the debate of the 1990s – the head, Brooksley Born, wanted to regulate derivatives, and others, such as Gensler (then at Treasury) were opposed. The Treasury team won that round and you know how the movie ended. Now we’re watching the sequel and it will be fascinating to see what Mr. Gensler has to say. My guess: “When the facts change, I change my opinions; what do you do?” This is currently Larry Summers’s favorite saying, and Gensler used to work for Summers in the 1990s – perhaps in some important senses he still does, as Summers is the administration’s overall economic guru.
The second panel is an all-star line up of experts and advocates from various sides of the broader issue; names and positions are below. Richard Bookstaber is a blogger, with deep experience in the financial markets. He favors some fairly limited reforms. Lynn Stout is a professor, probably inclined to push further and harder toward real change. The other witnesses are from various parts of the industry and seem likely to favor keeping markets more or less as they are – tell me if you think I’m proved wrong about that.
- Lynn Stout, Professor, UCLA School of Law, Los Angeles
- Mark Lenczowski, managing director, J.P. Morgan Chase, Washington
- Richard Bookstaber, New York
- David Dines, president, Cargill Risk Management, Hopkins, Minn.
- Michael Masters, Partnership Financial Consulting, Atlanta
- Daniel A. Driscoll, executive vice president and chief operating officer, National Futures Association, Chicago
June 4, 2009; 7:30 AM ET
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