At a House Finance Subcommittee hearing today, Rep. Michele Bachmann, R-Minn., warned fellow lawmakers that they should avoid overregulating over-the-counter derivatives at the risk of disrupting large U.S. companies.
Over-the-counter derivatives refer to a variety of Wall Street agreements which are largely unregulated and usually intended to offset risk. Specific types of OTC derivatives, like credit default swaps, have been credited with contributing to the recent financial meltown.
â€œAs our Committee considers the future of over-the-counter derivatives, we must remember that many U.S. companies responsibly utilize these financial products to manage their risks and limit damage to their balance sheets,” Bachmann said, according to a statement released by her office. â€œThese are Americaâ€™s job-creators and Congress should be careful not to over-reach and infringe on their ability to hedge risks responsibly.â€
Bachmann also introduced Timothy Murphy, the foreign currency risk manager for the Maplewood-based company 3M, who testified that 3M opposes “a mandate to move all derivatives into a clearing or exchange environment.” “Clearing” refers to a proposed process of approving OTC contracts. Murphy’s full comments can be read here.
House Agriculture Committee Chair Rep. Collin Peterson, D-Minn., introduced legislation this winter which would require clearing OTC transactions. Peterson has also publicly debated with House Finance Committee Chair Rep. Barney Frank, D-Mass., over whose committee should regulate OTC derivatives.