Preserves ability of end-users to manage their risk
Washington, D.C. - Today, Idaho Senator Mike Crapo and Nebraska Senator Mike Johanns filed an amendment to fulfill Congressional intent by providing an explicit exemption from margin requirements for non-financial end-users that qualify for the clearing exemption. The amendment is identical to H.R. 2682, which passed the U.S. House of Representatives by a vote of 370 to 24.
Since the Dodd-Frank conference took place, there has been a debate over whether non-financial end-users are exempt from margin requirements. Then-Chairmen Chris Dodd (D-CT) and Blanche Lincoln (D-AR) acknowledged the language for end-users was not perfect, trying to clarify the intent of the language with a joint letter. Certain regulators have interpreted the statutory language as requiring them to adopt rules that impose margin requirements on all uncleared swaps, regardless of who the counterparties are.
"Non-financial end-users from manufacturing to energy to farming rely on financial risk management tools like derivatives to manage the unique business risks associated with their day to day operations," Crapo said. "Our economy benefits from this type of risk management activity in the form of less-volatile business activities, and in turn, lower prices for consumers. The Senate needs to affirm Congressional intent by passing this amendment to ensure that regulators do not divert productive working capital from our economy into margin accounts that would impair economic growth."
Johanns said, "Farmers, ranchers and businesses using the financial markets to guard against risk is the type of responsible business practice we should encourage. Instead, they may be subject to far-reaching and unintended consequences of a very flawed law. Our amendment strives for much-needed clarity by allowing businesses to manage their risk and put their capital to good use, often creating more American jobs in the process."
"This amendment protects our ability to efficiently buy malting barley, hops and other ingredients used to brew our beers," said Kris Smelser, MillerCoors Regional Manager of the Burley, Idaho, grain elevator. "We appreciate his work to protect farm jobs in Idaho and many other major agricultural states."