Manufacturers concerned about derivatives provisions

Debate over tighter regulations on the multitrillion-dollar over-the-counter derivatives market continued today with manufacturing interests voicing concern after Republicans failed to change the financial regulatory reform legislation.

The Senate defeated a Republican alternative Wednesday offered by Senate Agriculture Committee ranking member Saxby Chambliss (R-Ga.) and Senate Banking Committee ranking member Richard Shelby (R-Ala.) by a 59-39 vote. Shelby, Chambliss and other Senate Republicans have argued that the new language would have ensured business end-users would be exempted from burdensome regulations. 

"Without this exemption, the cost of managing risk for manufacturers and other companies will increase by millions -- and in some cases billions --- of dollars, limiting their ability to drive economic growth and job creation," said Dorothy Coleman, vice president of Tax and Domestic Economic Policy at the National Association of Manufacturers (NAM) in a statement released after the vote. 

Two Republicans -- Sens. Chuck Grassley (R-Iowa) and Olympia Snowe (R-Maine) -- voted against the Republican proposal. 

NAM said it supports changes to prevent excessive speculation and improve transparency and stability in the derivatives market, but "we also want to see Congress preserve the ability of responsible companies to access OTC derivative products."

The current bill's language isn't clear or strong enough and could eliminate much-needed exemptions that could create higher costs, Coleman said in the statement. 

The Chambliss-Shelby substitute would have weakened the language, Senate Agriculture Chairman Blanche Lincoln (D-Ark.) said in a statement late Wednesday. Her measure would bring "100 percent transparency to the nation's financial markets, get banks back to the business of banking and keep jobs on Main Street," she said. 

Manufacturers use the OTC derivatives market to manage the cost of borrowing and other risks of operating businesses such as interest rates and commodity prices, according to NAM. 

"These risk management tools help businesses keep operations going, invest in new technologies, build new plants and retain and expand workforces, especially in a challenging economy," the NAM statement said. 

"We will continue to work with Congress to address these issues."