A substitute amendment by Sen. Saxby Chambliss (R-Ga.) that would block small derivatives traders from having to use a clearinghouse was defeated 9 to 12.
The senator attempted to amend legislation by Senate Agriculture Chairman Blanche Lincoln (D-Ark.) that requires nearly all derivatives traders to vet their trades through a clearinghouse to ensure their soundness.
As the bill currently stands, Chambliss said smaller entities, like the Farm Credit System, which uses derivatives to hedge investments against risk, will incur higher compliance costs by having to use a clearinghouse for trades.
"This is exactly what I fear, unintended consequences resulting from applying complicated regulations too broadly," Chambliss said. "If we subject these financial institutions to the increased costs of clearing their interest rate swaps, they will likely be forced to raise interest rates they offer to their customers, our constituents and farmers, is that really the objective we are trying to achieve?"