Both the Senate and House agriculture committees, which have jurisdiction over the Commodity Future Trading Commission, will hold hearings this week to examine the role credit derivatives have played in the nation's financial crisis. Credit derivatives are complex, unregulated financial instruments that are tied to the amount of risk of underlying - better understood - loans, bonds, or assets. They are traded over the counter between the buyer and seller.
Senate Agriculture Committee chairman Tom Harkin, D-Iowa, explained in a statement Oct. 9, that financial swaps or over-the-counter financial derivatives had been exempt from most regulations since 1993. Mainly that meant they did not have to be traded on fully regulated futures exchanges.
"I firmly believe we have to revisit and examine very carefully how these financial swaps and derivatives are regulated – or really not regulated," Harkin said. "That is the purpose of my hearing on Tuesday - to dig into these issues and get some answers. The questions I asked in 2000, and before actually, are still pertinent."
Harkin's committee will "explore the scope of CFTC's authority under existing law and whether this authority is adequate in the wake of the current financial crisis."
Neither committee announced the list of those who would testify. The Senate committee hearing will be held Oct. 14 at 9:30 a.m. at the Russell Senate Office Building in Washington, D.C.
The House committee hearing will be Oct. 15 at the Longworth House Office Building in Washington, D.C. It will be webcast at: www.agriculture.house.gov.