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Committee to Look at Swaps and Derivatives
Published Friday, October 10, 2008 at 04:55 AM
The Senate Ag Committee will hold a hearing next Tuesday focusing on the influence of swaps and derivatives on the financial markets and the adequacy of federal regulatory safeguards. Committee Chairman Tom Harking of Iowa says - financial swaps or over-the-counter financial derivatives have been exempt from most regulations since 1993. Harkin says - I firmly believe we have to revisit and examine very carefully how these financial swaps and derivatives are regulated – or really not regulated.

Harking believes - more oversight and regulation of these markets is needed. Swaps and derivatives function in many respects like futures contracts traded on exchanges regulated by the Commodity Futures Trading Commission. Harkin adds - for that reason, the Senate Agriculture Committee hearing 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.

Derivatives are financial instruments theoretically intended to limit risk and ward off financial problems. But with some doubts in the market as to how companies would value them, derivatives have created uncertainty and have increased risk. According to a published report, the derivatives market includes contracts and instruments valued at some 531 trillion dollars, up from 106 trillion in 2002.

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