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August 12, 2010

Curious critique of Wall Street Reform bill

The New York Times ran an odd commentary yesterday from Minnesota farmer Betsy Jensen concerned about how the new Wall Street financial reform bill could negatively affect farmers and “change the way I do business on the farm.”  She fears that all speculators, even traditional ones, coulld be driven out of the market: “It would be as if I'd lost a third of my customers.”

The commentary's tone was eerily similar to a July 14 Wall Street Journal article that appeared right before final Congressional vote on the Wall Street reform bill, claiming that somehow farmers would lose their ability to use derivatives to hedge risks.

Jensen's take on the Wall Street reform bill is curious for two reasons. One, the bill exempts legitimate end users of commodities like farmers, ranchers and business owners. Its target is Wall Street—not farmers (See IATP's statement on the bill). Second, farmers and agriculture were among the hardest hit by excessive Wall Street speculation in  2007–2008. In other words, farmers needed this bill. This is why House Agriculture Chair Collin Peterson and Senate Agriculture Chair Blanche Lincoln played leading roles in ensuring it was a strong bill. It's why farm groups from the National Farmers Union and National Family Farm Coalition to cotton and peanut growers—and IATP—were part of the diverse Commodity Market Oversight Coalition fighting Wall Street tooth and nail to get meaningful reform.

As a wheat grower, Jensen should have an inkling into the role of Wall Street speculators in wreaking havoc in agriculture markets. Last summer, the Senate Permanent Subcommittee on Investigations issued a report finding that commodity index traders drove wheat prices up and disrupted the market.

Jensen's piece strongly echoed the crowd opposing the Wall Street reform bill, warning that too much reform is a bad thing. Jensen cautioned that “reform must come small steps and not rapid action.” This undoubtedly will become the battle cry of Wall Street lobbyists as they try to slow down efforts by government regulators to implement the new law.

But for agriculture, reform can't come soon enough. It's too bad the Times didn't run a recent commentary from Nebraska Farmers Union President John Hansen instead. Hansen wrote, “This is good news for rural America. Most farmers get the short end of the stick when commodity markets fluctuate wildly, or when everyday commodity values are manipulated by out of control derivative speculation. In the last few years, most farmers were not able to capture the value of higher commodity prices in order to offset the higher costs for inputs like fuel and fertilizer, which forced many of them out of business or eroded their equity. It is clear that farmers and ranchers need stability in commodity markets for the products they buy and sell and the recently passed legislation will help bring order to our economy.”

Ben Lilliston

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