Dear Editors of The New York Times and The Star Tribune:
The Star Tribune, Minneapolis, Minnesota published an article, MF Global Woes Ripple Into the Heartland this week concerning the plight of Minnesota farmers who have had thousands of dollars, used for hedging their crops, frozen, due to the MF Global bankruptcy. These farmers have been told they may only recoup 66 percent of their money, if that.
Customers’ and farmers’ segregated funds were used to make the margin calls by MF Global. Minnesota farmer Besty Jensen was advocating against increased margin for these trades, as were the Nebraska farmers. It was both the inablity of the brokerage firm, MF Global, to self-regulate and the failure of the regulators, the CME, to detect this unprecedented use of segregated funds.
- “The circumstances surrounding the MF Global
bankruptcy are unprecedented. Many of our constituents have lost funds
and many more have lost confidence in futures and derivatives markets…
The 2009 Senate investigation, entitled “Excessive Speculation in the Wheat Markets”
It is time for informed debate. Confidence has been lost in every capital market –from equities to bonds to futures. Urgent action is needed by Congress to restore this confidence. Here are the two crucial first steps: (1) getting the facts on the table, with the help of main stream media and (2) eliminating self-regulation by the brokerage industry, immediately.
Editors of The New York Times and the Star Tribune, here is the original letter sent to you in August 22, 2010 for publication today.
The New York Times
“Reap What you Swap” (New York Times Op-Ed August 13, 2010) clouds discussion of
Dodd-Frank by making the incorrect inference that the bill may increase costs and/or
somehow limit legitimate speculation for farmers and other end-users.
A Senate investigation determined in 2009 that the futures markets in wheat had been
rendered in effective, as a hedging tool; from the excessive speculation by commodity
index funds’ ag swaps hedge exemptions.
Here is the position of the National Association of Wheat Growers in a letter (September
29, 2008) to the Commodities Futures Trading Commission on speculation and
regulatory reform of derivatives used by farmers:
“We encourage the Commission to consider ways that will bring cash and futures
markets together at expiration so that these contracts may once again serve as hedging
tools for our members. A better solution is to close the swaps loophole and apply the
appropriate speculative position limits to these entities.”
It would be helpful if the media would ascertain the validity of opinions that serve to
distort the legitimate, underlying purpose of derivative reform.
The Derivative Project
August 22, 2010