Nothing changes

JULY 10, 2009
Big Companies Go to Washington to Fight Regulations on Fancy Derivatives
By KARA SCANNELL
WASHINGTON -- Any doubt about how broadly U.S. corporations rely on fancy financial instruments vanishes with a look at who's lobbying Congress to forestall tougher regulation.

Companies from Caterpillar Inc. and Boeing Co. to 3M Co. are pushing back on proposals to regulate the over-the-counter derivatives market, where companies can make private deals to hedge against sudden moves in commodity prices or interest rates.

Many in Congress blame such instruments for exacerbating the financial crisis last fall. To fix the problem, a White House plan unveiled last month calls for more of the trades to take place on exchanges where regulators can monitor them, and requires dealers -- and ultimately companies -- to put more money aside to secure against big losses if trades turn bad.

This naturally has Wall Street in a stir, but it has also sent dozens of big manufacturers and other major corporations scurrying to Washington.

Caterpillar, which uses derivatives to offset increases in the price of copper, says new regulations may drive U.S. companies to seek financing overseas. MillerCoors LLC, Bayer AG's U.S. unit., and Delta Air Lines are among those lobbying on derivatives, which they use to manage fluctuations in materials prices, commodities, fuel, interest rates and foreign-currency swings.

At least 42 nonfinancial companies and trade associations are lobbying Congress on derivatives, according to a Wall Street Journal analysis of lobbying disclosure forms filed through April. That's more than triple the 14 nonfinancial companies that lobbied on derivatives in all of 2008 and zero in 2005. The figures include only companies that specifically name derivatives as a lobbying issue.

"Not all derivatives have put the financial system at risk and they should not all be treated the same," Janet Yeomans, treasurer of 3M, wrote in a letter to Sen. Mike Crapo (R., Idaho). The companies argue the White House plan will make it more expensive to manage risks and force them to put aside cash as collateral that could otherwise be used more productively. wsj.com


*and via Between the Hedges
The Business Insider:

- Merrill Lynch, frightened by the unending flood of people out of its doors, is planning on setting 2009 compensation levels back up to 2007 levels, according to a person familiar with the matter. Executives at the investment bank have been in talks with senior people at Bank of America, warning that the entire franchise could fall apart if compensation levels don't match those offered by, say, Citigroup. Last week, Citigroup revealed it would be paying 2007 compensation by raising salaries to make up for lower bonuses.