Should Derivative Reform Include End Users?  | Mon Jun. 21, 2010
8:34 AM GMT  One of the key pieces of financial reform is
Blanche Lincoln's proposal to force derivatives to be cleared on
an exchange instead of being traded over the counter in private
deals. However, end users like airlines or agribusiness
companies, which generally use derivatives to hedge price
fluctuations, hate the idea that this would apply to them as
well as to banks that use derivatives for speculation. The Wall
Street Journal reports:   Maybe so. But as Wallace Turbeville
has pointed out, the collateral problem could be taken care of
easily: the bank selling the derivative could simply extend a
conventional loan at the same time they sell the derivative
(which the customer would then post as collateral) instead of
taking on the collateral risk themselves (which essentially
rolls a loan and a derivative into a single package). What's
more, customers would almost certainly get a better price than
they do now with packaged products. The