Commodity Corner

from Tales from the Trail:

Think brussels sprouts and cauliflower are agricultural commodities? Think again.

While the financial bailouts tossed to automakers, banks and other groups during the recent economic crisis left a funny taste in the mouth of some Americans, one former U.S. regulator hopes efforts to prevent another panic doesn't go rotten.

The U.S. Commodity Futures Trading Commission is immersed in drafting dozens of rules to assist it in increasing oversight of the once opaque over-the-counter derivatives market, widely blamed for exacerbating the recent financial crisis.

Among the rules it must craft is what the definition of an agricultural commodity is? Of course, corn, cotton, soybeans and livestock, among other items, fall into this realm.

 But what about those "other foods" such as brussels sprouts, artichokes, cauliflower, or anything with curry? A former CFTC chairman says they are "abhorrent to American sensibilities" and should be banned.

"Like every U.S. citizen, there are certain agricultural commodities that are abhorrent to me," said Philip McBride Johnson, who is now with the law firm Skadden, Arps, Slate, Meagher & Flom.

 In a comment letter to his former agency, he said there is a "natural link" between defining an agricultural commodity and a provision in a law that requires the regulator to protect the public by forbidding the listing of certain products that "are abhorrent to American sensibilities."

Clearly banned under this act are financial products based on wars, terrorism, and assassinations. If Johnson has his way, regulators will be able to protect consumers from a dozen foods that don't mesh with his palate.

from Summit Notebook:

Don’t mention the R word

Policitians are often scared to use the "R" word, because a recession makes them unpopular. Investment bankers dislike the "R" word too, but in this case it stands for regulation. Regulation and lots of it is being cooked up in Washington and Brussels in response to the excessive risk-taking that helped bring on the credit crisis. Credit derivatives are in the firing line as the bad guys of the credit crisis and derivatives in energy and commodities could get caught in the cross-fire. Oil could also take a hit after rampant speculation was blamed for driving the price to a record of nearly $150 a barrel last year. Although the quest to get rid of excesses is driven by good intentions, industry insiders say there will be unintended consequences and argue the regulators could have underestimated the difficulty of their task. "It's not easy to bring back the genie into the bottle," Libya's top oil official Shokri Ghanem told the Reuters Global Energy Summit.