Senate Panel Cracks Down on Risky Wall Street Credit Swaps

A Senate committee on Wednesday added a critical piece to the sweeping Wall Street reform bill -- approving a plan to crack down on risky credit swaps known as derivatives.

The Senate bill would stop Wall Street investment banks from acting as brokers for the commercial firms and speculators who trade in derivatives -- in effect, bets on the value of future transactions, The Washington Post reported. It would also require most contracts for derivatives to be traded publicly and would force derivatives dealers to have money on hand to cover unexpected losses.

Since agriculture futures are derivatives, the bill was sponsored Sen. Blanche Lincoln (D-Ark.), chairwoman of the Senate Agriculture Committee, which approved it 13-8. The legislation carves out exceptions from some of the regulation for farmers and certain other commercial companies, though not from the requirement to raise money to cover the trades. Significantly, one Republican -- an influential one -- Sen. Charles Grassley (R-Iowa) joined Democrats in supporting the measure, which is meant to rein in a practice blamed for huge losses during the 2008 economic crisis. It is expected to be added to the larger financial reform bill nearing a vote in the Senate.

"This is no time for small fixes or tweaking around the edges," Lincoln said.

Sen. Saxby Chambliss (R-Ga.), the Agriculture Committee's top-ranking Republican, voted against the measure.