An issue that could directly impact "Joe Six-Pack."

After her brow-beating by Rep. Foley (R-FL) - see BTN Story - SEC Chairman Schapiro, along with CFTC Chairman Gensler and Fed Governor Tarullo, were implored by Republican representatives to exempt airlines, manufacturers and thousands of other nonfinancial companies from new rules governing derivatives trading, warning that jobs and corporate profits were at risk.  The regulators responded with mixed signals to members of the House Financial Services Committee.

Daniel Tarullo left open the possibility that some larger companies might have to post extra capital when trading derivatives.  Gary Gensler reassured the committee that his agency’s rules would "focus only on transactions between financial entities," adding that the rules should not apply to nonfinancial companies, or so-called end users, that buy derivatives to hedge costs.

    Implementing Dodd-Frank Reform Act.   The hearing stems from the requirement that big banks and other financial institutions process most derivatives through regulated clearinghouses - backstops in the event any party defaults.  Financial companies also are required to post margin, or extra capital, in case the deal sours. 

As it pertains to end users like United Airlines and Shell Energy, such derivative market participants are exempt from having to process through a clearinghouse.  However, Dodd-Frank failed to clarify whether those same companies must come up with margin capital - and this omission concerns large corporate execs, who believe the margin rule would tie up corporate money and damage their bottom line. 

When MillerCoors' Director of Commodity Risk Management pointed out that prudent use of derivatives by end-user companies doesn't generate risk or instability in the financial marketplace and played no role in the financial crisis," CFTC Chairman Gensler duly noted that regulators are "aware and focused on the cost of a six-pack" of beer, and would "get this margin thing right; we understand Congressional intent."  He added that new legislation to clarify the end-user exemption is not needed.

Perhaps related to the above comments, Republicans offered rare praise for Mr. Gensler, who's been aggressively pushing to impose the Dodd-Frank rules.   [NYT Dealbook, 2/16]