Vague law will hobble economy

Derivatives are a kind of financial instrument used in one form or another by nearly every major corporation. This is not just an issue for the J.P. Morgans of the world; Caterpillar, Ford, Procter and Gamble, and Boeing all depend on derivatives to manage business risks. Currency and interest-rate swaps protect companies from changes in interest rates and foreign exchange values. For American firms selling tractors in Japan or gas turbines in Europe, that’s a big deal.

Enter the Congress. Last year’s Dodd-Frank law contains over 100 different provisions dealing with derivatives and swaps. These changes involve things like securities registration, margin requirements, counter-party credit checks, and new compliance officers. Every firm in America — without exception — has been told that it must comply with the new laws beginning July 16. Oh, and by the way, the final rules haven’t been written yet.

It doesn’t take Warren Buffett to realize that when companies don’t know what new rules will look like, it affects their ability to commit capital and create new jobs. When I was the operations director for a small electronics firm in Manchester, N.H., I could feel how an uncertain business environment made us less willing to spend money. Businesses delay plant expansions, hold off on equipment purchases, or hire more cautiously throughout the year.

The Commodity Futures Trading Commission and the Securities and Exchange Commission are spearheading the rule-writing effort. Displaying a lack of both calendars and business sense, they’ve assured the markets that “guidance” will be posted on their website — “soon.” Allowing just five weeks to finalize and implement dozens of new rules is the height of arrogance and poor planning. It leaves the distinct impression that no one within 500 yards of the White House has ever held a job in the private sector.