As of today, the U.S. government has been shut down for six days. Federal employees deemed non-essential aren’t showing up at the office, their incomes have been interrupted, and many services have ground to a halt. Less consequentially, scores of tourists won’t be watching Old Faithful erupt every ninety minutes (which leads one to ask – does a geyser still erupt if tourists aren’t around to watch?), and children won’t be pointing in wonder at the crack in the Liberty Bell. On the bright side, the IRS has ceased all audit activity, the Department of Agriculture continues its vitally important beef inspections, and even though the panda webcams have been switched off, all of the National Zoo’s animals will continue to get their rations. For those actively engaged in the financial markets, the government shutdown is also notable for its…

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Today is the day. Even the apolitical among us know that if the two parties don’t agree today to something, anything – then the government will shut down at midnight. At least parts of it will. What comes next depends on whether you fall into the “essential” or “non-essential” category of government work. Services such as defense, homeland security, mail delivery, and even Congress will stay open for business, while national parks, and passport processing, among others, will grind to a halt as the funding tap runs dry. Without a spending resolution passed by Congress and signed into law, nearly 25% of the 3.3 million government workforce will be furloughed. As it turns out, when it comes to government spending, disagreement and indecision are all that is needed to shut it down. Whether you are for it or against it,…

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This month Pennsylvania became the first state to propose (as far as we can determine) an outright ban on the use of derivatives for taxpayer entities. After a state law in 2003 that allowed government entities to use derivatives, more than 700 swaps have been done on over $15 billion of debt for school districts, boroughs, townships and cities in the Keystone state. (Note: Chatham historically has not advised in the municipal space therefore we did not advise on any of these hedges) Many of these hedges have not fared well and some are outright disasters for school districts and municipalities, threatening their solvency. So it is easy to understand the fury that led State Senator Mike Folmer to introduce a bill to bar publicly funded entities to engage in derivatives. How did we get here? Assume you are the…

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On April 18 the Commodity Futures Trading Commission (“CFTC”) and the Securities and Exchange Commission (“SEC”) approved a final rule defining the terms “swap dealers,” “major swap participants,” and “eligible contract participants.” Many market participants were pleased that the regulators appeared to have listened to their concerns and defined the terms “swap dealers” and “major swap participants” in such a way that will not capture the vast majority of derivatives end users. The final rule provided less comfort to small end users, however, who may find that they will no longer be able to enter into over-the-counter derivative transactions because they do not qualify as “eligible contract participants.” – Major Swap Participants (“MSPs”): The final rule appears to be consistent with Congressional intent to focus the MSP definition on entities whose derivatives use is so material that the failure of…

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