The NYT has this story on how manufacturers, auto dealers, and the Chamber of Commerce are lobbying against the proposed derivatives exchanges and new consumer financial protection agency in the financial reform bill. It seems to me that they’re right to be concerned. Industrial firms, apart – apparently – from U.S.-owned automakers, are not treated as being “too big to fail” and do not face moral hazard incentives to invest in risky financial instruments. They’re simply trying to hedge against risk of price rises in their inputs. Cracking down on derivatives generally thus doesn’t make much sense. A properly tailored financial regulation bill would regulate banks and perhaps insurance companies specifically – the companies backed up by Federal Reserve lending, the Treasury’s implicit too big to fail guarantee, and deposit insurance.